Mercury NZ Earnings: Better-Than-Expected First Half Leads to Guidance Upgrade

Narrow-moat-rated Mercury NZ lifted fiscal 2024 EBITDA guidance by 5% to NZD 880 million after a better-than-expected first half. We increase our forecast in line and marginally lift longer-term forecasts given the positive outlook for electricity prices. We forecast a five-year EBITDA CAGR of 4.5% on completion of developments and rising retail prices. Our fair value estimate increases by 4% to NZD 5.40 per share. At current prices, the stock is overvalued. Full-year dividend guidance is unchanged at NZD 0.23 per share, representing a yield of 3.4%.