IDGC Center: profit doubled, but operating cash flow fell short of last year

On August 28, 2026, IDGC Center reported Q2 2026 results: revenue grew 13.8% YoY, EBITDA 33.6%, and net profit 114.7%. This review examines what drove the profit surge, why operating cash flow lags profit, and how this affects the stock's valuation.

Key takeaways

— Net profit doubled on higher EBITDA and lower finance costs

— EBITDA margin rose to 29.0% as revenue outpaced costs

— Operating cash flow fell 13.5% YoY despite higher profit

— Leverage remains low: net debt is 0.88 of trailing EBITDA

— Capex increased but remains below operating cash flow

— Stock trades at a discount to its own history: EV/EBITDA 1.52 vs 2.12 three-year average

Key figures, RUB bn

Net profit doubled on higher EBITDA and lower finance costs

In Q2 2026, IDGC Center's net profit reached 4,550.0 million RUB, up 114.7% YoY. The main driver was EBITDA growth of 33.6% to 11,022.9 million RUB, along with lower interest expenses: for H1 they fell from 3,178.9 million to 2,706.9 million RUB.

An additional contribution came from a reversal of expected credit losses of 170.6 million RUB for the half-year, as well as higher other income, including revenue from detected non-contractual electricity consumption (62.6 million RUB for H1).

As a result, net margin jumped to 12.0% from 6.3% a year earlier. This is the best quarterly figure in two years.

EBITDA margin rose to 29.0% as revenue outpaced costs

In Q2 2026, EBITDA margin reached 29.0% versus 24.7% a year earlier. Revenue grew 13.8% to 38,040.3 million RUB, while operating costs grew slower: staff costs rose 13.8% (to 9,904.4 million RUB for the quarter), materials costs 10.9% (to 6,696.7 million RUB), and electricity transmission services costs 13.3% (to 9,502.2 million RUB).

The main contribution to revenue growth came from electricity transmission services, which rose 13.2% to 34,256.9 million RUB for the quarter. Grid connection revenues increased 26.2% to 2,738.5 million RUB.

The decline in the cost-to-revenue ratio drove margin expansion. EBITDA growth (33.6%) significantly outpaced revenue growth, indicating positive operating leverage.

Operating cash flow fell 13.5% YoY despite higher profit

In Q2 2026, operating cash flow was 5,906.2 million RUB, down 13.5% YoY (5,817.7 million RUB in Q2 2025). The decline occurred despite higher net profit, explained by increased working capital outflows: receivables rose and payables fell.

For H1, operating cash flow grew 10.2% to 15,845.8 million RUB, but the trend worsened in Q2. This matters because dividends and capex are funded from operating cash flow.

Nevertheless, operating cash flow remains sufficient to cover capex: for H1, capex was 13,180.5 million RUB, which is 2,665.3 million RUB below operating cash flow.

Leverage remains low: net debt is 0.88 of trailing EBITDA

At the end of Q2 2026, IDGC Center's net debt stood at 33,136.3 million RUB, down 0.6 billion RUB from the previous reporting date and 2.8 billion RUB lower than a year earlier. The net debt to trailing twelve-month EBITDA ratio is 0.88.

The debt reduction was driven by positive free cash flow: in H1, operating cash flow exceeded capex by 2.7 billion RUB. Interest expenses for H1 fell 15% to 2,706.9 million RUB, also supporting net profit.

Low leverage leaves room for higher dividends or funding the investment program without taking on significant debt.

Capex increased but remains below operating cash flow

In Q2 2026, capex was 5,847.1 million RUB, down 4.8% YoY (6,143.7 million RUB). For H1, capex rose 9.9% to 13,180.5 million RUB, in line with the investment program.

Operating cash flow for H1 (15,845.8 million RUB) comfortably covers capex, resulting in positive free cash flow of 2,665.3 million RUB. This allows the company to fund its investment program without increasing debt.

However, in Q2 free cash flow was minimal – only 59.1 million RUB (5,906.2 million operating cash flow minus 5,847.1 million capex), reflecting seasonality and working capital growth.

Stock trades at a discount to its own history: EV/EBITDA 1.52 vs 2.12 three-year average

Based on trailing twelve-month figures (EBITDA – 41,422.9 million RUB, net profit – 14,746.1 million RUB), IDGC Center shares trade at an EV/EBITDA multiple of 1.52, significantly below the three-year average of 2.12. P/E stands at 1.78.

Dividend yield over the last 12 months is 10.63%, above the level we consider fair for this stock (10.5%). The model implies a payout ratio of 40% of profit, consistent with the current dividend policy.

The discount to its own history may reflect investor concerns about tariff growth slowdown or higher capex, but given current profitability and leverage, the valuation looks attractive.

Valuation on the latest reported figures

Bottom line

IDGC Center delivered a strong quarter: net profit doubled on higher EBITDA and lower interest costs, with profitability at a two-year high. Leverage remains low (0.88 EBITDA), supporting dividend appeal. However, operating cash flow declined in Q2, and free cash flow was minimal – a key concern for shareholders expecting stable dividends. At current valuation (EV/EBITDA 1.52 vs 2.12 three-year average), the market prices in deterioration, but if the company maintains operational efficiency, the re-rating potential is significant.