PZU: discounted valuation for growing EPS and dividend yields (stays BUY)

We rate PZU a BUY, with a new 12M price target (PT) of PLN 64.9/share, offering 42% upside potential. PZU is one of our top picks among the regional financials. We see its discounted valuation (2025E P/E of 6.8x and P/BV of 1.2x), and its status as one of the most reliable dividend payers in the region (9%+ yield next year), as attractive. This is in combination with positive fundamentals, including improving EPS momentum (our 2025E EPS is +18% yoy) and a medium-term performance supported by the recently-updated 2027E strategic targets (2024-27E EPS CAGR of 8% at the 2027E minimum net profit target). These, to us, provide quite a portfolio of arguments to support our positive view. We also consider PZU to be a more defensive pick when it comes to falling market interest rates. We forecast that its core investment portfolio, dominated by long-term treasury debt instruments with long maturities, may not see as much pressure on yields as that implied by the potential market rate cuts trajectory. The icing on the cake is the growth cycle in Polish P&C insurance, which is just beginning and is unlikely to disappear in the coming quarters, in our view, due to the at-least annual nature of the insurance renewal cycle; and the ambitious growth targets committed to by management, vs. rather sluggish growth in the life segment so far.