CEZ Group: Transition comes with high investment needs

~70% state-owned CEZ is one of the largest vertically integrated utility groups in Central and Eastern Europe and market leader in the Czech Republic. For 2024, consolidated revenues of CZK 345bn (+1.2% y/y) were reported, a new record high. Profitability rose further, cash flows remained strong, and net profit amounted to CZK 31bn (+3.2% y/y).

Net debt, however, increased as the growth strategy also focuses heavily on decarbonization and this transition is partly financed by debt, primarily through sustainable financing instruments. Average annual investments of over CZK 70bn are planned for the acquisition of non-current assets by 2030 (without expansion of nuclear power capacities). We believe CEZ is well prepared for a successful transition to a lower-emission generation portfolio. We consider three of the six outstanding EUR benchmark bonds to be undervalued.