Zacks Investment Research downgraded shares of Companhia Energetica de Minas Gerais (CIG) from NEUTRAL to UNDERPERFORM on June 27, 2013, with a target price of $8.00.
Despite compelling long-term growth prospects, concerns surrounding the stock have forced us to downgrade Cemig from Neutral to an Underperform recommendation, indicating poor performance with regard to the market in the next 6-12 months. Cemig is majorly owned by the government and, hence, faces risks of political interference in relation to its operational matters. Further, low rainfall impacts the company's electricity generation capacity while rising cost of services and operating expenses adversely impact margins. In the first quarter 2013, expenses grew by 7% year over year and were offset partially by the revenue increase in the quarter. Also, denomination of a portion of loans and financings in foreign currency, raises risks of higher financial expenses in the event of devaluation of the Brazilian currency.
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