Meralco volumes decline 1.8% in 1Q driven by weather
From AB Capital's The Opening Bell: Three Moves
Event
Meralco reported a 1.8% YoY decline in 1Q energy sales volume to 12,273 GWh, driven mainly by cooler weather which weighed on residential and commercial demand. Industrial sales also softened amid macro headwinds.
View
We see the decline as largely weather-driven, with cooler temperatures weighing on demand in the quarter. Commercial and industrial demand may remain subdued in the coming quarters amid still-weak macro conditions, while residential demand remains more sensitive to temperature movements. Management guided for 3% full-year energy sales volume growth, pointing to a gradual recovery outlook.
Catalyst
Key catalysts include normalization of temperatures supporting residential load and incremental demand from new connections. Key risk is a sustained higher inflation environment, which could weigh on consumption and delay recovery in commercial and industrial demand.
Action
We continue to like Meralco for its defensive earnings profile, supported by regulated returns and resilient cash flow visibility. We would look to accumulate on any weakness given its earnings quality and limited downside through the cycle.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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