{"id":331690,"date":"2025-02-28T01:00:21","date_gmt":"2025-02-27T17:00:21","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=331690"},"modified":"2025-02-28T01:01:11","modified_gmt":"2025-02-27T17:01:11","slug":"stock-in-focus-manila-electric-co-meralco-mer-28-feb-2025-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-electric-co-meralco-mer-28-feb-2025-by-ap-securities\/","title":{"rendered":"Stock in Focus: Manila Electric Co. – Meralco (MER) – 28 Feb 2025 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 Feb 2025<\/td><\/tr>
Recommendation<\/strong><\/td>Hold<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 499.60<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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After factoring the 2024 earnings beat into our forecasts and making further revisions to our regulatory risk discount to reflect the progress of MER\u2019s franchise renewal, we upgrade our Target Price for MER from P479.20 to P499.60\/share. Our Target Price represents a potential upside of only 3.0% from MER\u2019s last traded price of P485.00, reinforcing our belief that the run-up in MER\u2019s price has sufficiently priced in its prospects. As such, we remain a HOLD on MER.<\/p>\n\n\n\n

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

Earnings surpass both company guidance and estimates<\/strong><\/p>\n\n\n\n

MER reported a net income of P45.9-Billion, up +20.6% year-on-year (YoY), surpassing company guidance of P43.0-Billion and our more conservative estimate of P41.4-Billion. The outperformance surprisingly came from the distribution utility side of the business, as energy sales growth for both residential (+12.6%) and commercial (+9.9%) segments surprise to the upside, driving the 6.4% growth in energy sales for the period. Notably, we forecasted energy sales for residential to reach only 18,443 GWh (actual: 19,455) and commercial to reach 20,013 GWh (actual: 20,406). Industrial, on the other hand, trailed our estimate of 14,724 GWh (actual: 14,318).<\/p>\n\n\n\n

Tempered slowdown in powergen<\/strong><\/p>\n\n\n\n

We have previously flagged an expected slowdown from MER\u2019s powergen associate in Singapore, Pacific Light, as energy prices in the city state normalize from last year\u2019s elevated levels. This materialized with an 18% drop in Pacific Light\u2019s core consolidated net income (CCNI) contribution, which ended the year at P13.3-Billion. However, this slowdown was somewhat offset by windfall profits from MThermal (formerly Global Business Power) thanks to its participation in the co-optimized energy and reserve market, which allowed the unit\u2019s CCNI contribution to surge by 411% to P3.5-Bn. Overall, powergen\u2019s total contribution to (CCNI) jumped by 12.4% to P10.9-Bn, a faster growth rate than the 3.1% that we factored into our forecasts.<\/p>\n\n\n\n

Regulatory updates<\/strong><\/p>\n\n\n\n

MER has already filed its application to increase its distribution charges from P1.58\/kWh to P1.69\/kWh. The ERC has set hearings from March 3 to April 5, and should (ideally) make a decision before the new regulatory period starts in July. In addition, the bill granting an extension of MER\u2019s franchise beyond 2027 has already made progress, with Senate approving it on the third reading before it went on recess earlier this month and with the House concurring with the Senate amendments. The bill is now awaiting the endorsement of the House Speaker and Senate President to the Office of the President for signature. However, this won\u2019t be done until after the midterm elections and could be overshadowed by the impending impeachment hearings against Vice President Sara Duterte.<\/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>