{"id":324685,"date":"2023-08-30T17:56:25","date_gmt":"2023-08-30T09:56:25","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=324685"},"modified":"2023-08-30T17:56:27","modified_gmt":"2023-08-30T09:56:27","slug":"stock-in-focus-manila-electric-co-meralco-mer-30-aug-2023-by-regina-capital-development-corp","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-electric-co-meralco-mer-30-aug-2023-by-regina-capital-development-corp\/","title":{"rendered":"Stock in Focus: Manila Electric Co. – Meralco (MER) – 30 Aug 2023 by Regina Capital Development Corp."},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>MER<\/td><\/tr>
Company Name<\/strong><\/td>Manila Electric Co. (Meralco)<\/td><\/tr>
Broker<\/strong><\/td>Regina Capital Development Corp.<\/td><\/tr>
Opinion Issued on<\/strong><\/td>30 Aug 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 400.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

We are keeping our BUY rating on MER but revising our Target Price to P400\/share, reflecting the beat in our earlier estimates. We continue to see MER to post resilient figures for the balance of the year with demand staying elevated during El Ni\u00f1o, sustained momentum in its generation biz, and the diminished need to book substantial provisions.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

Summer season, coupled with the lifting of the pandemic status globally has affected Manila Electric Company (MER)’s 2Q 2023 performance positively. Hence, during the quarter MER saw its consolidated revenues to increase by +4.82% year-on-year (y\/y) to P119.18 billion. Breaking the topline down, 97% or P115.96 billion came from sale of electricity and the 3% balance from sale of other services. Driving its 2Q 2023 Net Income (NI) up +53.33% y\/y to P10.14 billion and core NI up by +52.84% y\/y to P10.16 billion.<\/p>\n\n\n\n

As briefly mentioned, summer season in the PH and more liberty to proceed with normal ops of business which resulted in higher demand from residential and commercial segments pushed the sale of electricity went up by +4.9% y\/y, with peak demand reaching 12,431 MW (+2.63% y\/y). However, the industrial segment posted a low single digit decline in demand still due to plant shutdowns and stringent competition in the likes of the semiconductors an, plastics, cement, and steel industries. The topline expansion was supported by the +14% y\/y increase in average retail rate to P10.68\/kWh on higher generation charges, as well as the +8.03% y\/y rise in WESM which averaged at P7.13\/kWh. Meanwhile, its average distribution charge got trimmed by -11% y\/y to P1.08\/kWh brought by the implementation of the DRTU adjustments.<\/p>\n\n\n\n

Recall that the ERC ordered that the DRTU be refunded to the public. MER managed to comply with it and completed the refund last May. Hence, moving forward, MER now has more leg room to reduce its provisions. However, it might take some time for MER\u2019s reset in tariff to materialize as the ERC has the reset of transmission operator over DUs as its priority.<\/p>\n\n\n\n

On the other hand, MER\u2019s powergen managed to sustain its momentum in 2Q 2023 as it contributed P2.9 billion (+163% y\/y) to MER\u2019s core NI. This was all thanks to the PacificLight\u2019s strong performance amid tight power supply in Singapore.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>