COPEL Q2: Another Mixed Result, Maintain Buy

Investment Thesis - COPEL (NYSE:ELP) is recommended for purchase following its neutral 2Q24 results, characterized by stable revenues and margins, with strong profit growth driven by a nonrecurring effect [2][20] - The company has shown positive trends in cost and expense control, alongside a reduction in leverage, indicating a pragmatic approach to management [2][20] Financial Performance - COPEL reported 2.2% annual revenue growth to BRL 5.4 billion ($980 million), with lower energy prices (-5.9%) and reduced wind power generation (-23%) contributing to the slowdown [6][4] - Adjusted EBITDA increased by 6% year-on-year to BRL 1.3 billion ($228 million), driven by a 32% increase in distribution performance, despite weaker generation and transmission results [9][11] - Net income surged by 53.9% year-on-year to BRL 474 million ($84 million), significantly boosted by a non-recurring item from the sale of the Araucária Power and Gas Plant for BRL 152 million ($27 million) [14][15] Cost Management - The company achieved a 9% year-on-year decrease in manageable generation and transmission costs, aided by gains from property sales and lower insurance costs [8] - The EBITDA margin remained stable, reflecting effective cost control despite modest revenue growth [11][10] Leverage and Debt - COPEL's leverage improved slightly to 1.9x net debt/EBITDA in 2Q24, demonstrating strong control over debt levels [12][13] - The company is expected to maintain low leverage while focusing on reducing expenses and ensuring resilient cash generation [13] Valuation - COPEL is viewed as attractively valued using the comparative evaluation method with P/E GAAP (FWD), suggesting potential for future growth [16][20] - The company is anticipated to adopt a cautious approach to dividends, with expectations for increased payouts only in 2025 [19]