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Cemig（CMIG4.SA）2Q24~Moving forward despite federalization headwinds
UBS·2024-08-15 02:59

Investment Rating - The investment rating for Cemig is Neutral with a 12-month price target of R10.40pershare[5][6][23].CoreInsights−Cemigreportednetrevenueex−constructionofR10.40 per share [5][6][23]. Core Insights - Cemig reported net revenue ex-construction of R8,177 million for 2Q24, reflecting a 3% year-over-year increase, which aligns with UBS estimates and consensus [2][9]. - Adjusted EBITDA for the same period was R1,726million,whichis51,726 million, which is 5% lower year-over-year and 4% below UBS estimates, while net income increased by 36% year-over-year to R1,689 million, primarily due to a provision reversal of R584million[2][3][10].−Thecompanyplanstorampupcapitalexpendituressignificantly,withaguidanceofR584 million [2][3][10]. - The company plans to ramp up capital expenditures significantly, with a guidance of R6.2 billion for 2024, following a capex of R1.4billionin2Q24[2][3].FinancialMetrics−Thevolumeofenergybilledinthedistributionbusinessincreasedby31.4 billion in 2Q24 [2][3]. Financial Metrics - The volume of energy billed in the distribution business increased by 3% year-over-year, driven by a 7% increase in the residential segment and a 3% increase in the industrial segment [3]. - Consolidated costs and expenses rose by 2% year-over-year, with notable increases in personnel costs (17%) and materials and third-party services costs (11%) [3][9]. - The company announced a dividend payment of R1.4 billion, resulting in a 4.2% dividend yield based on the last close [2][3]. Valuation and Forecast - The valuation of Cemig is based on a DCF FCFE model, with key assumptions including a long-term energy price of R$178/MWh and a cost of equity of 14.1% [5][6]. - Forecasts indicate a price appreciation of -6.3% and a dividend yield of 9.8%, leading to an expected stock return of 3.5% [11]