GEVORKYAN: never-ending capex story (downgraded to HOLD)
We have downgraded GEVORKYAN to HOLD (from Buy), with a new 12M price target (PT) of CZK 257/share, implying 11% upside. The share price is 6% below its July 2022 IPO price. We believe the relatively high IPO valuation (12.6x EV/EBITDA) and the prolonged capex cycle are the key reasons for the rerating of the stock closer to its CEE industrial peers. While the capex cycle has enabled GEVORKYAN to expand capacity, buy high-end machinery and sign a record number of contracts, it is still not over. We expect the higher capex to continue in 2025E, driving the net debt/EBITDA slightly higher, to 3.3x (from 3.2x in 2024), and delaying the positive FCFF generation to 2026E, on our estimates. The company expects a lower EBITDA margin, by c.3ppts, in 2025-29E vs. 2024, due possibly to the weakness in the automotive industry (28% of its 2024 revenues). On our estimates, we expect GEVORKYAN to deliver a 3Y (2024-27E) EBITDA CAGR of 10%, above the 7% growth of its projections. GEVORKYAN is now trading at 8.9x 2025E EV/EBITDA, representing a 33% discount vs. its global peers, but trading on a par with its CEE industrial peers. In our view, the key catalyst of the story would be higher earnings growth and the generation of positive FCFF, which would, in turn, help the company to deleverage, and give a signal to investors that the capex cycle is over.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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