CD Projekt: A long and bumpy path to recovery (downgraded to HOLD)
We have downgraded CD Projekt (CDR) to HOLD (from Buy) and cut our 12M price target (PT) by a material 30%, to PLN 209 (from PLN 297), offering a limited 11% upside. Despite the positive surprise in the 2Q21 results, we do not see any grounds for any greater turnaround for Cyberpunk 2077 (CP77) on the horizon. Having cut our CP77 copy sales volume assumptions materially, to 4.2m for this year and 5.0m in 2022E, we have also slashed our 2021-22E EBITDA forecasts by a substantial 61% and 50%, respectively. While we do see value related to The Witcher brand, we note that it is likely to be a long time before we see it reflected in the earnings (we assume The Witcher 4 release in 4Q25E only). On our 2021-23E forecasts, CDR is trading at huge valuation premiums vs. its global peers. With limited short-term triggers ahead (next-generation update and a paid expansion widely expected by the market), we do not see much room for positive surprises at this stage.CD Projekt is a holding company of the CD PROJEKT Capital Group which conducts its operations in two activity segments: CD PROJEKT RED and GOG.com. CD PROJEKT RED's activities cover the creation and publication of videogames, licensing the associated distribution rights and manufacturing tie-in products which exploit the commercial appeal of brands owned by Co. The activities of GOG Ltd. involve digital distribution of videogames via Co.'s proprietary GOG.com distribution platform, on the basis of contracts signed by GOG Ltd. with producers, IPR holders and external publishers. The platform enables customers to purchase games, remit payment and download game files to their personal devices.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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