Donbasenergo doubles EBITDA, triples profit in 1H13

Power GenCo Donbasenergo (DOEN UK) reported a 2.3x yoy increase in IFRS-based EBITDA for 1H13, according to a July 25 statement. The company’s net profit surged 3.1x yoy to UAH 465 mln in 1H13. Donbasenergo posted 9% yoy growth in revenue to UAH 2,481 mln, against the backdrop of a 5% yoy drop in power output to 3.95 TWh.

Alexander Paraschiy: The company’s EPS for just 1H13 amounted to UAH 19.7, which is close to DOEN’s market price (UAH 24/share). As a state-controlled company, Donbasenergo will have to pay at least 30% of its annual profit in dividends (even if privatization of its 60.8% stake happens this year), which implies the company will become a generous dividend payer in the next year.

While there is a high risk that Donbasenergo will try to hide its profit in the coming quarters to minimize the full-year bottom line and dividend-related cash outflow (as it did last year), we see a high probability that it will still post a record profit this year. In particular, in 2H13 the company will receive an additional CapEx-related profit of UAH 96 mln (refer to our news from June 25), which will make the profit-hiding task increasingly hard for the company. We therefore consider Donbasenergo to be the most promising stock on the Ukrainian Exchange.