New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>Mercury (MCY) had a good 1Q26, particularly relative to the challenging 1Q25.</li><li>Above-average hydro generation made a significant difference, and while its Lake Taupo storage lake is full, low wholesale electricity prices prevent a more positive short-term outlook for now.</li><li>Modest earnings uplifts have increased our target price by +10cps (+1.3%) to NZ$7.60.</li></ul>

Mercury (MCY) had a good 1Q26, particularly relative to the challenging 1Q25.Above-average hydro generation made a significant difference, and while its Lake Taupo storage lake is full, low wholesale electricity prices prevent a more positive short-term outlook for now.Modest earnings uplifts have increased our target price by +10cps (+1.3%) to NZ$7.60.

Mercury Fully Charged—1Q26 Operating Statistics

<ul><li>Mercury (MCY) delivered a FY25 EBITDAF result ahead of expectations, though challenging hydro conditions meant it was well below FY24 and normalised hydro earnings.</li><li>First-time FY26 EBITDAF guidance was strong due to normalised hydro earnings increasing +NZ$50m and favourable hydro conditions adding a further +NZ$50m.</li><li>Normalised NPAT of NZ$225m was +NZ$21m better than forecast, with MCY’s effective interest rate falling -1.4pp to ~5.4% in 2H25 from 1H25.</li></ul>

Mercury (MCY) delivered a FY25 EBITDAF result ahead of expectations, though challenging hydro conditions meant it was well below FY24 and normalised hydro earnings.First-time FY26 EBITDAF guidance was strong due to normalised hydro earnings increasing +NZ$50m and favourable hydro conditions adding a further +NZ$50m.Normalised NPAT of NZ$225m was +NZ$21m better than forecast, with MCY’s effective interest rate falling -1.4pp to ~5.4% in 2H25 from 1H25.

Mercury Guidance Rising With The River—FY25 Result

<ul><li>Mercury (MCY) had a challenging 4Q25 operationally, with strong hydro inflows in the second half of the period not enough to fully offset the low hydro storage that persisted through the first half of the quarter.</li><li>MCY has started FY26 with Lake Taupo almost full and has increased its average annual hydro generation assumption.</li><li>We expect MCY to see strong price growth in the coming quarters, and it is targeting cost-to-serve reductions, which will support improved earnings.</li></ul>

Mercury (MCY) had a challenging 4Q25 operationally, with strong hydro inflows in the second half of the period not enough to fully offset the low hydro storage that persisted through the first half of the quarter.MCY has started FY26 with Lake Taupo almost full and has increased its average annual hydro generation assumption.We expect MCY to see strong price growth in the coming quarters, and it is targeting cost-to-serve reductions, which will support improved earnings.

Mercury Recharged For FY26—4Q25 Op Stats

<ul><li>Mercury's (MCY) 1H25 result was strong operationally given challenging hydro conditions, but disappointed due to a material and unexpected opex increase.</li><li>Higher-than-expected opex growth stemmed from underlying cost increases, one-offs, and delayed system-related savings.</li><li>Looking ahead, MCY has maintained FY25 guidance despite renewed hydrology challenges and elevated opex. </li></ul>

Mercury's (MCY) 1H25 result was strong operationally given challenging hydro conditions, but disappointed due to a material and unexpected opex increase.Higher-than-expected opex growth stemmed from underlying cost increases, one-offs, and delayed system-related savings.Looking ahead, MCY has maintained FY25 guidance despite renewed hydrology challenges and elevated opex. 

Mercury - Costs Cut Into Near-Term Growth—1H25

<ul><li>Mercury (MCY) finished 1H25 with a solid set of operating statistics that saw it back off hydro generation and take advantage of near-record-low wholesale electricity prices.</li><li>We anticipate 1H25 earnings will be similar to 1H24, which would be a good outcome given the challenges of 1Q25.</li><li>The MSCI pricing period has commenced. We remain of the view that MCY will fall out of the index at the end of February 2025, which is providing an extended buying opportunity in MCY. </li></ul>

Mercury (MCY) finished 1H25 with a solid set of operating statistics that saw it back off hydro generation and take advantage of near-record-low wholesale electricity prices.We anticipate 1H25 earnings will be similar to 1H24, which would be a good outcome given the challenges of 1Q25.The MSCI pricing period has commenced. We remain of the view that MCY will fall out of the index at the end of February 2025, which is providing an extended buying opportunity in MCY. 

Mercury - Taking Advantage of Flexibility—2Q25 Op Stats

New Zealand

Mercury NZ Ltd provides utility services. The Company generates and supplies electricity from hydro, geothermal, gas-fired, and wind power stations, as well as owns and manages bio-energy power plants. Mighty River Power serves customers throughout New Zealand.

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Mercury NZ Ltd (MCY NZ)

Mercury Fully Charged—1Q26 Operating Statistics

Above-average hydro generation made a significant difference, and while its Lake Taupo storage lake is full, low wholesale electricity prices...

Forsyth Barr

Mercury Guidance Rising With The River—FY25 Result

Mercury (MCY) delivered a FY25 EBITDAF result ahead of expectations, though challenging hydro conditions meant it was well below FY24 and...

Forsyth Barr

Mercury Recharged For FY26—4Q25 Op Stats

We expect MCY to see strong price growth in the coming quarters, and it is targeting cost-to-serve reductions, which will support improved earnings.

Forsyth Barr

Mercury - Costs Cut Into Near-Term Growth—1H25

Mercury's (MCY) 1H25 result was strong operationally given challenging hydro conditions, but disappointed due to a material and...

Forsyth Barr

Mercury - Taking Advantage of Flexibility—2Q25 Op Stats

Mercury (MCY) finished 1H25 with a solid set of operating statistics that saw it back off hydro generation and take advantage of near-record-low...

Forsyth Barr

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