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N. CHRYSSOCHOIDIS STOCK BROKERAGE INVESTMENT SERVICES S.A. Equity Research Department EQUITY RESEARCH (FUNDAMENTALS) COCA COLA HBC Outlook: We upgrade our Coca Cola HBC Fair Estimated price to 22,00Euros/Share on the back of the published FY16 results. FY16 results showed that the company succeeded in obtaining an important total revenue growth -excluding FX fluctuations- while generating substantial operating earnings confirming its efforts towards operating efficiency, a fact that further enhanced net profitability. We retain our investment thesis as FV as we incorporate the evidenced efforts towards operating efficiency, the organic growth in terms of revenues excluding FX fluctuations and the company’s ability to generate and sustain a solid FCFF. Date: 21/02/17 FAIR ESTIMATED PRICE: 22.00Euros/Share Investment Thesis: FV Key Statistics: Valuation Date 21/02/17 Share Price 23,01 Price High 52 week 23,09 Price Low 52 week 16,79 Current num. of shares 116.915.862 P/E (E) 25 Market Cap. 2.690.233.985 EPS (E) 0,93 DPS(E) 0,44 *Closing Price as 20/02/2017 Analyst: Dimitrios Villiotis Tel: +30 210 3213913 mail: [email protected] web: www.chryssochoidis.gr

Valuation Date 21/02/17 COCA COLA HBC Share Price …chryssochoidis.gr/fundamentals/COCA COLA HBC UPDATE 210217.pdf · In closing remarks we consider Coca Cola HBC’s as the most

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  • NN.. CCHHRRYYSSSSOOCCHHOOIIDDIISS SSTTOOCCKK BBRROOKKEERRAAGGEE IINNVVEESSTTMMEENNTT SSEERRVVIICCEESS SS..AA..

    Equity Research Department

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    COCA COLA HBC

    Outlook:

    We upgrade our Coca Cola HBC Fair

    Estimated price to 22,00Euros/Share on the

    back of the published FY16 results.

    FY16 results showed that the company

    succeeded in obtaining an important total

    revenue growth -excluding FX fluctuations-

    while generating substantial operating

    earnings confirming its efforts towards

    operating efficiency, a fact that further

    enhanced net profitability.

    We retain our investment thesis as FV as

    we incorporate the evidenced efforts

    towards operating efficiency, the organic

    growth in terms of revenues excluding FX

    fluctuations and the companys ability to

    generate and sustain a solid FCFF.

    Date: 21/02/17

    FAIR ESTIMATED PRICE: 22.00Euros/Share

    Investment Thesis: FV

    Key Statistics:

    Valuation Date 21/02/17

    Share Price 23,01

    Price High 52 week 23,09

    Price Low 52 week 16,79

    Current num. of shares 116.915.862

    P/E (E) 25

    Market Cap. 2.690.233.985

    EPS (E) 0,93

    DPS(E) 0,44

    *Closing Price as 20/02/2017

    Analyst: Dimitrios Villiotis Tel: +30 210 3213913 mail: [email protected] web: www.chryssochoidis.gr

  • COCA COLA HBC-GROWTH AND OPERATING EFFICIENCY

    Coca Cola HBCs FY16 results were characterized by the growth in total revenues

    excluding FX impact, the sharp reduction of operating expenses reaching an eight year

    low level and the FX volatility that affects the overall results.

    Specifically, the unit cases volumes for the Emerging and Developing markets sector

    increased with a more favorable package mix as evidenced by the increase in revenue

    per case (excluding FX) but the substantial volatility of currency led to lower revenue

    per case and decreased y-o-y revenues. In the Established market sector the unit cases

    sold were 2.43% lower than the previous year reflecting the weaker sales in Water and

    Sparkling Beverages. Despite that, the sectors revenues per case were impacted from

    the volatility of GBP during the period. In terms of operating performance the company

    reaps the profits of the efforts towards operating efficiency as the company had the

    lower operating expenses since FY08, a fact that enhances the FCFF and the

    fundamental value of the company in combination with the Net profitability.

    In our valuation model we apply a more normalized projected revenue growth (1% from

    2% previously) as we take into consideration both the substantial impact of the

    currencies and the macro environment of the regions that contribute to the overall

    revenues and facing several challenges (Russia, Nigeria) and the evidenced softer

    revenues in the Established markets region. We also incorporate the more efficient

    operating performance which is the single most important factor for the generation of a

    c.450mn. FCFF per annum especially in the case of a weaker overall revenues

    environment.

    In closing remarks we consider Coca Cola HBCs as the most valuable pick among the

    Hellenic Equities universe, we are satisfied from the shares operating performance and

    we consider it as an attractive investment case among its European peers as it is traded

    10.35x in EV/EBITDA terms below the European average of 12.15x and 1.18x in

    Price/Sales ratio vs the European Price/Sales average ratio of 2.63x.

  • FINANCIAL SUMMARY AND VALUATION TABLES Table I: Income Statement

    Income Statement 2016A 2017E 2018E 2019E 2020E

    Total Sales 6.219.000.000 6.308.673.720 6.427.784.041 6.577.983.535 6.760.726.700

    Cost of goods 3.920.200.000 3.974.464.444 4.049.503.946 4.144.129.627 4.259.257.821

    Gross Profit 2.298.800.000 2.334.209.276 2.378.280.095 2.433.853.908 2.501.468.879

    Operating Expenses 1.792.500.000 1.829.515.379 1.799.779.532 1.841.835.390 1.893.003.476

    Impairment of intagible assets -

    Restrustiring costs 20.000.000 25.000.000 25.000.000 25.000.000

    Non-reccuring items -

    EBITDA 838.700.000 824.693.898 898.500.564 917.018.518 933.465.403

    Depreciation 332.400.000 340.000.000 345.000.000 350.000.000 350.000.000

    EBIT 506.300.000 484.693.898 553.500.564 567.018.518 583.465.403

    Interest 62.300.000 65.000.000 65.000.000 65.000.000 65.000.000

    Investments 13.800.000

    EBT 457.800.000 419.693.898 488.500.564 502.018.518 518.465.403

    Taxation 113.800.000 104.923.474 122.125.141 125.504.630 129.616.351

    Net Income 343.500.000 314.770.423 366.375.423 376.513.889 388.849.052

    Source: Companys statements, N.Chryssochoidis Research Department estimates.

    Table II: Cash Flows

    Cash Flow estimations () 2016A 2017E 2018E

    EBIT 506.300.000 504.693.898 578.500.564

    Taxation (1-Tax Rate) 113.800.000 25% 25%

    NOPAT 392.500.000 378.520.423 433.875.423

    Depreciation 332.400.000 340.000.000 345.000.000

    Capital Exp. 332.000.000 300.000.000 300.000.000

    IWC 12.000.000 16.343.719 2.493.049 -

    NCF 380.900.000 402.176.704 481.368.472

    Source: Companys statements, N.Chryssochoidis Research Department estimates

    Table III: Valuation Metrics

    Growth 12/16A 12/17E 12/18E

    Sales growth -2% 1% 2%

    EBITDA growth 11% -2% 9%

    Net Profit/Loss growth 25% -8% 16%

    RATIOS 12/16A 12/17E 12/18

    Debt/Equity 0,56 0,56 0,56

    Capex/EBITDA 40% 36% 33%

    ROE 12% 12% 12%

    WACC 6,00% 6,00% 6,00%

    VALUATION 12/16A 12/17E 12/18

    Book Value 7,80 7,80 7,80

    P/BV 0,32 0,72 0,72

    P/E 25 25 25

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    /Notes /Ratings P: Market Price

    MCAP: Capitalization UV / Underpriced/ Small Risk

    EPS: Earnings per Share

    UV1

    /

    Stock Price < 20% of Fair

    Underpriced/ Risk

    Stock Price < 10% of Fair

    P/E: Price/Earnings Ratio FV / Fairly Priced/ Small Risk

    10%20% of Fair

    DY: Dividend Yield N/R Not Rated

    ROE: Return on Equity

    FV: Fair Value Price