ENERGY CO OF MINAS GERAIS (CIG): what the price assumes
The priced-in model claim for ENERGY CO OF MINAS GERAIS (CIG) is temporarily suppressed because its solve record is unavailable. The separately dated narrative remains a snapshot, not a current quote.
Generated: 2026-07-24 · Exported: 2026-07-25 · Source: https://boothcheck.com/report/CIG
Headline
| Field | Value |
|---|---|
| Ticker | CIG |
| Company | ENERGY CO OF MINAS GERAIS |
| Sector / Industry | Utilities |
| Current price | $2.15/sh |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 12.2% |
| Operating margin today | 24.2% |
| Margin compression (value-band) | -12.0pp |
| Multiple paid | 4x operating income |
The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7.2% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | -0.73σ |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.27x | 3 | justifies |
| Earnings | 0.87x | 1 | justifies |
| Relative | 0.32x | 3 | justifies |
| Growth | 0.69x | 4 | justifies |
Families that justify the price: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.
Per-Model Detail (n=11)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $8.18 | 0.26x | yes | FCF base $1.0B, growth 13% (input: historical growth), terminal g 4.0%, WACC 8.8%, 6yr projection |
| DCF Exit Multiple | Growth | $4.13 | 0.52x | yes | Exit EV/EBITDA: 32.7x / 34.7x / 36.7x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $6.82 | 0.32x | yes | P/S fallback (negative EPS): Sector P/S 2.5x × TTM revenue — excluded from consensus |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $2.48 | 0.87x | yes | Stage 1: 5% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $5.27 | 0.41x | yes | BV/sh $1.88, ROE (TTM) 26.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $8.93 | 0.24x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $2.02 | 1.06x | yes | Rev $7.8B, growth 13% (input: historical growth; tapered), Terminal P/S: 0.6x / 0.8x / 0.9x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $0.00 | — | no | Negative/zero EPS — earnings-based value floored at $0 |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $7.85 | 0.27x | yes | BV $1.88 + 5yr PV of (ROE (TTM) 26.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $0.11 | 19.55x | yes | EBITDA $0.27B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | $2.46 | 0.87x | yes | FCF $946.1M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | — | — | no | — |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $6.82 | 0.32x | yes | Revenue $7.81B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | — | — | no | — |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $1.9b |
| Net debt / NOPAT (after-tax) | 1.36x |
| Net debt / operating income (pre-tax) | 1.04x |
| Interest coverage | 4.9x |
| Burning cash | no |
Bullet Takeaways
- Cemig is controlled by the government of the Brazilian state of Minas Gerais, and the decision that would most change the shares, whether the distribution arm is privatised, sits with the state's Legislative Assembly rather than with the board.
- Distribution is carrying the group while generation and trading shrinks: Cemig D's adjusted EBITDA rose 26.7% in the first quarter of 2026 while Cemig GT's fell 22.6%, and consolidated EBITDA slipped 2.1% on revenue that rose 6.3%.
- The investment programme is the largest in the company's history, about 6.7 billion reais in 2026 and roughly 44 billion reais across 2026 to 2030 with a peak in 2028, which is also when the next full tariff review is due to recognise the enlarged asset base.
Bull Case
A regulated distributor makes money in one unglamorous, reliable way. It builds assets the regulator agrees to remunerate, and it keeps its losses below the level the regulator allows. Cemig is currently doing both.
Energy losses ran at 11.41% in the first quarter of 2026 against a regulatory ceiling of 11.48%. That reads like an obscure operating statistic and it is close to the whole game for a Brazilian distributor, because every unit lost above the cap comes out of the shareholder's return rather than the tariff. Cemig D's adjusted EBITDA rose 26.7% over the quarter, to about 1.01 billion reais. The part of the company with a legal monopoly is working.
The investment plan is where the next decade of that business gets built. Capital spending reached 1.48 billion reais in the quarter, up 22.1%, and the company has committed to roughly 6.7 billion reais during 2026 and about 44 billion reais across 2026 to 2030, peaking in 2028. In a regulated utility, heavy capital spending is not a drag on the story; it is the story. Assets added to the regulated base earn a return the regulator sets, and the tariff review scheduled for 2028 is where a larger base is meant to turn into larger allowed revenue.
While that is happening, the company is paying its owners. Net income came to 979 million reais in the quarter, 658 million reais of interest on capital was declared, and total distributions on the 2025 result were approved at 0.9918 reais per share. A utility behaving like a utility.
Then there is the price itself, which is unusual enough to state plainly. Every family of method used to triangulate this business lands above where the shares trade, and the book-value-and-profitability methods land furthest above, leaving the price roughly 73% below where those methods sit. Cemig earns a trailing return on equity comfortably above its cost of capital, which is what pushes the book-based work so far from the quote.
The optionality is real rather than rhetorical. Privatisation of the distribution business remains under active discussion, and a change of control would swap a state shareholder for a commercial one, which is the single event most likely to close a discount of this size. A new chief executive, a sector veteran, took over in May 2026 with exactly the regulatory experience such a process would demand. None of that is a forecast. It is a description of where the leverage in this situation actually sits, which is not in the operating numbers.
Bear Case
Everything that makes this look inexpensive is real. So is everything that has kept it that way.
Start with who is in charge. The controlling shareholder is the government of the Brazilian state of Minas Gerais, and the decision that would most change the outcome for minority holders, privatising the distribution business, rests with the state's Legislative Assembly rather than with the board. That is a political process running on a political calendar. Buying the discount means buying a structure in which the largest owner has objectives beyond the share price, and no amount of operating improvement resolves it.
Now look under the consolidated line. Revenue rose 6.3% in the first quarter of 2026 while EBITDA fell 2.1%. In a utility that particular combination is the one to watch, because it means purchased-energy costs are moving faster than the tariff that is supposed to cover them. Generation and trading is where it surfaces: adjusted EBITDA there fell 22.6%, with the trading operation alone giving up roughly 198 million reais on higher energy purchase costs. Gas distribution shrank as well, EBITDA down 9.6% on volumes down 3.4%. Distributed volumes excluding self-generation fell 3.2%, which is free-market migration and rooftop solar quietly eroding the captive base that the regulated return is calculated on.
Then the funding. Gross debt stood at 19.6 billion reais at the end of March 2026 against 1.8 billion reais of cash and marketable securities, leaving net debt of 17.8 billion reais, which the company reports as 2.45 times recurring EBITDA at a borrowing cost of 89% of the Brazilian interbank rate. Set that beside quarterly EBITDA of about 1.79 billion reais and quarterly capital spending of 1.48 billion reais and the arithmetic gets uncomfortable: very nearly all of the operating cash the business produces goes back into the ground before interest, taxes and dividends are paid. The investment programme runs heavier through 2028. Leverage rarely falls while that is going on.
The tariff review is a two-way door, and the bull case treats it as a one-way one. Yes, 2028 is when a larger asset base gets recognised. It is also when the regulator resets the allowed return, and resets can go down. Nothing about a bigger base guarantees a better remuneration rate, and the review arrives in the same year the spending peaks and the balance sheet is at its most stretched.
Currency finishes the picture. Every figure above is in reais. A dollar holder's result is the Brazilian operating outcome multiplied by an exchange rate nobody at Cemig influences, and Brazilian policy rates have been high enough that the company's own debt cost is tethered to them.
None of which makes the shares expensive. They plainly are not, and it is a rare report where the bear has to concede the arithmetic outright. The argument is that the discount is the price of state control, currency exposure and a decade of capital spending that must be funded long before any of it returns, and that a stock can carry a discount like that for a very long time without anything actually being wrong.
Valuation
There is no premium to explain here, which makes this an unusual section to write.
The market is paying about 4 times company-wide operating income for Cemig. That is low enough that the shares change hands below the level even a steady 5% annual decline in operating profit would justify, so there is no forward assumption to interrogate. The price is not asking the business to do anything except continue to exist.
The methods are unanimous in direction and wide in degree. The price sits about 73% below where the book-value-and-profitability methods land, about 31% below where the forward cash-flow methods land, and about 13% below where the cash-flow-yield method lands. Peer comparison points the same way, although that particular reading rests on a sales-based stand-in rather than a like-for-like earnings comparison, and it deserves less weight than the others.
What a spread like that does not explain is why it exists, and for that the operating detail is more useful than the arithmetic. Distribution is improving: Cemig D's adjusted EBITDA rose 26.7% in the quarter, with energy losses held at 11.41% against a regulatory ceiling of 11.48%. Generation and trading is not: adjusted EBITDA there fell 22.6%, dragged by roughly 198 million reais of lost trading contribution as purchased-energy costs rose. Consolidated EBITDA of about 1.79 billion reais fell 2.1% even as revenue reached about 10.5 billion reais, up 6.3%. A monopoly business getting better inside a group whose consolidated result is drifting sideways is exactly the shape that produces a wide and unanimous discount.
The balance sheet is the constraint, and it is worth taking from the filed statements rather than a summary. Gross debt was 19.6 billion reais at March 31, 2026, cash and marketable securities were 1.8 billion reais, and net debt was 17.8 billion reais, which the company reports as 2.45 times recurring EBITDA. For a regulated utility that is not distress. It is also not headroom, because capital spending of 1.48 billion reais in a single quarter against about 1.79 billion reais of EBITDA leaves almost nothing for repayment, and the programme runs heavier into 2028. Interest on capital of 658 million reais was declared out of the same cash flow.
So the decomposition ends somewhere unusual. There is no assumption embedded in this price that needs defending. What needs assessing instead is whether a controlling shareholder that answers to an electorate, an exchange rate, and a tariff reset in 2028 together justify a discount of the size the methods describe.
Catalysts
Two calendars matter more here than the quarterly rhythm. The first is regulatory: the distribution tariff is adjusted every May, and the full review that resets the allowed return runs on a five-year cycle with the next one due in 2028. That review is when the investment programme, roughly 44 billion reais across 2026 to 2030 with its peak in 2028, is meant to convert into a larger remunerated asset base. The second calendar is political. Privatisation of the distribution arm remains under discussion and depends on the Legislative Assembly of Minas Gerais, which means the timing belongs to a legislature rather than to a management team.
Between now and then the quarterly prints carry two specific readings. Energy losses against the regulatory ceiling, most recently 11.41% against 11.48%, decide whether the distributor keeps its allowed return whole. And the path of purchased-energy costs in generation and trading, which cost that segment roughly 198 million reais of EBITDA in the first quarter, determines whether the consolidated result stops going backwards.
Leadership is the third variable and the newest. Alexandre Ramos Peixoto took over as chief executive in May 2026, bringing sector and regulatory experience. At a state-controlled utility, a change at the top is generally read for what it signals about the controlling shareholder's intentions rather than for the individual, and that reading will be tested at the next set of capital-allocation and dividend decisions.
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Cemig 1Q26 earnings call · Cemig 1Q26 earnings release · Cemig 1Q26 earnings call and 2026 strategic plan · Cemig 1Q26 earnings release and 2026 strategic plan · Cemig corporate announcement, May 2026 · Cemig 2026 strategic plan