Eurocash: Recovery taking longer than expected
We downgrade Eurocash to NEUTRAL (from BUY) and we cut our FV to PLN 26.7 (from PLN 31.6) on the back of 11%/13%/10% cuts to our 18E/19E/20E EBITDA forecasts from a slower than previously expected recovery of wholesale segment and continuing transition costs burdening the results of the retail division. We maintain our long-term positive view on EUR’s transition from wholesaler to retailer, although we expect that in the short term, the benefits of the transformation will be overshadowed by its costs. On top of that, anti-monopoly proceedings connected with the Mila acquisition are lasting longer than previously expected, which should also prolong the retail chain integration. Finally, we expect a relatively weak set of 1Q18 results with revs at PLN 5.5bn, +6% YoY, EBITDA of PLN 39m, +3% YoY.Eurocash, through its subsidiaries, is engaged in the distribution of food products, household chemicals, alcohol, and tobacco products (fast moving consumer goods). Through a range of distribution formats, Co. and its subsidiaries focus its business activities on the wholesale distribution to customers across the wholesale market segments, in particular, to stores throughout Poland such as retail stores, convenience stores at petrol stations, restaurants, hotels and cafeterias. Co. and its subsidiaries operate a range of distribution formats focused on supplying independent stores in Poland, which primarily include: Cash and Carry, Franchise Systems, and Distribution.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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