Dniproenergo increases net income 74% y-o-y in 1H11

Dniproenergo (UX: DNEN UK), Ukraine’s largest thermal electricity generator, reported this morning 1H11 revenues of UAH 4,131 mln (up 56% y-o-y) and net income of UAH 332 mln (up 74% y-o-y, margin of 8%), according to Interfax. Yegor Samusenko: The company significantly improved its net margin to 8% in 1H11, from 2% in 1Q11 on the back of the hike in electricity selling prices for all thermal GenCos. Given that the company was the first GenCo to report its 1H11 results, we expect other GenCos also to report solid improvements in profitability. Though we see this sector-broad improvement being rather short-term and expect whole-year figures lower, we expect a positive market reaction in the most liquid names (Centrenergo (UX: CEEN UK), Donbasenergo (UX: DOEN UK)) on profitability in 1H11. We also note that for Dniproenergo, whose privatization is due to be announced in September, the 1H11 result will be used as one of the inputs to determine its starting price at the upcoming auction.