Zacks Investment Research upgraded shares of Companhia Energetica de Minas Gerais (CIG) from UNDERPERFORM to NEUTRAL on January 07, 2014, with a target price of $8.25.
We find the long-term growth prospects of CEMIG to be bright. Electricity demand is growing in Brazil with the national agency, in its 10-year plan till 2019, predicting a consumption rise of about 5.9% annually. Government spending plans to improve the industry's infrastructure is an added boon. For CEMIG, new projects, strategic acquisitions and investments bode well for the future. The recent partnership with Vale will also bear fruit going forward by enabling Cemig GT to exploit business opportunities. Moreover, the company's focus on rewarding shareholders through dividend payments is quite evident from the payments made in Dec 2013. Considering these, we upgraded CEMIG from Underperform to Neutral, on expectations of the company's better performance in line with the broader market. Rising operating expenses, governmental interference and dependence on hydro sources for electricity also prevented us from being too optimistic about the stock.
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