Eurocash confirmed at BUY, TP PLN 19.7 - Weak results ahead fully priced-in, normalisation beyond
We adjust our operational forecasts for expected effects from Covid-19. We lower our TP for Eurocash to PLN19.7 from PLN 23.5 but we confirm our BUY recommendation given a steep decline of the share price. Although Eurocash benefitted from supplying smaller shops which proved particularly resilient during the pandemic, the company should not be immune to market trends and these were particularly weak in 2Q 20e following the stocking up observed in March. Retail sales of food, beverages and tobacco contracted by 9.1% yoy in April and 2.3% yoy in May as consumers relied on their supplies, while June brought a slight trend rebound with an increase of 0.2% yoy. Thus, we expect 2Q 20e results to be a particularly weak quarter for Eurocash. Given the 23% decline of the share price since the end of April we consider a lacklustre second quarter to be fully priced-in and we expect a recovery in 2H 20e.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.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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