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Greek Equities: Adopting a more cautious stance
ResearchGreece revisits their stock picks and assesses the political outlook ahead of the next parliamentary elections. Macro conditions remain solid, with Q1 real GDP up 2.0% Y/Y, although inflation accelerated to 5.2% Y/Y in May (+0.0% M/M). With the Athens Index up +11% YTD, valuation multiples of non-banks in their universe have expanded to 13.2x P/E and 8.0x EV/EBITDA 2027, leaving more limited upside. Combined with polls pointing to a hung parliament, ResearchGreece is turning more cautious on Greek equities. Banks remain their preferred exposure (solid outlook - volume, rates, asset quality) as a leveraged Greek macro play. They prefer National Bank of Greece, Bank of Cyprus, Piraeus and Optima. Outside banks, they favour selective infrastructure, industrial and defensive names such as OTE, Titan, PPC and Piraeus Port over consumer stocks and cyclicals.
Industrials
PPA reported strong 3Q24 results, prompting ResearchGreece to upgrade their earnings estimates for the second time in the last 30 days. The shares trade 6.6x EPS (ex-cash) and 4.3x EBITDA 2025E, with FCFE and dividend yield at 8% and 6%, respectively. TP increased to €48 (60% upside). If you think such a valuation is demanding, then consider the implied market cap of €1.2bn puts the shares on 6.5x EBITDA 2027, on ResearchGreece’s mid-single EBITDA growth estimates. If the shares stay at current levels, they will trade 3.3x EBITDA 2027E, with net cash at 38% of market cap.
Industrials
Trades on 5.5x EPS (ex-cash), 3.5x EBITDA 2023E, with a dividend yield >7%. PPA has produced a strong set of results for Q3 / 9M and the outlook for 2024-2026 is equally impressive. Undemanding growth can push EBITDA to €132m-134m and net income to €85m-86m in 2025-2026; with the valuation dropping to 2.5x EBITDA. More importantly, these numbers imply equity cash flow generation of c.€80m p.a. (15% yield), driving net cash to €285m (€235m incl. leases) or 50% of the current M/Cap. ResearchGreece initiates coverage with a Buy rating and TP €33 (50% upside).
