AD Plastik: out-of-luck hero (stays HOLD)

We stick to our HOLD rating on AD Plastik, but reduce our 12M price target (PT) by half, to HRK 88/share (from HRK 176), implying 10% upside. With the European market performing weaker than expected this year and the inevitable revenue hit from Russia, we are more cautious in our mid-term forecasts. We expect solid revenue growth next year already, but it will take some time before the increasing costs are matched by higher product prices, and we do not see margin normalisation before 2024E. Moreover, our model does not assume any dividend distribution for the next two years. We highlight EAPS’ (50% equity investment) improving outlook, expecting healthy growth and dividends for AD Plastik in the coming years, we stress that the company creates a good product and it should navigate its way out of current crisis, in our view. However, based on the current outlook, the next 12 months will still be tough for the entire industry, AD Plastik, with its Russian exposure, included. A sudden change in Russia/Ukraine, more contracts with its EU partners, or a faster-than-expected uptick in the global auto market all present major upside risks for our current rating.