Investment Thesis
Following the publication of the FY2024 results and the probability of a new status quo in Russia that could potentially increase shareholders’ access to the value created there, we are confident that the target price of Hellenic Bottling Company should be upgraded to €42. This is a 16% upward revision from our November’s report and a 5,5% upside from the current market level.
Management continues underpromising and overdelivering, despite the never-ending challenges they are facing, like the fire at the Bambi plant in Serbia, the sugar taxes expected in additional jurisdictions or the macroeconomic environment of Nigeria and Egypt. Taking under consideration all moving parts, they have guided for a 7-11% EBIT growth and they seem reasonably positioned to tackle with the risk of a probable new round of inflationary pressures that would increase costs.
Coca Cola HBC has a successful track record, strong brand offering, diversified country footprint, a healthy and sizable balance sheet (Net Debt/EBITDA at 1x). All the above suggest a very compelling investment case with predictable results.
The Group’s latest investments in Egypt, now adding 10% of the total volume, along with Nigeria are gaining traction, creating the conditions for additional upside once the economy in these two jurisdictions improves.
Markets have strongly reacted to the prospects of a new arrangement in Ukraine on Wednesday (12/2) and the convincing responses the management gave on Thursday’s analysts call (13/2). The stock has already crossed the €39.0 mark but there is more room to be covered.
Valuation
The firm is valued at €42 per share through a DCF exercise with the same applied assumptions we used three months ago: Weighted av- erage cost of capital assumed at 7.19%, the perpetual growth con- servatively assumed at 1%, and the guided CAPEX within the range of 6.5% to 7.5% of revenue is plugged as guided.
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