Market Comment
ATHEX reversed earlier losses and headed north yesterday, outperforming the European stock markets. In more detail, the General Index rose by 0.65% at 1,314.31 units (FTSE Large Cap: +0.69%, FTSE Mid Cap: +0.44%, Banks Index: +1.20%) and the traded value was shaped at EUR 87.6m, down from Wednesday’s EUR 128m and compared to y-t-d average of EUR 107.3m. We expect the market to move higher today, ahead of the Scope credit rating announcement.
Today’s Headlines
· Scope Rating credit assessment out today
· Energy Sector || Greek retail electricity market (EnexGroup) – July 2023
· PPC 2Q/1H23 Results – Solid quarter, broadly in line with our estimates, on track to meet the annual EBITDA guidance
· OTE 2Q23 results in line with consensus, Mgt reiterated FCF guidance and does not expect price increases
· NBG buybacks real estate assets from Prodea REIC-Press
· Galaxy Cosmos Mezz AGM on 07 August
Macro Headlines
Scope Ratings will release today after the market close the sovereign rating review on Greece.
Sector Headlines
Energy Sector || Greek retail electricity market (EnexGroup) – July 2023
Facts: Greek retail electricity market: IPPs market share dropped to 41.4% in July 2023 (according to data from Greek Energy Exchange – EnEx). Other key statistics: a) monthly average clearing Price at EUR 113.1/MWh, higher by EUR 21.2/MWh m-o-m and sharply lower by EUR 225.0/MWh y-o-y, b) total Electricity demand at 5,800/GWh, down by 3.1% y-o-y. In more detail, GEK-Terna’s Heron ranks first with 9.82%, Mytilineos’ Protergia follows with 7.89% (10.8% combined with the recently acquired Watt & Volt), ELPE’s Elpedison with 5.74% and MOH’s NRG with 5.30%. As a result, PPC’s retail market share in July 2023 rose by 3.6% m-o-m to 58.6%. Regarding the Generation mix traded in the Day-Ahead Market, Natural Gas ranks first with 29% (vs. 35% in the previous month), RES follows with 35% of total (vs. 35% in June), Hydro Plants 7% (7%), Lignite and Oil-Powered Plants contributed 6% (6%) and 3% (3%) respectively and finally, Imports 18% (14%).
Comment: It is noted that the increased demand during the month (due to the prolonged heatwave) was covered with increased Natural gas production and imports. In another comment, PPC partially reversed market share losses in July, following the heavy losses recorded in May and June, which were driven by the shift of High Voltage consumers to HERON. Recall that the MoU target called for PPCs’ market share to fall below 50% by 2020; however, PPC’s management had stated that company’s medium-term target assumes a market share of 50% by 2024.
Company Headlines
PPC || BUY | CP: EUR 10.48 | TP: 12.20
2Q/1H23 Results – Solid quarter, broadly in line with our estimates, on track to meet the annual EBITDA guidance
Facts: PPC reported in 2Q23 turnover of EUR 1,589m (-26% y-o-y, 2% above our estimate), and recurring EBITDA of EUR 309m (+19% y-o-y, 4% above our estimate). Finally, PPC reported IFRS net profits of EUR 130m vs. EUR 175m last year, positively affected by a EUR 142m one-off gain from the transfer of the lignite areas to the state. Net debt increased to EUR 2.18bn, up by EUR 789m y-t-d on adverse WC movement of EUR 848m (mainly CO2 allowances and receivables from the state subsidies on tariffs) and increased capex of EUR 448m.
PPC 2Q/1H23 Results
|
EUR m |
2Q22 |
2Q23 |
Y-o-Y change |
Optima |
Actual vs. Optima |
1H22 |
1H23 |
Y-o-Y change |
|
Turnover |
2,145 |
1,589 |
-26% |
1,560 |
2% |
4,392 |
3,582 |
-18% |
|
EBITDA |
259 |
298 |
15% |
296 |
1% |
429 |
578 |
35% |
|
Recurring EBITDA |
259 |
309 |
19% |
296 |
4% |
429 |
590 |
37% |
|
Net income |
175 |
130 |
-25% |
146 |
-11% |
-11 |
182 |
nm |
Source: Optima bank, The Company
1H23 analysis: PPC’s domestic sales volume in 1Q23 dropped by c.16.8% y-o-y to 12,640m GWh, driven by the 8.7% YoY decrease in market demand and the 5.0% market share erosion (average market share 58.5% in 1H23 vs. 63.5% in 1H22). Consequently, total revenues dropped by 18% y-o-y to EUR 3,582m also aided by the lower wholesale market prices (average wholesale price at EUR 131.3/MWh from EUR 237.6/MWh in 1H22). On the expenditures front, fuel expenses dropped by 35.4% y-o-y to EUR 649.7m, driven by the normalised natural gas costs (TTF gas futures at EUR 44.6/MWh in 1H23 vs. EUR 97.8/MWh in 1H22) and to lesser extent the c4% oil-related costs drop. Despite the CO2 price increase (average CO2 costs at EUR 89.2/ton in 1H23 vs. EUR 83.5/ton a year ago), CO2 costs dropped to EUR 394.5m from EUR 476.8m in 1H22 on lower lignite power output and efficient hedging. Additionally, the lower average DAM in 1H23 more than offset the increased volumes purchased, with energy purchase costs lower by 37.7% y-o-y to EUR 1,088.3m. Moreover, personnel costs rose by 5.7% y-o-y to EUR 370.9m, and finally, bad debt provisions in 1H22 dropped marginally by 1.4% y-o-y to EUR 81.5m, signalling a controlled pressure on collections. Below EBITDA, depreciation expenses were lower by 7.9% y-o-y at EUR 307m, while net financial expenses eased significantly by 11.8% y-o-y to EUR 132.7m. FCF generation remained negative in 1H23 at EUR 670m mainly due to due to the increased WC needs of EUR 848m and the EUR 448m capex, mainly driven by distribution and the new CCGT. Consequently, Group net debt rose by EUR 789m y-t-d to EUR 2.18bn, implying a comfortable net debt/EBITDA of 2.0x.
Divisional profitability split: PPC released also divisional EBITDA figures for the semester, with conventional generation divisional contribution turning negative at EUR 65m in 1H23 (vs. positive at EUR 594m last year), while on the other hand supply generated positive EBITDA of EUR 428m vs. losses of EUR 380m a year ago. Distribution contribution was 2% higher at EUR 209m (up by EUR 8m YoY on lower demand) and finally RES EBITDA contribution rose to EUR 17m vs. EUR 14m in 1H22 on increased capacity.
Conference call highlights: a) RES capacity currently at 669MW, expects to reach 1GW capacity year end; RES EBITDA contribution at EUR 40m in 2023, excluding ENEL Romania b) hedged more than 90% of CO2 costs c) management confident that it will complete the ENEL Romania acquisition in 3Q23e, and hold an investor day in autumn d) expects Net Debt/EBITDA to 3.0x in 2023 (from 2.0x in 1H23) on faster capex execution towards RES and distribution, f) expects significant WC release in 2H23 from the collection of state subsidies on tariffs
Conclusion: PPC reported a strong set of results which drove the upgrade on the annual guidance by EUR 100m to EUR 1.2bn, while at the same time executed its RES investment programme at a faster pace. Having said that, we expect that PPC is set to meet the stated EBITDA target for 2023e of EUR 1.2bn (excluding acquisitions), above our latest EUR 1,062bn estimate (we will soon revert with updated estimates on the company).
OTE | U/R | CP EUR 14.35 | TP U/R
2Q23 results in line with consensus, Mgt reiterated FCF guidance and does not expect price increases
OTE reported 2Q23 results that came in line with consensus estimates. Group revenues came in at EUR 854.1m (+1.1% y-o-y), slightly above consensus estimate of EUR 845m. Adjusted EBITDA reached EUR 349m (-1% y-o-y), in line with consensus estimate of EUR 348m. Net profit was shaped at EUR 112m (+5% y-o-y), slightly below consensus estimate of EUR 114m. Adj. FCF (AL) came in at EUR 376.7 (-2.8% y-o-y) and net debt dropped by 336.1m y-t-d to EUR 390.6m.
|
(EUR m) |
2Q23 |
2Q22 |
YoY |
vs Cons |
1H23 |
1H22 |
YoY |
|
|
Revenues |
854.1 |
844.8 |
1.1% |
1.1% |
1,657.7 |
1,665.1 |
-0.4% |
|
|
Adj. EBITDA |
349.1 |
353.4 |
-1.2% |
0.2% |
691.6 |
699.6 |
-1.1% |
|
|
Adj. EBITDA (AL) |
326.8 |
332.8 |
-1.8% |
– |
648.8 |
658.1 |
-1.4% |
|
|
mgn (%) |
38.3% |
39.4% |
– |
– |
39.1% |
39.5% |
– |
|
|
Net profit |
111.9 |
106.8 |
4.8% |
-1.4% |
247.2 |
236.2 |
4.7% |
|
|
Adj. FCF (AL) |
147.9 |
159.9 |
-7.5% |
– |
376.7 |
387.7 |
-2.8% |
|
|
Net Debt |
390.6 |
537.4 |
-27.3% |
– |
390.6 |
537.4 |
-27.3% |
source: Company, Bloomberg consensus
Greece: posted once again a good performance with revenues up 2.4% on strong mobile (+2.4% y-o-y, visitor roaming revenues +13% y-o-y) and ICT revenues (+12.4% y-o-y) whilst retail services revenues decreased by 3.7% y-o-y. Fiber service subscribers rose by 7.0% y-o-y to 1.51m and FTTH soared by 109.8% y-o-y to ca 194k.
Romania: performance remained weak with revenues down by 11.4% y-o-y and adj. EBITDA (AL) down 65.0% y-o-y, reflecting the loss of the contribution from MVNO services to FMC customers and the impact from mobile termination rate (MTR) cuts.
FY Guidance: Management confirmed its reported Free Cash Flow guidance of ca EUR 500m in 2023 as well as its CapEx guidance of EUR 640m and expects Greece to maintain trends in 2H23, supported by positive revenue trends in key segments and lower costs in certain categories. Nevertheless, group operations should remain impacted by challenging conditions in Romania.
Conference call highlights: Management stated that government officials prefer the market to maintain its current status and therefore it does not expect any price increases. FTTH coupon to the customer is also expected to be launched by the end of the year or early 2024.
Reportedly (euro2day), National Bank of Greece buybacks leased real estate assets from Prodea Investments REIC and has acquired three assets for EUR 151m hitherto, while the agreement encompasses the acquisition of over 40 properties. The same reports suggest that the total cost of the agreement will reach EUR 300m.
Galaxy Cosmos Mezz announced that a reconvened Annual General Meeting will be held on Monday 07 August at 11.00 a.m.
Calendar of Events
Macros
04/08/23 | Scope Ratings – Greek sovereign credit review
08/08/23 | CPI JUL
10/08/23 | Industrial Production Index JUN
11/08/23 | Import Price Index in Industry JUN
Results (2Q/1H23)
09/08/23 | Alpha Services & Holdings, Coca Cola HBC
10/08/23 | IDEAL Holdings
31/08/23 | HELLENiQ ENERGY
04/09/23 | OPAP
05/09/23 | Fourlis Holdings
EGM / AGM
07/08/23 | Galaxy Cosmos Mezz Plc (rep AGM)
29/08/23 | Mytilineos (EGM)
30/08/23 | Intralot (AGM)
04/09/23 | Thessaloniki Water Supply (AGM)
05/09/23 | Frigoglass (AGM)
06/09/23 | EYDAP (AGM), Biokarpet (EGM)
Ex-Dividend
07/08/23 | Piraeus Port Authority (EUR 1.04), Ekter (EUR 0.08)
23/08/23 | Jumbo (EUR 0.3220), Elastron (EUR 0.2020)
24/08/23 | KRI-KRI (EUR 0.20)
28/08/23 | ADMIE Holding (EUR 0.058)
11/09/23 | Thessaloniki Water Supply
13/09/23 | EYDAP (EUR 0.02)
14/09/23 | Real Consulting (EUR 0.03)
Ex-Capital Return
23/08/23 | GEK Terna (EUR 0.20)
28/08/23 | Biokarpet (EUR 0.015)
07/09/23 | Athens Medical Center (EUR 0.03)
| OPTIMA bank |
Research Department
Τ: 210 8173 383 F: 210 3279 287 E: [email protected] 32 Aigialeias & Paradissou str., 15125, Maroussi optimabank.gr |
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