Eurocash: Weaker for longer (downgraded to SELL)
We have downgraded our rating for Eurocash to SELL (from Buy), with our 12M price target (PT) cut to PLN 16.4 (from PLN 31.3). The 9M18 results were sound in the wholesale segment, but the retail operations continued to disappoint and management expects the integration-related costs to remain elevated for at least another two-to-three quarters. At the same time, labour costs are still under pressure and the brand awareness of Delikatesy Centrum in new regions remains low. Overall, we have cut our 2018-19E EBITDA forecasts by 18-26% to PLN 369m and PLN 395m. Effectively, we see 7-18% downside risk for the Bloomberg consensus figures. At the same time, we underline that, on a consensus 1YF EV/EBITDA of 8.3x, Eurocash is trading at a 15% premium to Jeronimo Martins. Expecting a wave of downgrades and profit stagnation, we see such a premium as unjustified.Eurocash, through its subsidiaries, is engaged in the distribution of food products, household chemicals, alcohol, and tobacco products (fast moving consumer goods). Through a range of distribution formats, Co. and its subsidiaries focus its business activities on the wholesale distribution to customers across the wholesale market segments, in particular, to stores throughout Poland such as retail stores, convenience stores at petrol stations, restaurants, hotels and cafeterias. Co. and its subsidiaries operate a range of distribution formats focused on supplying independent stores in Poland, which primarily include: Cash and Carry, Franchise Systems, and Distribution.
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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