Report
Natalia Svyriadi

Coca-Cola Hellenic | Solid execution priced-in; Turn to Hold

CCH eyes 7-12% organic EBIT growth in 2024e – CCH lifted its 2024 guidance which now calls for +7-12% organic EBIT growth (from +3-9% previously), effectively indicating adj. EBIT between €1,116m and €1,192m. Key components changed were mainly: 1) 8-12% organic top line growth (vs 6-7% prior) and 2) c€10-12m scope benefit from Finlandia acquisition. CCH maintained its forecasts for low-to-mid-single digits comparable COGS/case inflation and FX headwind at €30-50m. With current consensus being close to the middle of the updated range (and already at the high end of the previous guidance), strong execution is already embedded in the numbers, raising the bar for further positive surprises operationally, in our view.

… following solid H1’24 execution on operating leverage benefits – CCH reported a solid set of results, with H1’24 adj. EBIT of €564m, +7.5% yoy on an organic basis (+0.6% reported) despite the tough H1’23 base. The company enjoyed slightly better than we had expected operating leverage, with adj. EBIT margins down just by c30bps (to 10.9%) despite the multiple challenges (affordability pressures, FX impact). This came mainly as a result of double-digit price/mix growth (+10pps yoy) and healthy volume acceleration (+3% organic, +4.2% in Q2), with CCH growing revenues +13.6% organically in H1’24.

Raising FY’24 EBIT +2%, to the mid of the guided range – Against the background of macro uncertainty weighing on consumption spending and uncertainly around pricing sustainability for EU staples, we raise our 2024e EBIT just slightly, while leaving 2025-26e little changed. In 2024e we pencil in +10% organic revenue growth, led by a +7%pps rise in price mix, and adj. EBIT of €1,150m (+6% yoy, c10% organic), at the mid of the +7-12% organic EBIT guidance. In 2025-26e we maintain our organic revenue growth forecast at 6-7% annually and anticipate c7-9% adj. EBIT growth in the same period.

Healthy balance sheet sustained – In the long-run we still believe CCH remains well placed to benefit from the growing NARTD market and margin expansion, as well as significant growth prospects in less developed markets, premiumization opportunities and share gains. CCH’s cash generation ability remains intact (>€200m FCF) despite ongoing investments, with net-debt/EBITDA (c1x in 2024e) remaining below the low end of mgt’s target gearing range (1.5x-2.0x), indicating capital flexibility.

Valuation – Valuation-wise the stock remains 10% below its long-term average valuation of >9x 1 yr fwd EV/EBITDA and at c10% discount vs EU beverages, effectively incorporating an elevated risk premium due to its emerging market exposure. Following just marginal changes in our estimates, we maintain our PT to €33.5/share (8.3% WACC). Following a 24% rally ytd, we see a balanced risk/reward profile for the stock amid ongoing consumer challenges. As such we lower our rating to Hold. At our PT, CCH would trade at a 12m forward EV/EBITDA of 9x, near its own long-term average, and still at c6% discount to the EU beverages sector.
Underlying
Coca-Cola HBC AG

Coca-Cola Hellenic Bottling Co. produces, sells and distributes an extensive portfolio of non-alcoholic ready-to-drink beverages. Co.'s business is engaged in producing, selling and distributing non-alcoholic ready-to-drink beverages under bottlers' agreements with The Coca-Cola Company. In some Territories, Co. also produces, sells, distributes and markets its own brands of juice and Water beverages. In addition, Co. bottles and distributes beer in Bulgaria and Former Yugoslav Republic of Macedonia and Co. distributes a selected number of third party premium spirit brands in certain central and eastern European operations.

Provider
Eurobank Equities
Eurobank Equities

Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.

Research is the backbone of Eurobank Equities' platform, with a team of 4 professionals committed to generating actionable investment ideas by providing timely research products. We are committed to offering value-added services to clients by filtering market noise and providing insights on the multiple sectors that we cover. Our universe includes 26 - large, medium and small cap - companies whose market capitalization amounts to 80-85% of the total market capitalization of the Athens Stock Exchange. Our research team also maintains the capacity to generate ad-hoc research for micro-cap listed companies.

Our team has consistently gained recognition among institutional investors for its quality research, having ranked No. 1 team in Greece at the Extel Surveys of 2013-2016 and 2018. We have also been named Leading Brokerage Firm in Greece over 2014-2016 and in 2018.

Analysts
Natalia Svyriadi

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