Gradus: Hold it and hope for better times (stays HOLD)
We keep our HOLD rating on Gradus, cutting our 12M price target (PT) slightly, to BGN 1.46/share (9% upside potential), from BGN 1.55/share. The market environment has improved for Gradus (poultry price in the EU up by 10% yoy in 2H21 mtd; hatching eggs prices up by 7% yoy in 3Q21 in Bulgaria). However, the very low vaccination rate in Bulgaria (only 27% of its citizens are fully vaccinated) implies a persisting pandemic risk in the country. On top of this, Gradus is still suffering from the ban on hatching eggs exports to Russia. This encourages us to keep our conservative approach to the company’s mid-term growth profile (we keep our forecasts for 2022-23E EBITDA roughly unchanged). We appreciate that the company has a strong balance sheet (2021-23E net cash/EBITDA at 0.1-0.3x, on our numbers). This should allow for dividend distributions (2021-23E dividend yields of 4-7%), but it stays in line with the profit distribution profile of its peers (also 4-7% yields, according to the Bloomberg consensus). Finally, on our numbers, Gradus trades at 2022-23E EV/EBITDAs of 8.6-7.6x, more than double its EME peers (3.8-3.6x), which does not leave much room for further multiples expansion, in our view.
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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