Kruk: forging forward (stays BUY)

We have increased our annual investment scale to PLN 2.5bn, in the long term, up from PLN 2.3bn, leading to our 2024-25E net profit increases of c.8%. Higher investments for longer result in value creation in the medium term, as revenues build up slowly, but more sustainably in a debt-collecting business. We continue to see Kruk as a high-quality long-term growth story, and we see most of the upside coming from that angle. However, at the current valuation juncture, we also see Kruk as cheap, trading at our 2024-25E P/Es of 7.6-7.1x, visibly below its 5Y average 12M FWD consensus P/E of 9.2x currently. We see this as an attractive entry point, supported additionally by the market’s reaction to the 2Q24 results, affected by some operational, yet short-lived, headwinds in the Spanish operations. Should the temporary nature of these headwinds, as management has guided, prove to be true, the company could deliver a solid 3Q24E trading update (due in the first half of October) and 3Q24E results, due on 29 October, which could, again, draw attention to the stock. We have increased our 12M price target (PT) for Kruk to PLN 585/share, from PLN 520.7, offering 39% upside potential, and we remain BUYers.