Eurocash - 3Q19 results’ forecasts
Eurocash is an active M&A player in the Polish FMCG grocery market with an appealing strategy and business model which have significantly strengthened its position on the back of a large number of acquisitions accomplished: Tradis, Kolporter, InMedio, Rogala and StodóÅ‚ka franchisee, PDA, Eko Holding and Mila. Moreover, Eurocash should benefit from cross-selling opportunities, higher discounts from producers, and further opex optimization. Nevertheless, high integration costs in the retail segment will still have an adverse impact on the Company’s earnings this year.
Eurocash’s earnings in 2019E stay under pressure stemming from the slower and more costly than previously expected restructuring of the acquired assets and costs of new projects development. After the non-IFRS 16 EBITDA margin erosion in 2019E yoy we expect the profitability improvement in 2020. Nevertheless the bulk of the post-merger synergies will be digested by the growing cost base, predominately labor costs (increase of the minimum wage and PPK introduction) and further development of new projects.
Recognizing Eurocash’s equities as fairly priced we maintain our LT Hold fundamental recommendation intact. On the other hand, expecting an improved earnings momentum starting from 3Q19 we upgrade our ST market-relative stance towards Eurocash’s equities to Overweight.
Eurocash, through its subsidiaries, is engaged in the distribution of food products, household chemicals, alcohol, and tobacco products (fast moving consumer goods). Through a range of distribution formats, Co. and its subsidiaries focus its business activities on the wholesale distribution to customers across the wholesale market segments, in particular, to stores throughout Poland such as retail stores, convenience stores at petrol stations, restaurants, hotels and cafeterias. Co. and its subsidiaries operate a range of distribution formats focused on supplying independent stores in Poland, which primarily include: Cash and Carry, Franchise Systems, and Distribution.
BOS Brokerage, with over 20-year experience, offers brokerage services on the Polish capital market to satisfy numerous needs of institutional and retail investors.
Our comprehensive offer includes brokerage services on both the stock exchange and the forex market as well as brokerage services on the energy market, debt and equity issues, distribution of investment funds and assets management.
BOS Brokerage analytical team belongs to the most appreciated and acclaimed on the market. According to Parkiet daily’s poll (as of January 7, 2019), DM BOŚ equity research team was selected by institutional investors as the third best in Poland. Moreover, the team members won several individual best analysts awards, including Sobiesław Pająk – IT (best analyst), media/telco (ranked 2.), strategy (ranked 4.), Tomasz Rodak – video games (best analyst), overall ranked 5., Łukasz Prokopiuk – chemicals (ranked 2.), mining (ranked 3.), Maciej Wewiórski – real estate (ranked 3.).
In August 2017 Parkiet daily indicated DM BOŚ recommendations as the most accurate over 12 months and according to the Puls Biznesu daily (as of April 11, 2017) DM BOŚ research team was the most prolific on the Polish market and issued the biggest number of recommendations (247) in the years 2014-2016.
The analysts handle over 80 companies listed on the Warsaw Stock Exchange.
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