DP Eurasia: Grab a slice (stays BUY)

We have updated our view on DP Eurasia, keeping our BUY rating, but cutting our price target (PT) to GBp 128/share (from GBp 235/share) mainly on GBP/TRY weakness (listing in GBp), and a higher RFR in Turkey, where the majority of its business is based. In terms of the business, the investment story remains broadly unchanged. In Turkey (67% of sales, 75% of stores, 90% of EBITDA in 2018), DP Eurasia plans to grow its already FCF-generating business further, seeing potential for 900 stores in the long term (545 as of 2018). In Russia (33% of sales, 25% of stores, 20% of EBITDA in 2018), it is aiming for 1,500 stores in the long term (from 179 currently). The Domino’s Pizza concept has already proved that it suits Moscow’s taste and there is a potential to speed up the Russian store rollout (from 40-60 annually) once the regions outside Moscow prove successful as well. DP Eurasia now trades at a 43% discount vs. its global restaurant peers on 2019-21E EV/EBITDA. Its business in Turkey remains strong, with a good value for money offer and a well-established brand; the Russian segment is growing; FCF is likely to break even this year; locally there is no direct FX exposure; and we believe it is a good play for once the situation in Turkey stabilises.