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Greek Equity Strategy – 2025 outlook | Almost same story, different year

Repeat of 2024, with different headwinds – Following a year in which Greek equities performed broadly in line with EU periphery stocks (but better than broad EU indices), 2025 looks somewhat trickier given international headwinds (e.g. tariffs, geopolitics). Easing monetary policy is certainly a positive, in the sense that it could justify higher valuations, but the overriding driver of re-rating would be a resolution of the war in Ukraine, as is the case for the EU as a whole. On the positive side though, on the domestic front, after a year of material headwinds from supply (c€3.4bn, c4% of the ASE market cap), there seems to be no material overhang from corporate activity, at least for mainstream names. On the contrary, flows are likely to be supportive in 2025 given the dry powder left to be deployed after the Terna Energy corporate action. Given the light positioning, we expect incremental demand to also be supported by flows from Continental Europe in view of Greece’s potential placement on a watchlist for migration to Developed Markets (in mid-2025).

Fundamentals at the forefront; c9% median EBITDA growth for non-fins, just 7% NII reduction for banks vs peak levels – In our view, it will be fundamentals that will take center stage in 2025, with earnings performance forming a solid pillar for returns. We estimate c9% median operating profit growth for non-financials, supported by GR’s strong macro outlook (>2% GDP growth, a standout among EU peers). As for banks, our models for the systemic 3 banks envisage c7% reduction in 2025 NII from the record 2024 level, translating into c12% lower EPS yoy but just 5% lower vs 2023 levels.

Valuations remain cheap, both on absolute and on relative basis – Valuations have not changed materially in the last year, with Greece continuing to stand out in that most stocks remain at material discount vs their own history, besides trading at >20% discount vs EU peers. The risk-reward skew looks particularly attractive for banks, which continue to incorporate a COE in the high-teens, overly punitive in our view.

>20% 12m upside for the ASE; tilt to banks, overlay catalyst-rich names and profit compounders – Our bottom-up valuation indicates >20% upside for the ASE driven by a mix of re-rating and profit growth (>10% median EPS growth). With Greek stocks not only closing the ROE differential vs their EU peers but offering premium returns, we believe some re-rating is warranted. Our ASE target corresponds to an ERP of 5.7%, still higher than the current ERP embedded in EU stocks (c5%). From an allocation perspective, we continue to pivot our sector allocation recommendation towards banks (i.e. higher than the 39%/31% weighting in the FTSE Large Cap/ASE index), where we feel there is the best risk-reward skew, with Piraeus being our top pick (solid delivery, capital build-up, cheap valuation). With this in mind, depending on investors’ benchmark (ASE/FTSE 25), we advocate overlaying select non-financial names onto a bank-focused portfolio, reiterating Metlen (sustainable profit reset, rising RES exposure, listing on the LSE) and Titan (exposure in US infrastructure spending, cyclical recovery of construction activity in GR, value crystallization from the upcoming listing of its US subsidiary) as top picks. We remove PPC and Jumbo – in the absence of immediate/concrete catalysts – while adding Sarantis (one of the highest profit compounders in our universe) and Cenergy (long-term beneficiary from electrification and energy transition). In the mid-cap space, we flag Kri-Kri as a medium-term high-conviction growth story. We also suspend coverage on Tenergy, given the limited float.