Monday, April 26, 2021 | special comment PGNiG: Forecast of 2021 Q1 Results Rating: accumulate | target price: PLN 6.84 | current price: PLN 6.80 PGN PW; PGN.WA | Oil&Gas, Poland Analyst: Kamil Kliszcz +48 22 438 24 02 PGNiG is slated to release its 2021 first-quarter results jumped nearly 80% y/y in Q1, facilitating adjusted EBITDA in on May 20th, 2021. the amount of PLN 1.29bn in the E&P segment vs. PLN 0.85bn in Q1 2020. Dry well charges will knock Based on selected operating figures disclosed by the PLN 100m off this on the reported level. Company, we are expecting adjusted quarterly EBITDA of no less than PLN 3.1 billion, representing an In the Trading segment, we are anticipating a 24% y/y slump increase of 22% from the same period a year ago. The in adjusted EBITDA due to higher gas costs and downward drivers behind such a strong rebound included the E&P pressure on retail margins (higher-than-forecast gas use segment, capitalizing on higher prices of gas and oil on implies a higher share of expensive spot buying). The scale comparable volumes, and the Distribution segment, of this phenomenon is best illustrated by quarter-to-quarter benefitting from higher tariff rates on a 15% larger changes in the segmental results (we estimate the increase volume. On the downside the Trading segment might in gas costs associated with tariff and non-regulated sales at see year-over-year contraction due to intercompany 0.8bn q/q). Note that the full effects of the linkage of the gas transactions. Yamal contracts to market prices did not kick in until March of last year. If accurate, our estimate would imply that PGNiG achieved 35% of our FY2021 LIFO EBITDA forecast in In the Distribution segment, PGNiG registered a 15% rise in the first quarter, indicating a need for upward the gas volume in Q1 2021, along with a tariff hike in revisions, in particular to the outlook for Distribution. February that, combined, are expected to boost segmental The first-quarter EBITDA of E&P is not likely to fulfill EBITDA close to PLN 1bn from PLN 0.8bn in Q1 2020. more than 23% of our FY forecast but from H2 2021 the segment’s contributions to consolidated revenues In the Heat segment, the sales volume increased as well in will increase with the addition of recent acquisitions. Q1, bringing with it higher costs of emission allowances that, however, are usually recognized as D&A expenses. As a The zloty price of crude oil was 15% higher in Q1 2021 than result we expect to see an increase in segmental EBITDA to in the same year-ago period, and in conjunction with PGNiG’s PLN 0.45bn from PLN 0.42bn a year ago. volume disclosures (incl. overlift in Norway) this suggests margin growth of approximately PLN 180m. When it comes to gas, the spot rates used to sell to the Trading business Historical quarterly results and FY2020 Q1 estimates (PLN m) Q1 20 Q2 20 Q3 20 Q4 20 Q1 21E YoY 2021E YTD Revenue 13,756.0 7,282.0 6,392.0 11,767.0 15,474.4 12% 47,734.3 32% EBITDA 2,078.0 7,274.0 1,333.0 2,324.0 3,063.8 47% 8,838.5 35% EBITDA (adj.) 2,598.0 1,331.0 1,338.0 3,158.0 3,163.8 22% 9,013.3 35% E&P 71.0 172.0 478.0 207.0 1,192.1 - 5,237.0 23% E&P (adj.) 846.0 327.0 483.0 954.0 1,292.1 53% 5,411.8 24% Trade & Storage 909.0 6,646.0 632.0 1,392.0 498.7 -45% 784.3 64% Trade & Storage (adj.) 654.0 549.0 632.0 1,392.0 498.7 -24% 784.3 64% Distribution 771.0 405.0 362.0 618.0 989.8 28% 2,117.6 47% Heat 416.0 117.0 35.0 362.0 449.3 8% 945.5 48% Other -89.0 -66.0 -174.0 -255.0 -66.0 - -246.0 27% EBIT 1,207.0 6,449.0 588.0 1,341.0 2,059.4 71% 4,967.7 41% Financing activity -261.0 -68.0 -375.0 144.0 3.7 -101% -44.3 -8% Net profit 779.0 5,141.0 116.0 1,304.0 1,547.3 99% 3,301.7 47% Source: PGNiG, E – mBank estimates List of abbreviations and ratios contained in the report: EV – net debt + market value (EV – economic value) EBIT – Earnings Before Interest and Taxes EBITDA – EBIT + Depreciation and Amortisation PBA – Profit on Banking Activity P/CE – price to earnings with amortisation MC/S – market capitalisation to sales EBIT/EV – operating profit to economic value P/E – (Price/Earnings) – price divided by annual net profit per share ROE – (Return on Equity) – annual net profit divided by average equity P/BV – (Price/Book Value) – price divided by book value per share Net debt – credits + debt papers + interest bearing loans – cash and cash equivalents EBITDA margin – EBITDA/Sales OVERWEIGHT (OW) – a rating which indicates that we expect a stock to outperform the broad market NEUTRAL (N) – a rating which indicates that we expect the stock to perform in line with the broad market UNDERWEIGHT (UW) – a rating which indicates that we expect the stock to underperform the broad market Recommendations of Biuro maklerskie mBanku: A recommendation is valid for a period of 9 months, unless a subsequent recommendation is issued within this period. 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