OREANDA-NEWS. July 30, 2010. Enel OGK-5 published its 1H2010 operating and IFRS results.

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OGK-5 beat the consensus across the board: 3% higher on top line, 4% higher on EBITDA, 20% higher on net income, reported the press-centre of OTKRITIE Financial Corporation.

Top line growth was driven mainly by strong electricity demand recovery: OGK-5’s net electricity output amounted to 20.8 TWh in 1H10, up 21% YoY.

Profitability improvement (EBITDA margin amounted to 21% in 1H10, up 1 ppt. vs 1H09) is attributable to electricity market liberalization and improved operating efficiency.

Net income outpaced consensus thanks to forex gains of RUB1.3bn on the company’s euro-denominated loan in 1H10. OGK-5’s net financial gains amounted to RUB574m.

We believe that OGK-5’s 1H10 operating results will have a positive read-through for the entire generation sector, highlighting the electricity demand recovery and ability of the companies to maintain relatively high margins even in the seasonally-weak 2Q. The figure below shows Russian electricity consumption data, and our adjustments for weather and non-working days factors.

Valuation: OGK-5 trades at USD372/kW vs. the OGK average of USD265/kW.

Action: We view the results positively for OGK-5 and for the generation sector in general. Our top picks among gencos are Mosenergo, TGK-1 and OGK-1. We maintain HOLD rating on OGK-5, though anticipate short-term support in the stock.