{"id":328616,"date":"2024-07-30T12:45:12","date_gmt":"2024-07-30T04:45:12","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=328616"},"modified":"2024-07-30T12:45:14","modified_gmt":"2024-07-30T04:45:14","slug":"stock-in-focus-manila-electric-co-meralco-mer-30-july-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-electric-co-meralco-mer-30-july-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Manila Electric Co. – Meralco (MER) – 30 July 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>28 July 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
<\/div>\n\n\n\n

We maintain a HOLD rating on MER, mainly due to the lack of progress in its tariff adjustments and its franchise renewal bid. These uncertainties have prompted us to impose a 15% regulatory risk discount on MER\u2019s business, resulting in a Target Price of P351.25. Without the regulatory risk discount, our Target Price would have been P395.67. Note that given the earnings outperformance in the first half, we may put our rating for MER under review for a potential upgrade.<\/p>\n\n\n\n

<\/div>\n\n\n\n

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

MER hikes full-year guidance<\/h3>\n\n\n\n

MER reported stellar earnings growth of 31.3% year-on-year (YoY) to P12.8-Billion in 2Q24, on the back of a surge in demand for electricity during the scorching summer months. The outperformance has led MER management to raise its 2024 earnings guidance from P40-Billion to P43-Billion, although warning that demand may weaken in the second half due to the onset of a La Ni\u00f1a-boosted rainy season. Note that the 1H 2024 figures represent 56.6% of our 2024 forecast for MER.<\/p>\n\n\n\n

Sales volume rise on hot demand<\/h3>\n\n\n\n

MER\u2019s power distribution unit reported that 2Q 2024 energy sales jumped 19.0% QoQ and 8.5% YoY to 14,647 GWh. The rise in power demand was driven mainly by the Residential segment, which saw a 13.0% YoY jump in 2Q24 energy sales to 5,571 GWh. Commercial demand for the period also increased by 8.9% to 5,389 GWh, driven by hotels which saw a 14% surge in sales. Growth in the Industrial segment remained flattish at +1.6% YoY, although the company said that key plastics, cement, and semicon accounts posted mid-single digit growth.<\/p>\n\n\n\n

Powergen earnings tempered by Singapore, somewhat offset by Panay<\/h3>\n\n\n\n

MGen\u2019s Singapore affiliate, PacificLight Power, reported a 29% drop in 1H 2024 core net income to P6.4-Billion as the Singapore electricity market continued to normalize. This is an improvement from the 57% drop in core income reported in 1Q 2024. Weakness in Singapore was somewhat offset by a 78% jump in core earnings from Global Business Power, MGen\u2019s wholly-owned portfolio of power plants in VisMin, which reported a net income of P1.5-Bn for the period. <\/p>\n\n\n\n

Management cited the termination of its Panay power plant\u2019s fixed rate PSA, which allowed PEDC to take advantage of elevated WESM prices during the second quarter.
MGreen, MGen\u2019s RE unit, reported a 68% jump in core net income on the back of fresh contributions from new solar plants and the newly-acquired SPNEC portfolio.<\/p>\n\n\n\n

<\/div>\n\n\n\n

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