EBR - CEMIG Q1: Lukewarm Results And Few Updates Regarding Risks

2024-05-24 08:43:10 ET

Summary

• The 1Q24 results were discreet. However, some points were very positive, such as new divestments.
• The risks of federalization, which I believed to be remote, have not materialized. However, this remains the main risk for the company, and is on my radar.
• The discrepancy in the company's valuation metrics versus peers draws attention. I see no reason for an average discount of more than 20% compared to peers.

Investment Thesis

I recommend buying Cemig ( CIG ) shares after the release of the 1Q24 results on May 14th. The thesis that I described in my coverage initiation report published on March 26th is intact, where I described how the remote possibility of the company's federalization had caused the shares to fall and opened up an opportunity....

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