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Coca-Cola HBC | Africa calling: The next growth frontier

Transformative $2.6bn deal with CCBA – Coca-Cola HBC announced an agreement to acquire a 75% stake in Coca-Cola Beverages Africa (CCBA) from The Coca-Cola Co. and Gutsche Family Investments for a total consideration of $2.6bn, implying a full equity value of c$3.5bn and an EV of $4.5bn including c$1bn net debt. The transaction, expected to be completed by end-2026, pending regulatory and shareholder approvals, will be funded through a mix of $1.6bn cash and c21mn new shares (5.5% of share capital) issued to GFI. On 2024 pro forma figures, the deal lifts CCH’s volume to 4bn unit cases (+38%) and EBIT to c€1.4bn (+20%), enhancing scale and exposure to fast-growing markets such as South Africa, Kenya, and Ethiopia. At an implied trailing EV/EBITDA of c10x and 2026e near c8x, by our math, the valuation sits at the low end of industry benchmarks, reflecting the FX and execution risk inherent in emerging market franchises.

Q3 trading update reaffirmed FY’25 guidance – Q3’25 organic revenues grew 5% yoy led by +3.8pps price/mix and 1.1pps volumes, slightly below consensus, bringing 9M’25 revenues to € 8.82bn (+8% organic). on volumes of 2.29bn u.c. (+2% yoy). Management reaffirmed expectations to deliver at the upper end of the 7–11% organic EBIT growth range and the 6–8% revenue range for FY’25, while flagging a now positive FX contribution between €5-15m and lower net financial costs (€ 10–20mn vs € 15–25mn prior). CCH’s guidance implies FY’25 adj. EBIT in the range of €1,324-1,340m.

Trivial recalibrating: HSD 3-year EBIT CAGR intact – We fine-tuned our forecasts post-Q3, trimming volumes by c0.5% across regions to reflect affordability pressures and softer inflation trends. We now project 2025e revenues of €11.5bn (+7.2% yoy, +7.5% organic) and 2026e revenues of €12.23bn (+6% yoy). Cost assumptions are broadly unchanged, with c4% increase in COGS/case and mid-single-digit opex growth. We thus continue to see adj. EBIT at €1.33bn (+11.5% yoy, or +11% organic) in 2025 rising to €1.42bn (+7% yoy) in 2026. On this basis, we maintain our high-single-digit 2025-27e EBIT CAGR view, underpinned by organic revenue growth, efficiency gains, and strong brand momentum. CCBA’s inclusion should add >20% to 2027e EBIT once consolidated.

Healthy balance sheet provides underpinning – CCHBC maintains a robust financial position, with FY’25e net debt/EBITDA of just 0.7x, well below its 1.5–2.0x target range. The CCBA acquisition, financed via bridge loan and equity issuance, will temporarily lift leverage toward c2x post-closing, at the upper end of guidance, but remains comfortably manageable given CCH’s cash generation profile and refinancing flexibility.

Valuation – We value CCHBC through a DCF model using an 8% WACC, with our PT staying unchanged at €46/share, as we do not yet incorporate CCBA in our modelling. We thus maintain our Hold rating as the risk-reward profile looks balanced at current levels, with the EV/EBITDA valuation near its long-term average. We note that we continue to value CCH on a stand-alone basis, i.e. without any assumed contribution from CCBA, as the deal is not likely to close until end 2026. That said, we see scope for this business to become accretive to valuation from 2027e, assuming profit growth settles in the high-single digits in the next couple of years and the business is assigned a c8x EV/EBITDA multiple.