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Coca-Cola Hellenic | Steady momentum, limited valuation upside

Solid H1’25 performance, in broad sync with expectations – CCH delivered a solid H1’25 performance, with comparable EBIT up 15% yoy (12% organic) despite continued macro and geopolitical headwinds. The result was driven by 2-digit organic growth in Emerging Markets, with all segments contributing to revenue growth, supported by strong pricing discipline and favorable mix effects (both pack and category). While higher A&P spend weighed on profitability in Established and Developing markets, gross margin improvement and ongoing cost-efficiency measures, as well as strong emerging markets EBIT, led to a 20bps organic uplift in group adjusted EBIT margin. At the bottom line, a sharp drop in net financial costs—reflecting stronger interest income and limited FX losses—pushed adjusted net profit up 25% YoY to €475m.

2025 mgt guidance to the upper end of the range but absence of upgrade somewhat disappointing – Mgt reaffirmed its FY’25 guidance, now expecting to hit the top end of the guided revenue and EBIT range, namely +8% and +11, respectively, reflecting robust H1 execution. Guidance or COGS/case remained unchanged (low-to-mid single-digit growth), while the FX headwind was revised down to 0-1% (vs 1-3% previously). Net financial cost forecasts were also halved, offering additional support to EPS and cash flow estimates. Despite the robust results, the absence of upgrade to the upper end of the guidance left the stock stalling since Q2 results.

Segment-level recalibrating; HSD 3-year EBIT CAGR intact – We have fine-tuned our forecasts (c1% upgrades) to reflect stronger-than-expected momentum in Emerging Markets, particularly from FX relief and operational execution, partially offset by weaker margin trends in Established and Developing markets. Our 2025 forecast now calls for €1,324m in adjusted EBIT (+11% YoY) on €11.66bn in revenues (+8% YoY), implying a margin of 11.4% (+30bps YoY). While near-term FX and geopolitical volatility remain swing factors, we maintain our 2027e EBIT forecast of €1,546m, indicating a c9% 2024–27e EBIT CAGR. Growth ahead remains driven by a balanced contribution from volume and price/mix, supported by moderating input cost inflation, with commodity prices now largely normalized post-Russia/Ukraine shock.

Healthy balance sheet provides for ongoing investments/optionality – CCH maintains a healthy financial position, continuing to invest in brand equity and market development, with capex/sales guidance of 6.5–7.5% (H1’25 at 5% level). Free cash flow improved in H1’25, underscoring the group’s robust cash generation, driven by operational leverage and disciplined working capital management. With net debt/EBITDA projected below 1.0x, CCH retains significant balance sheet optionality - allowing for enhanced shareholder returns and/or bolt-on M&A.

Valuation – We raise our PT to €46 (from €45), reflecting time value roll-forward and minor profit upgrades. We reiterate our Hold, as CCH is trading in line with its LT average 9x EV/EBITDA multiple, and at parity with the median of EU beverage peers. While operational momentum remains solid, further upside appears limited taking into consideration the volatile macro and trade environment. Crucially, the scope for further re-rating from Russia looks capped, with the current price discounting those cash flows at (what seems reasonable) c13% WACC vs c7% for the rest of the business.