Meridian Energy Earnings: Good Momentum Likely To Continue in Fiscal 2024

Narrow-moat Meridian Energy performed well in fiscal 2023 despite missing most of the rain that benefited North Island hydroelectric competitors. EBITDA increased 10% to NZD 783 million, in line with expectations, and underlying net profit after tax rose 35% to NZD 315 million, beating our forecast by 9% because of lower-than-expected interest expense. Strength was broad-based, with positives including higher customer sales volumes, higher generation volumes, and higher retail prices. Dividends increased 3% to NZD 17.90 cents per share, 80% imputed for New Zealand residents. We upgrade our medium-term EBITDA forecasts by 3% after increasing expectations for retail prices and increase our fair value estimate by 4% to NZD 4.80 per share. At current prices, Meridian is slightly overvalued, offering a forecast fiscal 2024 dividend yield of 3.8%.