Kofola: a good drink, but for another time (HOLD - re-initiation of coverage)
We re-initiate coverage of Kofola with a HOLD recommendation and a 12M price target (PT) of CZK 306, offering almost no upside (1%). Although the company has a stable industry position, with the potential to grow its market share further in some segments, as well as an established brand, we believe that the current inflationary environment will affect its profitability negatively in 2022-23E, thus making its investment case less attractive in the near future. We expect the company to continue paying dividends, although we expect the dividends to be lower vs. the company’s guidance, as a result of the falling EBITDA and a rising net debt/EBITDA ratio. Kofola offers a 3.6% dividend yield at its current share price. The company is trading at 10.3x 2022E EV/EBITDA, on our estimates, offering a 7% discount to its global soft drinks peers, which we see as justified, given Kofola’s lower margins and relatively high net debt/EBITDA level.Kofola CeskoSlovensko as is a Czech Republic-based company, which is engaged in the non-alcoholic beverages production. The Company is part of the Kofola Group, which produces drinks in eight production plants and its key brands include Kofola, Hoop Cola, Jupi, Jupk, Rajec, Radenska, Paola, Semtex and Vinea. Besides the traditional markets of the Czech Republic and Slovakia, the Company is also present in Poland and in Slovenia with limited activities in Austria and Russia. On selected markets the Company distributes among others Rauch, Evian or Badoit products and under the licence produces RC Cola or Orangina. The Company also produces and distributes Pepsi Co products in Croatia and Slovenia.
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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