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On Wednesday, Berenberg initiated coverage on Coca-Cola HBC AG (CCH:LN) (OTC: CCHGY) with a Buy rating and set a price target of GBP 40.68. The firm highlighted the beverage company’s potential for growth despite recent challenges in its operating environment.
Coca-Cola HBC, a leading bottler of The Coca-Cola Company (NYSE:KO)’s products, has faced investor concerns over its exposure to Russia, high inflation, and currency devaluations in Nigeria and Egypt. These factors have influenced the company’s valuation, with its enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple dropping from an average of 10.5x to 8.0x since 2022. The multiple currently stands at 8.8x based on Berenberg’s forecasts for the fiscal year 2025 EBITDA.
Despite these challenges, Berenberg suggests that Coca-Cola HBC’s shares have the potential to re-rate further. This optimism is based on the company’s ability to deliver growth amidst macroeconomic volatility and its return on invested capital (ROIC) trajectory.
The analyst from Berenberg pointed out that the company’s low valuation over the past three years is a reflection of the investor concerns. However, as confidence in Coca-Cola HBC’s growth prospects increases, the firm expects the stock to witness an upward valuation adjustment.
Coca-Cola HBC’s strategic initiatives and performance metrics will be closely watched by investors as they assess the company’s ability to navigate through the uncertain economic landscape and deliver on its growth promises.
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