{"id":326498,"date":"2024-01-25T14:03:04","date_gmt":"2024-01-25T06:03:04","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=326498"},"modified":"2024-01-25T14:03:05","modified_gmt":"2024-01-25T06:03:05","slug":"stock-in-focus-manila-electric-co-meralco-mer-25-jan-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-electric-co-meralco-mer-25-jan-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Manila Electric Co. – Meralco (MER) – 25 Jan 2024 by AP Securities"},"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>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>25 Jan 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Hold<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 351.25<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Despite the impressive EPS growth, we maintain our HOLD rating on MER with a discounted Target Price of P351.25 as regulatory risks still loom large over the company.<\/p>\n\n\n\n

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

MER sees 4.5% sales volume growth this year<\/h3>\n\n\n\n

MER First Vice-President and Chief Commercial Officer Ferdinand O. Geluz said that the company is expecting energy sales to grow by 4.5% in 2024 as volume grows by mid-single digits across all business segments. Geluz expects a rebound in industrial sales following a weak 2023, while commercial sales growth is expected to slow to 5-6% following double-digit growth in 2023. He also said that they expect a \u201cspike\u201d in residential demand as customers start to feel the heat of El Ni\u00f1o.<\/p>\n\n\n\n

Company guidance is slightly ahead of our forecasts<\/h3>\n\n\n\n

The 4.5% volume growth expected by Mr. Geluz is slightly higher than the 3.8% volume growth we forecasted for the year. Our forecast of 5.5% sales growth for commercial is in-line with company guidance of \u201c5-6%\u201d, and while the company official did not provide specific figures for residential and industrial, our 2024 forecast for the two segments are 2.3% and 3.5% respectively.<\/p>\n\n\n\n

Revenues to tick lower from generation charge base effects<\/h3>\n\n\n\n

Despite volume growth, we expect a 2.2% downtick in MER revenues as generation charges start to normalize following the spike in generation costs in 2022-2023. However, given that these are simply pass-through charges and MER\u2019s net income is tied to distribution fees which will largely remain constant, EPS growth is expected to be a robust 27.2%. In particular, the company\u2019s continued push into power generation is bound to be the main growth driver, although profit margins from its Singapore power plant will likely narrow following the imposition of price caps on the Singapore electricity spot market.<\/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>