Comarch – A Great Buy After Third-Quarter Earnings Beat
Comarch generated strong 2019 third-quarter earnings well ahead of analysts' estimates, with EBITDA adjusted for IFRS16 effects, a one-time fine reversal, and positive exchange-rate differences posting a year-over-year rebound of a whopping 41%. The main earnings driver in the period was an improved sales mix with a higher proportion of global sales facilitated by Comarch's expanding presence in fast-growing technology solutions for TMT, retail, and services. At the same time, Poland's share in the geographic sales mix decreased in the wake of a slump in government orders leading up to the October general election. After adjusting our outlook to reflect the third-quarter earnings beat, we now expect Comarch to generate FY2019 and FY2020 EBITDA and bottom-line results 10%-11% above what is currently assumed by the analysts' consensus. Meanwhile CMR stock at 5.9x 2019E EV/EBITDA and 5.7x 2020E earnings is trading at disproportionate discounts of 40% each relative to its comparable companies and its own earnings potential. After updating the valuation model, we raise our target price for Comarch to PLN 250.000 per share, and with nearly 32% implied upside potential we maintain our buy call for the stock.
Comarch is a producer of IT systems for key sectors of the economy: telecommunications, finances, public administration, large companies and the sector of small and medium-sized companies. A range of Co.'s product offering includes ERP-class and financial and accounting systems, CRM systems and loyalty software, sales support and electronic document exchange systems, knowledge management, Business Intelligence, security and protection of data and many other solutions. Apart from providing IT solutions to its customers, Co. is focused on professional customer service and on providing consulting, advisory and integration services as a uniform package.
Set up in 1986, mBank (originally BRE – Export Development Bank) is Poland’s 4th largest universal banking group in terms of total assets and 5th by net loans and deposits at the end of June 2019. mBank has one of the oldest brokerages in Poland – we have been providing brokerage services since 1991 - and the biggest, serving about 300 ths clients.
We provide all brokerage services available in the Polish capital market (i.e. Warsaw Stock Exchange, non-public markets and forex) in a way that meets the expectations of all groups of investors, both individual and institutional. Participating in the dynamic growth of the Polish capital market since its inception, we have acquired competences and experience needed to provide the highest quality of service and we have won the trust and satisfaction of our Clients.
Over the past decade, mBank's Equity Research Team has been consistently ranked among the top research teams in Parkiet's annual institutional investor surveys (Parkiet is Poland's leading daily business newspaper). mBank analysts provide coverage on an extensive list of companies, mainly in Poland but also elsewhere in the CEE region: Austria, Czechia, Portugal, Ukraine and Hungary.
Clients get access to a comprehensive selection of research products including daily market insights, monthly roundups, macroeconomic views, industry- and company- specific analyses, investing strategies, earnings comments, etc.
We give our institutional clients numerous opportunities to connect with industry professionals, top executives, and leading analysts:
- Get direct access to senior management teams at listed companies (over 30 meetings in 2018),
- Engage in our many industry events, featuring listed Polish and global firms (in 2018, we hosted sector-themed conferences around industrials, chemical companies, telecoms, retail, and financials, and co-hosted a Best of Poland investors' with Commerzbank and the Warsaw Stock Exchange),
- Stay informed through an array of enlightening discussion panels, workshops, and briefing sessions with regulatory officials.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.