CD Projekt: Unjustified premium to its peers (downgraded to SELL)
We are downgrading CD Projekt from Hold to SELL, and slash our 12M price target (PT) by 54% to PLN 96.0 (implying 8% downside). We believe the market has overreacted to the recent positive newsflow around the release of Cyberpunk: Edgerunners on Netflix. While we recognise the success of the anime series, we believe the related boost to the number of Cyberpunk 2077 copies sold may be only temporary, neither changing the medium-term outlook materially, nor making the valuation multiples look attractive. Having cut our 2022-23E net profit forecasts by 49% and 30%, respectively (we are 5-7% above the Bloomberg consensus), we see CDR trading at strong premiums to its global peers for both years. Even on the average 2020-24E P/E, taking into account CDR’s most recent AAA release year, the stock is trading at a 20% premium to its peers on our forecasts, which we do not consider justified.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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