SHARES of Manila Electric Co. (Meralco) rose last week and outperformed the broader market as analysts said the company could absorb a customer refund without materially affecting its earnings or dividend payout.
Meralco ranked third in value turnover on the Philippine Stock Exchange (PSE), with P835.69 million worth of 1.37 million shares changing hands in the week of Aug. 3-7, PSE data showed.
The stock closed at P494 on Friday, up by 2.9% from P480 a week earlier. The gain outpaced the 0.7% rise in the Philippine Stock Exchange index (PSEi) and the 1% increase in the industrial sector over the same period.
Year to date, however, Meralco shares have fallen by 13.9%, underperforming the PSEi’s 3.9% gain and the industrial sector’s 5.7% decline.
The Energy Regulatory Commission on July 31 ordered Meralco to refund P9.5 billion to customers over six months. The regulator separately allowed the company to recover P8.7 billion in previously unrecovered pass-through costs over 36 months.
The rulings followed Meralco’s first-half results. The company posted a 3.8% increase in consolidated core net income to P26.5 billion, driven by stronger contributions from its power generation and retail electricity supply businesses.
Reported net income rose by 12.6% to P27.54 billion, while consolidated revenue climbed by 15.7% to P283.71 billion.
Jasper Timoteo A. Ondap, an equity analyst at Regina Capital Development Corp., said in a Viber message that the P9.5-billion refund would affect Meralco’s distribution utility revenue, although its impact on core earnings “may be milder than headlines suggest.”
He said Meralco was already processing a similar refund under its ongoing P20-billion refund cycle, but the amount and shorter implementation period of the new order “may dent it.”
Mr. Ondap said the P8.7-billion recovery should not be netted against the refund because the two sit in “entirely different brackets.”
He said the recovery covers pass-through costs, including generation and system loss charges, that Meralco collects and remits to power generators, the National Grid Corp. of the Philippines, and government agencies.
“Meralco can definitely do so without materially affecting its earnings guidance or dividend payout,” he said, referring to the company’s capacity to absorb the refund obligation.
Mr. Ondap said uncertainty remained over which party would ultimately bear the cost of system loss charges.
He added that the issue could weigh on the profitability of Meralco’s distribution utility business and affect any future rerating of the stock.
Jash Matthew M. Baylon, an equity trader at The First Resources Management and Securities Corp., said the refund, as a pass-through tariff, was unlikely to affect Meralco’s profits, although future earnings could face pressure from potentially lower rates.
Mr. Baylon said both the refund and the cost recovery are “regulated pass through and distribution tariffs,” which are unlikely to affect the company’s bottom line.
He added that Meralco’s full-year guidance and dividend payout remained achievable.
He said that despite the stock’s gain last week, investors remained cautious as they awaited clarity on the potential removal of system loss charges, which could have broader implications for the energy industry.
Juan Alfonso G. Teodoro, an equity analyst at Timson Securities, Inc., said the refund could weigh on earnings in the short term but was unlikely to significantly affect Meralco’s core business because it represents “more of an adjustment to return excess charges to customers rather than a sign that Meralco’s operations are weakening.”
Mr. Teodoro said the 3.8% growth in the company’s core income gave Meralco room to absorb the refund without hurting its full-year results.
“Our [earnings forecast in 2026 for] Meralco is approximately P52 billion,” he said.
Mr. Ondap placed support at P450 to P470 and resistance at P500.
Mr. Baylon placed support at P470 to P480 and resistance at P530.
Mr. Teodoro placed support at P450 and resistance at P520 to P530.
Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Pierce Oel A. Montalvo
