Analysts: ČEZ's performance in Czechia is meeting expectations, full-year estimates may rise

Analysts say the performance of energy group ČEZ is so far meeting expectations this year. The company's net profit for the third quarter is expected to fall by almost half year on year due to extraordinary levies paid to the state. By contrast, analysts say the company's revenue is rising, thanks to higher electricity prices on the market. This is according to comments by analysts to the Czech News Agency (ČTK). They expect ČEZ to at least meet its full-year financial targets, and possibly raise them. The company will announce its results for the first three quarters on Thursday. Energy group ČEZ earned 22.3 billion crowns in the first half of this year, with its net profit down 34 percent year on year.

„Given the higher realised electricity prices, we expect ČEZ to report higher revenue and a modest increase in EBITDA for the third quarter of this year. Net profit, however, will fall, mainly due to the windfall tax,“ Komerční banka analyst Bohumil Trampota told ČTK.

He expects EBITDA for the third quarter to rise by about 1.4 percent year on year to CZK 30.5 billion, while revenue is forecast to increase by more than nine percent to CZK 88.1 billion. The main reason is higher realised electricity prices. By contrast, Trampota expects net profit for the third quarter to fall by almost 50 percent year on year to CZK 9.4 billion.

J&T Bank analyst Milan Lávička also expects year-on-year growth in revenue and operating profit. He puts operating profit at CZK 32 billion. „On the one hand, the higher realised price of electricity has a positive impact; on the other, costs are adversely affected by levies on excess revenue, higher operating costs due to increased inflation, and higher profits from commodity derivatives trading in the third quarter of 2022 compared with this year. As in the first half of the year, the windfall tax will also have a negative impact on net profit,“ Lávička explained.

Analysts therefore expect ČEZ to meet its full-year financial targets. These envisaged operating profit of CZK 105 billion to CZK 115 billion and net profit of around CZK 33 billion to CZK 37 billion. Trampota noted that, combining the company's first-half results with estimates for the third quarter, ČEZ would need to generate about CZK 3.1 billion in net profit and around CZK 17 billion in EBITDA in the final quarter to meet its annual targets. „We expect ČEZ to meet its targets. We still see a possibility, however, that its full-year forecast will be raised,“ Trampota added.

Lávička also expects a similar trend and believes the company will most likely raise its full-year operating profit forecast. For net profit, however, there is still a major unknown in the form of the so-called windfall tax, according to Lávička. „Although the results so far point to the forecast being exceeded, uncertainty over the final amount of this tax for the full year means we cannot predict whether management will adjust its forecast,“ Lávička added.

The government introduced extraordinary levies in the form of a windfall tax and levies on excess revenue at the end of last year in response to the energy crisis. The proceeds are intended to cover the costs of measures related to the sharp rise in energy prices.

ČEZ is one of the largest energy companies in Czechia. The state is its majority shareholder, holding around 70 percent of the shares through the Ministry of Finance.