TGK-14: H1 profit doubles, but debt growth raises quality concerns

On August 25, TGK-14 released its results for the first half of 2026. Revenue grew 19.2%, EBITDA – 64.6%, net profit – 109.3%, driving net margin to 6.5% from 3.7% a year earlier. This review examines what lies behind these figures, how debt changed, and why the stock has fallen since the release.

Key takeaways

— H1 revenue grew 19.2% to RUB 23.7 bn, but growth slowed in Q2

— EBITDA margin jumped from 14.6% to 20.2% – operating leverage on tariff growth

— Net profit doubled, but 6.5% margin still below pre-crisis levels

— Debt rose RUB 2.7 bn in the quarter and RUB 3.0 bn over the year – to RUB 11.2 bn

— Net debt/EBITDA LTM stands at 3.16 – above sector average

— No dividends paid, but model suggests fair yield of 10.8%

— Stock falls after report: -9.8% since release despite profit growth

Key figures, RUB bn

H1 revenue grew 19.2% to RUB 23.7 bn, but growth slowed in Q2

For H1 2026, TGK-14's revenue reached RUB 23.7 bn, up 19.2% year-on-year. The main driver, judging by the dynamics, was tariff increases for heat and electricity, as well as higher useful supply.

However, growth slowed in Q2: after a faster Q1, Q2 was more modest. This is visible in the half-year dynamics, though exact quarterly figures are not disclosed. Slower Q2 is typical for the power sector, as Q1 includes the heating season.

EBITDA margin jumped from 14.6% to 20.2% – operating leverage on tariff growth

EBITDA for H1 grew 64.6% YoY, with EBITDA margin expanding from 14.6% to 20.2%. This jump is the result of operating leverage: with revenue up 19.2%, a significant portion of costs remained fixed, leading to disproportionate growth in operating profit.

The margin improvement is the main positive of the report. It shows the company converted tariff growth into profit, not just revenue. However, sustainability of this margin level will depend on fuel price dynamics and future tariff indexation.

Net profit doubled, but 6.5% margin still below pre-crisis levels

Net profit for H1 grew 109.3% YoY, with net margin reaching 6.5% versus 3.7% a year earlier. This is a significant improvement, but the absolute profitability level remains modest for a power company.

Profit growth is partly driven by operational results, but may also be supported by one-off factors such as revaluation of financial investments or FX differences. These items are not highlighted in the report, so their contribution cannot be assessed. Nevertheless, profit doubling is a fact that the market, judging by the stock dynamics, is not rushing to price in.

Debt rose RUB 2.7 bn in the quarter and RUB 3.0 bn over the year – to RUB 11.2 bn

Net debt at the latest balance sheet date stood at RUB 11,163.21 mn, up RUB 2.7 bn from the previous reporting date and RUB 3.0 bn over the last 12 months. Debt growth is a key negative in the report, especially against the backdrop of profit growth.

Rising debt amid growing profit may indicate that the company is financing capex or working capital through borrowings. Operating cash flow for the last 12 months was RUB 1,600.0 mn, notably below net profit and EBITDA – possibly some profit is not converting into cash due to receivables growth or other factors.

Net debt/EBITDA LTM stands at 3.16 – above sector average

Net debt to EBITDA for the last 12 months is 3.16. For the power sector, this is considered elevated: comfortable levels are usually below 2.5–3.0. High leverage limits financial flexibility and increases sensitivity to interest rate hikes.

Importantly, LTM EBITDA includes H1 2026 results, when margins were record-high. If margins revert to more typical levels in H2, the ratio may worsen. Debt growth of RUB 3.0 bn over the year against LTM EBITDA of RUB 3.5 bn is a worrying sign.

No dividends paid, but model suggests fair yield of 10.8%

Over the last 12 months, the company paid no dividends, and our model also estimates the next payout at RUB 0.0 per share. Nevertheless, the forward yield based on our estimate is 19.1%, significantly above the fair yield for this name of 10.8%.

Such a high forward yield with zero payouts seems paradoxical, but it reflects market expectations of future dividends. However, given the current debt level and no payouts in the past, the likelihood of imminent payments remains low. Investors should focus on actual dividend history rather than model estimates.

Stock falls after report: -9.8% since release despite profit growth

The share price before the release was RUB 0.00397, rose 0.8% on the release day, but has since fallen 9.8%. Thus, the market reacted negatively to the report despite strong operational performance.

The decline is likely due to rising debt and weak operating cash flow. Investors may question profit quality and margin sustainability. At the current market cap of RUB 5,024.40 mn and EV/EBITDA LTM of 4.58 versus the 3-year average of 5.44, the stock trades at a discount to its own history, but this discount may be justified by high debt.

Valuation on the latest reported figures

Bottom line

Bottom line: TGK-14 delivered a strong half-year – revenue and EBITDA grew double-digit, margin expanded to 20.2%, net profit doubled. However, the quality of these results is questionable: debt rose RUB 3.0 bn over the year, operating cash flow is weak, and no dividends are paid. The market rightly punishes the stock – it has lost 9.8% in recent weeks. For holders, the key question is whether the company can convert profit into cash and stabilize debt; otherwise, the current discount to its history may persist.