CEZ: good 9M2005 numbers - no surprise

Net income came in at CZK 13.42bn, which is 3% below market expectations and 6% below our forecast on larger currency losses. Total revenues were helped by an increase in electricity sales revenues by 7.9% yoy to CZK 43.5bn thanks to the higher electricity price (+11.1% yoy) offsetting lower electricity sales. Total operating costs decreased by 4.2% yoy to CZK 24.8bn due to higher utilization of lower-cost power plants and lower electricity purchases, and repairs & maintenance costs. The EBITDA margin expanded to 50% from its previous 43%. CEZ increased its FY2005 unconsolidated net income target by 5% to CZK 16bn and consolidated by 6% to CZK 17.1, which is in line with our expectations. The company said that it may review its dividend policy of a CZK 1 per share annual increase at its June AGM should it be unsuccessful in further acquisitions. Given the operating performance being in line with our expectations, we keep our projections unchanged and reiterate a fair value of CZK 855 with a Buy recommendation.