Kety: Can I get my first PLN 500+, please (stays BUY)

Despite the 20% rally since our BUY call on Kety on 12 June, we maintain our rating and increase our 12M price target (PT) to PLN 534/share (19% upside), from PLN 473/share; this would be an all-time high level of PLN 500+ for Kety. The main drivers behind our higher PT are: i) the very strong set of 2Q20 preliminary financials, with its EBITDA reaching a record high of PLN 180m, 16% above our forecast and +34% yoy; and ii) management claiming that COVID-19 has not affected its business so far. We see the results as extremely impressive, given the recessionary environment in Europe in 2Q20, and we do not exclude the possibility that, should 3Q20E turn out to be a strong quarter, the company may even increase its 2020E forecasts (announced before the epidemic eruption). On top of this, Kety expects solid FCF in 2Q20E, with net debt at only c.PLN 450m. This implies a net debt/EBITDA of just 0.75x at end-2Q20E, creating room for a higher DPS to be paid from the 2019 profit. We assume a 100% dividend payout ratio, resulting in a DPS of PLN 31 and a 7% dividend yield. On our updated figures, Kety trades at a 2020E EV/EBITDA of only 8.1x, i.e., still 12% below the company’s long-term average.