On Tuesday, Bernstein SocGen Group initiated coverage on Coca-Cola (NYSE:KO) Hellenic (CCH:LN) (OTC: CCHGY), assigning an Outperform rating and setting a price target of GBP34.50. The firm forecasts a 7.7% normalized net sales growth, driven by performance in emerging and developing markets, which is expected to partially offset the lower growth in established markets.
The analyst anticipates profit margin expansion for Coca-Cola Hellenic, similar to that of Coca-Cola European Partners (NASDAQ:CCEP), and expects the return of cash to shareholders to contribute to an approximate 13% normalized earnings per share (EPS) compound annual growth rate (CAGR). This projection places Bernstein's expectations ahead of the current market consensus.
Despite potential risks associated with foreign exchange, particularly in relation to the Nigerian Naira (NGN) and the Egyptian Pound (EGP), and the challenges of operating a Russian business at arm's length without cash repatriation, the analyst believes the stock has been undervalued.
Coca-Cola Hellenic's stock has experienced a de-rating over the past three years. However, Bernstein's analysis suggests that even without considering the Russian segment, Coca-Cola Hellenic is trading at an attractive valuation. The firm estimates an 11.9x enterprise value to earnings before interest and taxes (EV/EBIT) for the next twelve months plus one, which is below the 13.5x ratio they believe is warranted for the company.
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