Report
Jakub Mician

WOOD Flash – Coca-Cola HBC: 1H18 results in line, but does it deserve a premium valuation?

This morning (9 August), Coca-Cola HBC (CCHBC) reported its 1H18 results. Revenues came in spot on with our expectations and consensus, at EUR 3,228m (+0.5% yoy), while volumes expanded 4.6% to 1,067m unit cases. On an FX-neutral basis the revenue expansion came in at +6.4% yoy. Below the top line, for EBIT, the company posted margin expansion of 60bp to 9.6%, partially offset by margin erosion (-20bp) in the Emerging segment, stemming from phasing and the FIFA World Cup. Finally, CCHBC reported net profit short of consensus by 4%, driven by higher finance costs stemming from lower interest returns on cash deposits. FCF generation remains very strong (+33% yoy) at EUR 127m. In the bottling space, we continue to prefer CCI over CCHBC, due to CCI’s stronger fundamentals in the investment case and valuation.
CCHBC is the most expensive bottler in the world on an EV/EBITDA basis. On the consensus 2018/19E EV/EBITDA multiple, the stock is trading at 11.6x and 10.5x, implying 24% premiums (for both periods) to its bottling peers. At the same time, relative to CCI, the company is trading at 77% and 91% premiums vs. the Turkish bottler, while, as we mentioned above, CCI’s fundamental growth is stronger. While CCI has fallen victim to overall market sentiment and its FX-proxy status, we believe the further offloading of FX-exposure from its P&L could narrow the valuation gap to other bottlers, while we believe the fundamentals for CCHBC do not justify the inflated multiple.
Underlying
Coca-Cola HBC AG

Coca-Cola Hellenic Bottling Co. produces, sells and distributes an extensive portfolio of non-alcoholic ready-to-drink beverages. Co.'s business is engaged in producing, selling and distributing non-alcoholic ready-to-drink beverages under bottlers' agreements with The Coca-Cola Company. In some Territories, Co. also produces, sells, distributes and markets its own brands of juice and Water beverages. In addition, Co. bottles and distributes beer in Bulgaria and Former Yugoslav Republic of Macedonia and Co. distributes a selected number of third party premium spirit brands in certain central and eastern European operations.

Provider
Wood and Company
Wood and Company

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.

Analysts
Jakub Mician

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