CEZ AS increased for a fourth day, its longest stretch of gains since December, as Banco Espirito Santo SA recommended buying the biggest Czech utility’s shares.
The stock jumped as much as 2 percent and closed up 0.7 percent at 612 koruna, with the number of shares changing hands at 164 percent of the three-month daily average. CEZ fell 13 percent this year through Feb. 28 to its lowest level since October 2008 as power prices tumbled.
Espirito Santo upgraded Prague-based CEZ to buy from sell today in a report from Warsaw-based analyst Maciej Hebda, naming CEZ its top pick among utilities in emerging Europe. While power for next-year delivery in Germany, where CEZ exports part of its output, slid to a record-low 40.40 euros on Jan. 31 and traded at 41.30 euros today, the company said on Feb. 28 it had presold more than a half of its 2014 output at 49.50 euros to 50 euros.
“The market overreacted to the recent German power-price decline” and “overlooked the positive impact of hedging on achieved prices,” Hebda said in the research note. The stock’s valuation is “attractive given higher expected dividend yield versus Polish utilities,” he said.
Espirito increased its “fair value” price estimate for CEZ shares to 745 koruna from 683 koruna in the report.