We are keeping our Buy recommendation on Companhia Paranaense de Energia or COPEL (ELP), a fully integrated electric utility operating in Brazil. The company is engaged in the generation, transmission and distribution of electricity to more than three million customers in the southern state of Paran?.

The company's second quarter results were as expected. Net revenue reached R$1,387.4 million (US$835.8 million) from R$1,355.0 million in the same quarter of 2007. During the quarter total power consumption billed by COPEL grew 5.8%. The outlook for the following quarters remains reasonably positive, mainly considering the growing demand for electricity in Brazil in spite of the difficult business environment around the world.

A slowdown is expected for the Brazilian economy in 2009, but a recession is highly unlikely. We also believe that the tariff correction in 2009 will be positive for the stock. Finally, after the recent sell-off, COPEL shares are trading at a very attractive valuation.

Presently, COPEL is trading at a P/E of 4.0x our 2008 estimated earnings. We believe the company's valuation looks highly attractive. Also, the Brazilian economic plans for increasing investments in the electric energy sector are positive signs for COPEL. We think there is a huge upside potential for the stock in the short term and maintain our Buy recommendation on COPEL. Our target price is US$21.25.