Sarantis | Quality largely priced-in; moving to Hold
Sarantis’s share price has rallied 24% since the May EU elections, outperforming other Greek non-financials by 10% in the same period. However, with the stock now at c15-20% discount vs. EU peers, we believe that the valuation has started to look full. The balanced risk-reward prompts us to take a breather, thus moving to a Hold rating. While we remain structurally positive for the stock, we would be hesitant to apply a higher multiple, especially as c20-25% of operating profit stems from the EL JV, for which there remains uncertainty regarding the potential extension of the shareholder agreement (expiring in end 2021). As explained in detail in our previous note, valuing Sarantis’s stake in EL as a “limited-life†business being bought out at book value upon maturity results in a valuation less than €9 per share, pointing to limited upside from current levels.Structurally, we remain positive and reiterate our view that Sarantis is well-placed to sustain c6% organic growth and EBIT in the low teens in the coming years, given the balanced category exposure (both aspirational and functional) and the diverse geographic footprint.
Co. is a consumer goods manufacturer and distributor engaged in operations in Greece. Co. produces consumer goods such as cosmetics, pharmaceuticals, households, pet products, car's accessories and apparel. Co. produces its own brand name of cosmetic products such as Prosar, Str8, BU99, Clochard, Carroten, Tokalon and others. Co.'s product portfolio also includes a range of international brands such as Estee Lauder, Clinique, Aramis, Donna Karen, Orlane, Montana Versace and others.
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.
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