Warsaw Stock Exchange: the tide is turning (upgraded to BUY)

We have upgraded Warsaw Stock Exchange (GPW) to BUY (from Hold), with a higher price target (PT) of PLN 55.4/share (from PLN 38.4), implying 33.5% upside. We believe that management’s efforts to diversify the revenue streams and expand the value creation chain could start to bear fruit in the coming years and, as a result, we turn more optimistic on GPW’s story. We forecast a 2023-27E net income CAGR of c.7%, driven mainly by: 1) the new 2023-27 strategy; 2) a trading fees increase in both the equity and commodity segments; and 3) the solid development of the Polish equity markets, following the recent election of a pro-EU and more cooperative Prime Minister (PM). As a result, GPW’s capacity to pay dividends (a key element of the equity story, in our view) not only remains intact, but we have also revised it upwards. We now expect a stable 75% payout ratio, with the DPS growing in line with the EPS and GPW to pay out a c.PLN 2.8 DPS in 2024E from the 2023E profit, yielding 6.6% at the current share price. On our 2024E figures, GPW trades at 11.2x P/E, below the market-accepted 5Y 12M FWD P/E average, while also trading below its 5Y average discount to the WIG index.