Unipro: 1H IFRS results and conferencr call

Unipro: 1H IFRS results and conferencr call

Unipro presented 1H 2019 results and hosted a conference call. Marginally positive.


Financial results appeared to outperform our estimates.

EBITDA grew up by 20.4%; the net profit rise marked 34.5% outperforming our targets by 2% average.

Electricity price growth at the one-day-ahead market, a rise in output volume and KOM capacity prices provided for the increase in figures.


Positive takeaways:

 - Company upgraded EBITDA forecast to RUB 28-30 bn from RUB 26-28 bn.

 - 2020 dividends volume was confirmed at RUB 20 bn p.a. by two transfers.

 - For the first time, the management highlighted the work on minimizing emission and the respective toughening of the ESG requirements.

 - Confirmation of the company being interested in participating in  modernization auctions, which are scheduled in August.


Negative takeaways:

 - Management provided no comment on the terms of a peaceful agreement with RusAl.

 - Commissioning of the 3rd unit of Berezovskaya GRES was rescheduled to 1Q 2020. Management did not name the exact month.

 - Management still shares moderate expectations on output considering its decline within the past three years.



The fact that the 2020 dividend payments volume has not been cut down, yet it has been confirmed at the earlier announced level of RUB 20 bn, indicates that the management sees great chances of reaching a peaceful agreement with RusAl. As announced earlier, October 2nd of 2019 is the deadline for the event. Thus, the risk of losing DPM payments has been minimized.

The company will face price dips in both price zones in 3Q 2019, however, for now, the prices remain higher than the ones last year due to an increased water ratio of impoundments and the rise of cheap output by HEPS that follows.

Rescheduled commissioning of the damaged unit of Berezovskaya GRES was not surprising as the great volume of repairs provided for such risks. We highlight that fact that every month of the delay costs the company about RUB 1.3 bn.

We assume that the positive of dividend payout being confirmed and the strong 1H 2019 IFRS numbers overweigh the negative made by the delay of commissioning of the BGRES’ 3rd unit. The company’s management confirmed its intention to payout RUB 20 bn p.a. as dividends. Given volume provides for 11.9% in terms of the DY, which is the highest one within the utilities sector.

We confirm the price target at RUB 2.9 and the recommendation BUY for UPRO shares.



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