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Coca-Cola Hellenic | Charting growth ahead through operational excellence

Solid 2023 execution – CCH delivered a strong set of results, with 2023 numbers landing above the upper end of mgt guidance and consensus forecasts, thanks to solid operational execution. The company enjoyed stronger than anticipated operating leverage managing to expand adj. EBIT margins by 50bps (to 10.6%) despite the multiple challenges (affordability pressures, Nigeria cash crisis). This came as a result of the significant price/mix growth (+19pps yoy and c2pps above consensus) and healthy volume growth (+1.7% organic), with the group gaining market share while continuing to grow higher-margin segments (coffee, energy).

CCH FY24 guidance calls for +3-9% organic EBIT growth – In view of the current backdrop, CCH mgt provided FY’24 guidance, which calls for +3-9% organic EBIT growth, effectively indicating adj. EBIT in between €1,070m and €1,160m following CCH’s key factors. Key underpinning components are summarized into: 1) 6-7% organic top line growth and 2) low-to-mid-single digits comparable COGS/case inflation, 3) FX headwind forecast at €30-50m and c€5-10m scope movement from Finlandia acquisition on the EBIT line.

We maintain a conservative stance only marginally raising our forecasts remaining near the high end of the guided range – With CCH having taken noticeable pricing in 2022 and 2023, we prefer to maintain a relatively conservative stance looking ahead. We pencil in 3-5% organic price/mix in 2024-26e, coupled with 2.5-3% volume growth and low-to-mid single digit growth in COGS/case. This translates to organic revenue growth of 6-7% annually and c4-10% adj. EBIT growth in the same period. For 2024e, we estimate adj. EBIT of €1,132m (+4.4% yoy, c7.3% organic, on flattish margins), at the high end of guidance.

Healthy balance sheet points to optionality – In the long-run we believe CCH remains well placed to benefit from the growing NARTD market and margin expansion, as well as rising consumption per capita in less developed markets, share gains and premiumization opportunities. The group’s key merits, namely its strong liquidity and cash generation ability, remain intact, suggesting optionality for value-accretive M&A or scope for higher dividends, with our net-debt/EBITDA estimate (c1x in 2024e) remaining below the low end of mgt’s target gearing range (1.5x-2.0x).

Valuation remains attractive – Valuation-wise the stock still remains below its long-term average valuation of >9x EV/EBITDA and at >20% discount vs EU beverages, effectively still incorporating an elevated risk premium due to its emerging market exposure. Following the changes to our estimates and after lowering slightly our WACC to 8.3% (from 9.2% before), we raise our PT to €33.5/share (from €30.8 previously). At our PT, CCH would trade at a 12m forward EV/EBITDA of 9x, near its own long-term average, and still at >10% discount to the EU beverages.