Kofola: cost pressures remain high (stays HOLD)
We maintain our HOLD recommendation on Kofola, cutting our price target (PT) by 4%, to CZK 293. Despite increasing our revenue forecasts, we see that high market interest rates and inflation environment feed through to higher costs, and some of the benefits are eaten away at the EBITDA level. Although we have increased our 2022E EBITDA forecast by 9%, thanks to higher inflation-driven revenue growth than expected previously, we remain a notch below management’s target. We continue to believe that Kofola should maintain its existing market and be able to partially pass the growing inflation onto consumers, but increasing cost pressure, the weakening macro and rising interest rates all justify our HOLD recommendation. Currently, Kofola trades at 8.9x EV/EBITDA for 2022E, at a discount of 16% vs. its peers.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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