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Autohellas | Gearing up for a growth comeback

Challenging, albeit resilient, 2024e… – Our 2024e forecasts picture the precarious backdrop in the auto trade business, which is expected to partly offset the strong performance in long term rentals and the resilient picture in short term rentals and used car sales. In the meantime, the inflationary environment alongside the normalization of the supply chain have led to higher priced vehicles and at the same time stabilizing demand, thus weighing on vehicles inventory and depreciation costs. We model 2024e rental revenues of €472m (+7% yoy) and Auto-trade revenues of €518m (-8% yoy), calculating total group sales of c€990m (-1% yoy). We pencil in an EBITDA of €276m (+1.4% yoy, reflecting a c2% drop in costs ex D&A), and EBIT of €125m (-10% yoy) reflecting a 14% assumed spike in depreciation costs. Our 2024e net profit estimate is set at €76.5m, -1% yoy and some 5% below our previous forecast.

… as indicated by 9-month trends – 9-month results revealed negative growth of c2% in sales and c5% in operating profit, reversed by a c€8m gain from Aegean’s dividend stake, with 9M net profit up c4% yoy. Greece rentals and International rentals delivered positive sales growth (+7% yoy and +4% yoy, respectively) but were more than offset by -8% decline in Auto trade revenue.

Mid-single digit 3-yr EBIT CAGR ahead – Prospects for Autohellas remain healthy after the decline of 2024e, with the group set to benefit from structural growth avenues (tourism, LtR penetration), further M&A synergies and cyclical drivers (growing new cars mkt, c2% GDP growth in Greece). We envisage 2.5% EBIT growth in 2025e, accelerating to c6% in 2026-27e, driven by operating leverage. This will translate into higher EPS growth thanks to the gradual deceleration in financial costs amid declining rates and the full benefit of the fixed rate bond and the RRF-related loans.

Balance sheet optionality – Autohellas continues to enjoy a healthy financial position, as its strong cash flow generation capability (>65% OCF conversion) is instrumental in helping it continue to invest in fleet (>€200m capex post 2024e). Autohellas’s debt is steered to its vehicle fleet, with leverage at just 2.5x net debt/EBITDA, among the lowest levels among international peers. In the meantime, Autohellas has been able to deliver top-notch returns (ROE c20% in 2023, 16% in the coming years) while reinvesting in the business, thanks to its high margins, lean structure and network/scale advantages. The solid cash flows and balance sheet offer optionality for Autohellas to pursue more aggressive expansion or higher shareholder remuneration policy. Our model assumes c35-45% payout ratio, compared to a historic average of c45%.

Valuation – We value OTOEL with a DCF model, using a c10% WACC, which we believe captures the relative risk profile of the business vis-à-vis the rest of our coverage universe, the nature of the industry and factors such as stock liquidity. Our PT is set at €14.6/share, effectively valuing the stock at 4.6x 2025e EV/EBITDA, namely at par with the median of international peers. We believe the depressed valuation leaves scope for re-rating as Autohellas scales up, although we recognize that investor engagement will depend on the extent of operating cadence in 2025. We establish a “Buy” rating from “Not Rated” previously (as the stock was part of our Sponsored Research program).