Gradus: inflation hedge (but not cheap) (stays HOLD)
We keep our HOLD rating on Gradus, cutting our 12M price target (PT) slightly, to BGN 1.30/share (1% upside potential), from BGN 1.46/share. We see the company as a play on growing consumer inflation, and it should be able to pass the higher costs of production onto its clients, especially given its leading position in the Bulgarian poultry market. This results in a 2021-24E EBITDA CAGR of 13%, according to our forecasts. Moreover, we appreciate that the company has a very strong balance sheet (net debt/EBITDA at 0.1x over 2022-24E, on our numbers), which should allow it to pay regular dividends (2022-24E dividend yields of 6-7%). However, the valuation multiples (2022-24E EV/EBITDAs of 10.0-8.0x, on our numbers) imply 19-33% premiums vs. its peers’ median (according to the consensus). Consequently, given the 1% upside potential, we keep Gradus as a HOLD.
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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