TPSA: 2Q`06 results review

Transcription

November 12, 2014
Small & Mid Cap coverage
Poland
Our Polish Small- & Mid-Caps coverage includes an overview of 58 names.
With this report we are initiating coverage of 30 stocks and maintaining
coverage of 28. Of the 30 newly covered stocks we are rating 21 as BUYs, 7
as HOLDs and 2 as SELLs. As for the already covered companies, we are
making changes to price targets/recommendations for three names only. We
are upgrading our target price and recommendation for Netia (Hold from
SELL, TP raised to PLN 5.71), reducing target price for ABC Data (down 2% to
PLN4, HOLD maintained) and re-initiating coverage of Work Service (Hold
rating, Target Price set at PLN19.5).
Companies covered in the note are significantly diversified in terms of sectors,
valuations and growth prospects. To make the research more user-friendly, pages
5-6 include a comparison of the stocks by valuation metrics (P/Es and
EV/EBITDAs), estimated mid-term EPS/revenue growth and finally past share
price performance.
Below we are listing the most expensive/cheap stocks as well as the names
offering the strongest/weakest growth prospects.
2015E P/E (x)
10 Highest
10 Lowest
BPH
108.2 BOS
9.8
Voxel
97.0 MW Trade
9.0
Medicalalgorithmics
31.0 Action
8.9
Netia
29.2 Ovostar
8.4
Atrem
26.5 Pozbud
8.3
Emperia
23.9 Paged
8.2
Budimex
19.5 AB
7.7
Pekaes
18.3 ZEPAK
7.7
Synektik
18.0 ABC Data
6.7
Work Service
17.5 Hawe
5.4
2015E EV/EBITDA (x)
10 Highest
10 Lowest
MW Trade
38.8 Farmacol
Medicalalgorithmics 24.9 Open Finance
Work Service
11.1 Tesgas
CD Projekt
11.0 ZAP
DOM Development
10.2 Ovostar
PRESCO
10.1 Hawe
Apator
9.9 Asseco SEE
Synektik
9.9 Emperia
Ronson
9.8 Netia
Forte
9.6 ZEPAK
Research analysts:
5.9
5.4
5.2
5.2
5.1
4.6
4.5
4.5
4.4
4.3
Source: DM BZ WBK estimates
Pawel Puchalski, CFA
+48 22 586 8095; pawel.puchalski@bzwbk.pl
Dariusz Gorski
+48 22 586 8100; dariusz.gorski@bzwbk.pl
Tomasz Kasowicz
+48 22 586 8155; tomasz.kasowicz@bzwbk.pl
Adrian Kyrcz
+48 22 586 8159; adrian.kyrcz@bzwbk.pl
Tomasz Sokolowski
+48 22 586 8236; tomasz.sokolowski@bzwbk.pl
2014-2017 EPS CAGR (%)
10 Highest
10 Lowest
Bytom
64% Budimex
Ciech
48% Hawe
CD Projekt
44% Wielton
Atrem
40% Wojas
PCE
33% Farmacol
Medicalalg.
33% Open Finance
Work Service
31% Monnari
ACE
29% Ovostar
Gino Rossi
24% Echo
Alumetal
21% PHN
-5.4%
-5.8%
-6.4%
-6.9%
-7.5%
-7.5%
-12%
-13%
-15%
-29%
2014-2017E EBITDA CAGR (%)
10 Highest
10 Lowest
CD Projekt
41% Unibep
2.2%
Medicalalg.
40% Pozbud
0.6%
Bytom
32% ZAP
0.4%
Elemental
28% Budimex
-3.5%
Work Service
25% PRESCO
-3.7%
PCE
22% Ovostar
-3.7%
Ronson
22% Open Finance
-5.4%
Atrem
21% Netia
-5.9%
Tesgas
21% Monnari
-5.9%
Pekaes
20% Hawe
-6.7%
Lukasz Kosiarski
+48 22 586 8225; lukasz.kosiarski@bzwbk.pl
Andrzej Bieniek
Securities broker, Investment advisor
+48 22 586 8225; andrzej.bieniek@bzwbk.pl
Michal Sopiel
+48 22 586 8233; michal.sopiel@bzwbk.pl
Tomasz Kucinski
+48 22 534 1610; tomasz.kucinski@bzwbk.pl
Dom Maklerski BZ WBK is a separated organizational unit of Bank Zachodni WBK S.A. seated in Wrocław at Rynek 9/11, 50-950 Wrocław, registered by the District Court for Wrocław-Fabryczna in Wrocław, 6th
Business Division of the National Court Register, under KRS no. 0000008723, NIP: 896 000 56 73, share capital: PLN 992.345.340 paid up in full..The disclaimers concerning the nature of the published document are
found on the last page of the document and constitute its integral part..
Polish Equity Research
Contents
SMC Radar: A stock – picking tool .......................................................................................................... 5
AB .......................................................................................................................................................... 7
ABC DATA ............................................................................................................................................... 9
ACE .......................................................................................................................................................11
ACTION ...................................................................................................................................................15
ALUMETAL ...............................................................................................................................................17
AMBRA....................................................................................................................................................21
AMICA .....................................................................................................................................................25
APATOR ..................................................................................................................................................29
ASSECO SEE ..........................................................................................................................................33
ASSECO BUSINESS SOLUTIONS ................................................................................................................37
ATREM ....................................................................................................................................................41
BANK BPH ..............................................................................................................................................43
BENEFIT SYSTEMS ...................................................................................................................................47
BOS BANK ..............................................................................................................................................49
BUDIMEX .................................................................................................................................................53
BYTOM ....................................................................................................................................................55
CD PROJEKT ...........................................................................................................................................59
CIECH .....................................................................................................................................................61
DOM DEVELOPMENT ................................................................................................................................63
ECHO INVESTMENT ..................................................................................................................................65
ELEMENTAL HOLDING...............................................................................................................................67
EMPERIA .................................................................................................................................................71
ERBUD ....................................................................................................................................................73
EUCO ....................................................................................................................................................77
FARMACOL ..............................................................................................................................................79
FORTE ....................................................................................................................................................81
GINO ROSSI ............................................................................................................................................85
GRAJEWO ...............................................................................................................................................89
HAWE....................................................................................................................................................93
GRUPA KETY ...........................................................................................................................................97
MEDICALGORITHMICS ...............................................................................................................................99
MIDAS ...................................................................................................................................................103
MONNARI ..............................................................................................................................................105
MW TRADE ...........................................................................................................................................109
NETIA ...................................................................................................................................................113
NEUCA ..................................................................................................................................................115
OPEN FINANCE ......................................................................................................................................117
OVOSTAR UNION ...................................................................................................................................119
PAGED ..................................................................................................................................................121
PRIME CAR MANAGMENT........................................................................................................................125
PEKAES ................................................................................................................................................129
PELION .................................................................................................................................................133
PHN .....................................................................................................................................................135
POZBUD ................................................................................................................................................137
PRESCO .............................................................................................................................................139
RONSON .............................................................................................................................................143
SYNEKTIK ..............................................................................................................................................147
TESGAS ................................................................................................................................................149
TRAKCJA ...............................................................................................................................................151
UNIBEP .................................................................................................................................................153
VOTUM .................................................................................................................................................157
VOXEL ..................................................................................................................................................161
WIELTON...............................................................................................................................................165
WOJAS ................................................................................................................................................169
WORK SERVICE .....................................................................................................................................173
ZA PULAWY ..........................................................................................................................................175
ZCH POLICE .........................................................................................................................................177
ZE PAK ................................................................................................................................................179
2
Throughout the report we use share prices as of November 5, 2014
3
Fig. 1. BZ WBK coverage: Initiations of coverage
Company
ACE
Alumetal
Ambra
Amica
Apator
Asseco BS
Asseco SEE
Bank BPH
BOS Bank
Bytom
Elemental Holding
Erbud
Forte
Gino Rossi
Grajewo
HAWE
Medicalgorythmics
Monnari
MW Trade
Paged
PCM
Pekaes
Presco
Ronson
Unibep
Votum
Voxel
Wielton
Wojas
ZE PAK
Recomemndation
12M Target Price
current
previous
change
current
previous
chng. %
upside %
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Buy
Sell
Sell
Buy
Buy
Hold
Hold
Hold
Hold
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
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n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
-
16.50
52.40
12.00
149.00
42.40
10.30
16.40
59.75
49.10
2.00
3.90
29.60
67.60
4.00
35.50
4.40
230.00
13.50
21.60
67.00
59.70
10.57
3.10
1.53
9.20
9.90
12.50
6.00
8.40
31.90
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
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n.a.
n.a.
n.a.
n.a.
54%
19%
36%
37%
12%
37%
33%
15%
18%
43%
35%
12%
19%
29%
16%
75%
13%
42%
16%
62%
18%
17%
-18%
-10%
16%
32%
11%
7%
5%
7%
chng. %
upside %
0%
-2%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
15%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
33%
4%
50%
45%
30%
13%
8%
22%
0%
18%
65%
20%
31%
12%
132%
3%
63%
23%
7%
5%
15%
71%
38%
64%
6%
3%
17%
-46%
Fig. 2. BZ WBK coverage: Changes to valuations & recommendations
Company
Recomemndation
current
previous
AB
ABC Data
Action
Atrem
Benefit Systems
Budimex
CD Projekt
Ciech
Dom Development
Echo Investment
Emperia
EuCO
Farmacol
Kety
Midas
Netia
Neuca
Open Finance
Ovostar
Pelion
PHN
Pozbud
Synektik
Tesgas
Trakcja
Work Service
ZA Pulawy
ZCH Police
Buy
Hold
Buy
Buy
Buy
Hold
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Buy
Hold
Hold
Buy
Buy
Buy
Buy
Buy
Hold
Buy
Sell
12M Target Price
current previous
change
►
►
►
►
►
►
►
►
►
►
►
►
►
►
►
▲
►
►
►
►
►
►
►
►
►
►
►
Buy
Hold
Buy
Buy
Buy
Hold
Buy
Buy
Hold
Buy
Buy
Buy
Buy
Buy
Buy
Sell
Buy
Buy
Hold
Hold
Buy
Buy
Buy
Buy
Buy
Restricted
Buy
Sell
4
43.00
4.00
69.70
7.10
391.00
153.00
18.00
51.40
45.10
7.65
81.00
31.70
66.00
311.00
1.39
5.71
376.00
7.00
75.00
79.00
29.10
7.70
32.50
7.40
1.22
19.50
170.40
11.60
43.00
4.10
69.70
7.10
391.00
153.00
18.00
51.40
45.10
7.65
81.00
31.70
66.00
311.00
1.39
4.95
376.00
7.00
75.00
79.00
29.10
7.70
32.50
7.40
1.22
Restricted
170.40
11.60
SMC Radar: A stock – picking tool
Fig. 3. Small& Mid caps – Value Radar
2015E P/E (x)
10 Highest
BPH
108.2
Voxel
97.0
Medicalalgorithmics
31.0
Netia
29.2
Atrem
26.5
Emperia
23.9
Budimex
19.5
Pekaes
18.3
Synektik
18.0
Work Service
17.5
10 Lowest
BOS
MW Trade
Action
Ovostar
Pozbud
Paged
AB
ZE Pak
ABC Data
HAWE
10 Highest
MW Trade
Midas
PCM
Ciech
Echo
Pelion
ABC Data
Presco
Voxel
Paged
9.8
9.0
8.9
8.4
8.3
8.2
7.7
7.7
6.7
5.4
2015E Net debt to Equity (x)
10 Lowest
8.6 Asseco BS
5.0 Bytom
1.4 Tesgas
1.3 Benefit
0.7 Votum
0.7 Medicalalgorithmics
0.6 Synektik
0.6 CD Projekt
0.5 Monnari
0.5 Budimex
-0.2
-0.2
-0.3
-0.3
-0.3
-0.3
-0.4
-0.4
-0.5
-2.1
2015E ROE (%)
10 Highest
CD Projekt
45.3%
EuCO
36.1%
Budimex
33.2%
Bytom
32.0%
Votum
31.8%
Benefit
29.2%
Action
23.5%
MW Trade
23.1%
Medicalalgorithmics
22.9%
Forte
22.0%
2015E EV/EBITDA (x)
10 Highest
10 Lowest
MW Trade
38.8 Farmacol
Medicalalgorithmics
24.9 Open Finance
Work Service
11.1 Tesgas
CD Projekt
11.0 ZAP
Dom Development
10.2 Ovostar
Presco
10.1 Hawe
Apator
9.9 Asseco SEE
Synektik
9.9 Emperia
Ronson
9.8 Netia
Forte
9.6 ZE PAK
10 Lowest
ZE PAK
5.1%
Pekaes
4.9%
Tesgas
4.4%
Trakcja
4.4%
Emperia
4.0%
Atrem
2.6%
Netia
2.1%
PHN
1.4%
Voxel
1.1%
BPH
0.7%
5.9
5.4
5.2
5.2
5.1
4.6
4.5
4.5
4.4
4.3
2014-2017E EPS CAGR (%)
10 Highest
10 Lowest
Bytom
64.1% Budimex
-5.4%
Ciech
47.6% Hawe
-5.8%
CD Projekt
44.3% Wielton
-6.4%
Atrem
39.6% Wojas
-6.9%
Police
33.1% Farmacol
-7.5%
Medicalalgorithmics
32.7% Open Finance
-7.5%
Work Service
31.3% Monnari
-11.6%
ACE
29.1% Ovostar
-12.5%
Gino Rossi
24.2% Echo
-14.5%
Alumetal
20.5% PHN
-28.7%
2015E Net margin (%)
10 Highest
10 Lowest
Medicalalgorithmics
54.0% Erbud
1.7%
Echo
39.9% Neuca
1.7%
CD Projekt
30.7% Atrem
1.5%
Euco
24.2% Action
1.4%
MW Trade
22.0% Emperia
1.4%
Hawe
20.7% ABC Data
1.2%
Asseco BS
18.4% Voxel
1.1%
PHN
17.0% Pelion
1.1%
Ovostar
15.1% AB
1.0%
Apator
14.4% Midas
1.0%
2014-2017E EBIT CAGR (%)
10 Highest
10 Lowest
Bytom
62.2% Pelion
0.4%
Ciech
47.6% Pozbud
0.2%
CD Projekt
45.2% Wojas
0.1%
Tesgas
44.2% Presco
-2.5%
Police
39.7% Budimex
-4.1%
Medicalalgorithmics
39.6% Echo
-5.8%
Atrem
33.1% Monnari
-8.3%
Work Service
25.6% Ovostar
-9.1%
Alumetal
22.7% Hawe
-10.0%
Votum
22.3% Open Finance
-12.4%
2014-2017E EBITDA CAGR (%)
10 Highest
10 Lowest
CD Projekt
40.9% Unibep
Medicalalgorithmics
39.7% Pozbud
Bytom
32.0% ZAP
Elemental
28.1% Budimex
Work Service
25.0% PRESCO
PCE
22.0% Ovostar
Ronson
21.5% Open Finance
Atrem
20.8% Netia
Tesgas
20.8% Monnari
Pekaes
20.1% Hawe
5
2.2%
0.6%
0.4%
-3.5%
-3.7%
-3.7%
-5.4%
-5.9%
-5.9%
-6.7%
2015E EBITDA Margin (%)
10 Highest
10 Lowest
Echo
71.4% Atrem
Medicalalgorithmics
59.9% Erbud
CD Projekt
37.3% Unibep
Hawe
31.3% Emperia
Asseco BS
29.4% Neuca
MW Trade
27.5% Action
Netia
27.3% Pelion
Euco
27.1% AB
Presco
27.0% ABC Data
Ovostar
26.7% Midas
4.0%
3.3%
3.2%
3.2%
2.3%
2.0%
2.0%
1.6%
1.6%
-4.6%
2014-2017E Revenues CAGR (%)
10 Highest
10 Lowest
Medicalalgorithmics
41.3% ACE
Midas
40.0% ZAP
Work Service
26.7% ZEPAK
CD Projekt
22.0% Phn
Tesgas
16.3% Ciech
Action
13.7% Hawe
Forte
13.2% Pozbud
MW Trade
11.6% PRESCO
Bytom
11.4% Open Finance
Votum
11.2% Netia
1.2%
1.1%
0.6%
0.5%
-1.5%
-2.4%
-2.6%
-3.1%
-3.1%
-4.2%
-1.9
-2.7
-2.8
-3.4
-4.3
-4.9
-5.3
-11.9
-12.5
-12.6
3M Market Performance (%)
10 Highest
10 Lowest
Bank BPH
36.7 Voxel
Work Service
35.4 Ambra
PCM
34.1 ABC Data
Grupa Kety
33.7 BOS Bank
Forte
28.3 ACE
Elemental Holding
26.1 Wojas
Alumetal
25.3 Wielton
PHN
24.5 Emperia Holding
Paged
24.3 Hawe
Amica Wronki
23.5 Open Finance
-3.9
-4.2
-4.8
-4.9
-6.2
-6.4
-6.5
-13.4
-17.4
-17.7
YTD Market Performance (%)
10 Highest
10 Lowest
Euco
79.9 Farmacol
Work Service
49.6 Pelion
Monnari Trade
48.9 Ovostar
Forte
44.9 Hawe
Paged
35.9 Atrem
Ciech
34.6 ACE
Kety
33.4 Voxel
Wojas
26.1 Emperia
Votum
25.8 Presco
Tesgas
24.3 Open Finance
-26.6
-27.3
-27.5
-30.1
-31.1
-32.5
-32.5
-35.4
-42.3
-69.4
Fig. 4. Small& Mid caps – Momentum Radar
1M Market Performance (%)
10 Highest
10 Lowest
Voxel
24.3 ACE
Bank BPH
21.5 Police
Medicalgorithmics
13.0 Netia
Midas
11.3 Budimex
Paged
11.0 Farmacol
Votum SA
11.0 ZE PAK
Prime Car Management 10.0 Ambra
Benefit Systems
8.2 Presco Group
Alumetal
8.1 Open Finance
Ovostar
8.0 Wielton
1Y Market Performance (%)
10 Highest
10 Lowest
Forte
69.1 Ambra
Medicalgorithmics
66.4 Ovostar
Work Service
58.7 Farmacol
Euco
57.6 Pelion
Kety
50.9 Emperia
Paged
46.9 Atrem
Votum
42.3 Voxel
Ciech
41.2 Hawe
Monnari Trade
33.2 Presco
Synektik
30.5 Open Finance
-25.5
-27.5
-27.6
-28.9
-30.7
-30.9
-34.5
-40.5
-49.0
-71.1
6
IT Distribution
Poland
NOVEMBER 12, 2014
RECOMMENDATION
AB
BUY (MAINTAINED)
CURRENT PRICE: PLN32.4
TARGET PRICE: PLN43.0 (MAINTAINED)
Negative earnings dynamics
 1Q14/15 Results Preview. We expect that AB continued
 Recent developments. The company mulls paying a
dividend and a launch of a buyback tender offer. The
company has recently completed a PLN100mn 2019 bond
issue priced Wibor6M + 1.6%.
 Outlook. During its last results’ presentation, AB said that
it saw signs of market improvement in the Czech Republic,
mainly in the enterprise sector but also in the public sector.
 Change in Forecasts. We apply no changes to our model.
Hold
Under Review / Suspended
TP
40
35
30
WIG Relative
ABE
25
20
15
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Oct-11
10
The chart measures performance against the WIG index.
On 11/05/2014, the WIG index closed at 53,591.
LAST RECOMMENDATIONS
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Buy
10-23-2014
31.2
43.0
3.7%
3.2
Buy
7-9-2014
29.9
39.0
4.5%
-0.6
Hold
4-28-2014
29.1
35.0
2.7%
4.4
Hold
1-30-2014
33.7
35.0
-13.6%
-15.9
 Change in Valuation & Recommendation. We keep our
12-month Target Price for AB at PLN43.0 and maintain our
Buy rating for the stock. The comparative valuation points
to PLN29.2 per share
Sell
45
Jan-12
its top-line improvement in 1Q14/15, although its earning
may prove to be a small disappointment. We expect that in
the Czech Republic and Slovakia AB kept its strong
dynamics, driven by the distribution agreement with Apple.
In Poland, we expect a 4% y/y sales expansion. We expect
the gross margin at 3.95% vs. 3.90% in 1Q13/14. We also
forecast a visible increase in SG&A costs - PLN40.1mn vs.
PLN29.5mn in 1Q13/14 (SG&A/sales ratio at 2.81%). We
assume revenues of PLN1.43bn (+13.7% y/y), an EBITDA
of PLN19.4mn. The net profit should settle at PLN10.7mn
(net margin at 0.75%). Outcome: NEGATIVE.
STOCK PERFORMANCE
Buy
MAIN SHAREHOLDERS
Mr. Andrzej Przybylo
ING pension fund
Mrs. Iwona Przybylo
Allianz pension fund
Aviva mutual fund
% of votes
15.0%
13.1%
10.0%
9.1%
5.7%
COMPANY DESCRIPTION
One of the largest IT distribution company in Poland and
Czech Republic.
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
lukasz.kosiarski@bzwbk.pl
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013/14E
5,758
96.0
85.3
57.3
8.4
8.6
2014/15E
6,092
100.0
87.4
60.6
7.9
8.3
2015/16E
6,339
104.1
90.7
62.0
7.7
8.0
2016/17E
6,596
108.4
94.6
64.1
7.5
7.6
Source: Company data, DM BZ WBK estimates
Fig. 1. AB: 1Q14/15 results preview
7
Reuters/Bloomberg codes
ABEP.WA / ABE PW
Market capitalisation (PLNm)
524
Number of shares (m)
16.2
Free float (%)
79.1%
Avg. daily turnover 3M (PLNm)
0.2
1M
3M
YTD
Price performance
5.5%
22.3%
-0.3%
PLN in millions, unless otherwise stated
Sales
1Q11/12 2Q11/12 3Q11/12 4Q11/12 1Q12/13 2Q12/13 3Q12/13 4Q12/13 1Q13/14 2Q13/14 3Q13/14 4Q13/14 1Q14/15E
y/y
q/q
1,428
13.7%
-5.9%
944
1,429
1,001
963
1,123
1,730
1,355
1,306
1,256
1,637
1,348
1,517
24.2
36.7
13.8
16.9
14.3
28.4
15.2
16.2
20.6
33.5
18.8
23.1
19.4
2.6%
2.6%
1.4%
1.8%
1.3%
1.6%
1.1%
1.2%
1.6%
2.0%
1.4%
1.5%
1.4%
21.8
34.0
11.6
14.1
11.9
25.8
12.6
13.8
18.2
31.0
16.3
19.9
2.3%
2.4%
1.2%
1.5%
1.1%
1.5%
0.9%
1.1%
1.4%
1.9%
1.2%
1.3%
Net profit
10.1
21.6
8.3
Net margin
1.1%
1.5%
0.8%
7.9
9.3
16.8
6.2
9.5
13.1
21.2
10.6
12.4
0.8%
0.8%
1.0%
0.5%
0.7%
1.0%
1.3%
0.8%
0.8%
EBITDA
EBITDA margin
EBIT
EBIT margin
Fig. 2. AB: Forecasts changes
2014/15E
New Previous
Sales
6,092
6,092
EBITDA
100.0
100.0
EBIT
87.4
87.4
Net profit
60.6
60.6
New
6,339
104.1
90.7
62.0
Change
0.0%
0.0%
0.0%
0.0%
2015/16E
Previous
6,339
104.1
90.7
62.0
New
6,596
108.4
94.6
64.1
Change
0.0%
0.0%
0.0%
0.0%
-5.8% -15.7%
-0.3
-0.2
16.2 -10.7% -18.4%
1.1%
-0.3
-0.2
10.7 -17.8% -13.6%
0.8%
-0.3
2016/17E
Previous
6,596
108.4
94.6
64.1
-0.1
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. AB: Valuation changes
In PLN per share, unless otherwise stated
New
43.0
29.2
DCF valuation
Comparable valuation (based on 2013/14-2015/16E)
Previous
43.0
29.2
Change
0.0%
0.0%
Fig. 4. AB: Income statement forecast
2012/13
Fig. 5. AB: Balance sheet forecast
2013/14 2014/15E 2015/16E 2016/17E
2012/13
2013/14
2014/15E
2015/16E
2016/17E
1,002
1,091
1,213
1,306
1,393
Fixed assets
166
168
185
179
173
274.5
Total assets
1,167
1,260
1,398
1,485
1,565
Current liabilities
741
791
868
893
921
211
195
195
195
195
5
5
5
6
6
0
0
0
0
0
421
464
524
586
638
16
Net sales
5,430
5,758
6,092
6,339
6,596
Current assets
COGS
5,220
5,484
5,839
6,075
6,322
Gross profit
210.0
273.7
252.9
263.5
SG&A
139.3
161.2
165.5
172.8
179.9
Other operating income, net
-6.6
-27.2
0.0
0.0
0.0
EBITDA
74.2
96.0
100.0
104.1
108.4
Operating profit
64.2
85.3
87.4
90.7
94.6
-12.2
-11.7
-12.7
-14.2
-15.5
Profit before tax
52.0
73.7
74.8
76.5
79.1
share capital
16
16
16
16
Income tax
10.3
16.4
14.2
14.5
15.0
Minority Interest
0
0
0
0
0
Net profit
41.7
57.3
60.6
62.0
64.1
Total liabilities
1,167
1,260
1,398
1,485
1,565
161
160
125
Gross margin
3.9%
4.8%
4.2%
4.2%
4.2%
EBITDA margin
1.4%
1.7%
1.6%
1.6%
1.6%
Operating margin
1.2%
1.5%
1.4%
1.4%
1.4%
Net profit margin
0.8%
1.0%
1.0%
1.0%
1.0%
Net financial income (costs)
bank debt
Long-term liabilities
bank debt
Equity
Net debt
199
149
Fig. 6. AB: Cash flow forecast
2012/13
2013/14
2014/15E
2015/16E
2016/17E
CF from operations
0.9
77.8
16.3
8.5
54.9
CF from investment
-4.9
-13.4
-29.3
-7.4
-7.2
0.0
26.4
0.0
0.0
-12.4
Net change in cash
-4.0
90.8
-13.0
1.1
35.3
CF from financing
8
IT Distribution
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ABC DATA
HOLD (MAINTAINED)
TARGET PRICE: PLN4.00 (PREV. PLN4.10)
 3Q14 Results Review. ABC Data reported 3Q14 results
 2014 guidance. Company slashed its FY14 official
guidance: new forecast is sales at PLN5.54bn (vs.
PLN5.76bn), EBITDA at PLN74.8mn (vs. PLN92.1mn).
New FY14 guidance implies 4Q14 sales at PLN1.61bn and
EBITDA at PLN31.6mn.
 Recent developments. Mrs. Ilona Weiss, deputy CEO, will
replace Mr. Norbert Biedrzycki as CEO on 1 January,
2015.
 Change in Forecasts. We have applied some changes to
our model following 3Q14 results release.
Hold
Sell
5
5
TP
4
4
WIG Relative
3
ABC
3
2
2
1
1
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Jan-13
Jul-12
Oct-12
Apr-12
Oct-11
0
Jan-12
way below expectations due to PLN10mn impairment on
receivables; adjusted results came in line with
expectations. Revenues expended 13% y/y to PLN1.37bn,
matched expectations (PLN1.35-1.40bn); revenues from
Polish market increased by 15% y/y to PLN703mn (we
expected a 5% growth), sales in EU countries came flat y/y
at PLN506mn (huge disappointment, we expected +20%
y/y), while export sales outside EU increased by 69% y/y to
PLN166mn. Gross margin stood at 4.79% vs. 4.46% in
3Q13 and 5.11% in 2Q14. Our assumption was 4.70%.
SG&A came at PLN56.8mn vs. PLN36.4mn in 3Q13. Sales
costs include PLN10mn one-off costs of impairment on
receivables. SG&A to sales ratio stood at 4.13% vs. 3.01%
in 3Q13. EBIT came at PLN7.5mn (-59% y/y), adjusted
EBIT came at PLN17.5mn vs. expectations of PLN19.2mn
(market) and PLN18.2mn (BZ WBK). Net earnings came at
PLN2.0mn, tax rate in 3Q14 at 54.7%. Operating CF in
3Q14 stood at PLN30.8mn.
STOCK PERFORMANCE
Buy
Apr-13
Least preferred IT distributor
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Hold
10-23-2014
3.6
4.1
5.2%
4.7
Sell
7-9-2014
4.3
4.0
-14.4%
-19.5
Sell
4-28-2014
3.9
3.9
8.1%
9.8
Sell
1-30-2014
4.1
3.9
-5.1%
-7.4
MAIN SHAREHOLDERS
ABCD Management
MCI Venture Projects
PZU pension fund
Aviva pension fund
BZ WBK Asset Management
% of votes
41.0%
20.5%
9.3%
7.0%
5.0%
COMPANY DESCRIPTION
One of the largest IT distribution company in Poland.
 Change in Valuation & Recommendation. We cut our
12-month Target Price for ABC Data at PLN4.00 and
maintain our Hold rating for the stock. The comparative
valuation points to PLN3.76 per share
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
4,822
79.6
77.2
59.2
7.7
9.2
2014E
5,623
72.4
70.2
39.3
11.6
11.4
2015E
5,924
96.5
93.8
67.5
6.7
8.5
2016E
6,267
101.6
98.8
71.1
6.4
8.1
Fig. 1. ABC Data: 3Q14 results review
9
ABCP.WA / ABC PW
480
125.3
Free float (%)
37.2%
0.2
1M
3M
YTD
Price performance
-1.8%
-4.5%
-10.9%
Sales
EBITDA
EBITDA margin
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
752
1,304
760
742
892
1,300
1,089
1,096
1,212
1,425
1,169
1,391
1,375
13.4%
-1.1%
11.7
19.3
13.2
8.0
9.5
28.1
16.9
14.9
19.5
28.3
12.7
22.5
1.6%
1.5%
1.7%
1.1%
1.1%
2.2%
1.5%
1.4%
1.6%
2.0%
1.1%
1.6%
10.4
18.3
12.3
7.3
8.7
27.3
16.3
14.4
18.9
27.6
12.2
21.9
1.4%
1.4%
1.6%
1.0%
1.0%
2.1%
1.5%
1.3%
1.6%
1.9%
1.0%
1.6%
Net profit
6.4
29.5
6.4
Net margin
0.9%
2.3%
0.8%
0.2
5.0
19.5
11.0
14.3
14.2
19.7
6.8
11.2
0.0%
0.6%
1.5%
1.0%
1.3%
1.2%
1.4%
0.6%
0.8%
EBIT
EBIT margin
Fig. 2. ABC Data: Forecasts changes
2014E
New Previuos
Sales
5,623
5,787
EBITDA
72.4
86.6
EBIT
70.2
84.4
Net profit
39.3
51.5
New
5,924
96.5
93.8
67.5
Change
-2.8%
-16.4%
-16.8%
-23.6%
2015E
Previuos
5,924
96.5
93.8
67.5
-1.0
-1.0
7.5 -60.5% -65.9%
0.5%
-1.0
-1.0
2.0 -86.0% -82.2%
0.1%
-1.0
2016E
Previuos
6,267
101.6
98.8
71.1
New
6,267
101.6
98.8
71.1
Change
0.0%
0.0%
0.0%
0.0%
8.0 -58.9% -64.3%
0.6%
-0.7
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. ABC Data: Valuation changes
New
4.00
3.76
DCF valuation
Comparable valuation (based on 2014-2016E)
Previous
4.10
3.76
Change
-2.4%
0.0%
Fig. 4. ABC Data: Income statement forecast
Fig. 5. ABC Data: Balance sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
3,693
4,822
5,623
5,924
6,267
Current assets
COGS
3,509
4,596
5,358
5,650
5,977
Gross profit
183.8
226.5
265.9
273.9
SG&A
132.8
151.0
198.2
4.6
1.7
2.4
EBITDA
58.8
79.6
Operating profit
55.6
Profit before tax
2012
2013
2014E
2015E
2016E
824
842
995
1,065
1,152
Fixed assets
73
75
81
85
87
289.5
Total assets
896
917
1,076
1,151
1,239
180.1
190.7
Current liabilities
587
600
765
817
875
0.0
0.0
112
141
230
253
278
72.4
96.5
101.6
21
1
1
1
1
77.2
70.2
93.8
98.8
20
0
0
0
0
-11.4
-9.1
-11.6
-10.5
-11.2
288
316
310
332
363
125
125
125
125
125
0
0
0
0
0
896
917
1,076
1,151
1,239
220
228
231
bank debt
bank debt
Equity
44.2
68.0
58.6
83.3
87.6
share capital
Income tax
9.0
8.9
19.3
15.8
16.6
Minority Interest
Net profit
31.1
59.2
39.3
67.5
71.1
Total liabilities
Gross margin
5.0%
4.7%
4.7%
4.6%
4.6%
EBITDA margin
1.6%
1.6%
1.3%
1.6%
1.6%
Operating margin
1.5%
1.6%
1.2%
1.6%
1.6%
Net profit margin
0.8%
1.2%
0.7%
1.1%
1.1%
Net debt
118
124
Fig. 6. ABC Data: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
73.7
30.1
-42.4
43.8
43.1
CF from investment
-1.8
-4.0
-8.3
-7.3
-4.8
-67.6
-22.7
44.1
-22.1
-15.2
-6.7
14.4
23.1
CF from financing
Net change in cash
4.3
3.3
10
Automotive
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ACE
BUY (INITIATION)
TARGET PRICE: PLN16.5
A highly probable rise in earnings

Equity Story. We are initiating our coverage of ACE, a leading
STOCK PERFORMANCE
supplier of disc brake system components in Europe, with a Buy
recommendation and a target price of PLN16.5 per share (54%
upside!). We expect the company to improve its profitability in the
coming years due to efficiency improvements in Fuchosa (Spain),
implementation and utilisation of nodular iron technology in Feramo
(Czech Rep.) and new aluminium projects in EBCC (Poland). That
said, we expect the gross margin to rise on improving sales in 2015E
and 2016E, by 1.5pp and by 0.5pp to 23.5% and 24%, respectively.
We thus expect company to show substantial net profit dynamics in
years ahead. Given ACE’s strong cash generation nature we see the
company as attractive from dividend pay-outs point of view.

Automotive
market
outlook.
According
to
PWC,
Autofacts
passenger and light-commercial vehicle production (key driver for
ACE volumes) should grow y/y by 5.4% in EU in 2014, though fall by
0.3% in the CEE region. For 2015 and beyond, PWC expects the
Rec.
Date
pace (2013-2018 CAGR at 3.4%).

Price
Price performance
on issue 12 month
date
target
European automotive market to continue to grow, albeit at a slower
n/a
n/a
n/a
n/a
absolute
relative
(p.p)
n/a
n/a
Financials. We forecast ACE revenues in 2014E at EUR98.1mn (3% y/y), while in 2015E company’s sales should go up to
COMPANY DESCRIPTION
EUR101.1mn (+3% y/y). For 2016E We expect ACE revenues to
The ACE group (casting company) is a leading supplier of
disc brake system components to the production-focused
European automotive industry (Tier 2). The company’s main
products are: iron anchors and aluminum calipers. The
company’s production is based in three plants in Spain
(Fuchosa), Poland (EBCC) and the Czech Republic
(Feramo).
grow 5% y/y (above the market CAGR for 2013-2018), when the
company should be fully utilising its new capacities and projects.
EBIT is expected to rise to EUR4.9mn (+10% y/y) in 2014E, to
EUR5.8mn (+19% y/y) in 2015E and to EUR7.1mn (+21% y/y) in
2016E. That said, the net profit margin should rise to 4.1% (2015E)
and 4.9% (2016E) from 2.8% in 2014E.

Main shareholders
Risks/triggers. The deepening slowdown in the European economy
could hit sales of passenger cars and LCV sales and this is the key
risk that we see for ACE’s business. Among other risks, the delay in
Casting brake (Spain)
PZU pension fund
Aviva pension fund
ING pension fund
% of votes
11.45%
15.91%
14.70%
14.13%
obtaining homologation for its products could also harm the pace of
the company’s earnings growth in the future years.

Valuation & recommendation. Based on our DCF model, we arrived
ANALYST
at a 12 month TP of PLN16.5 per share, which implies a 54% upside
Tomasz Kasowicz
(+48) 22 586 81 55
tomasz.kasowicz@bzwbk.pl
potential. We thus initiate our coverage of ACE with a Buy
recommendation.
Company Data
EURmn
2013
2014E
Sales
100.8
98.1
EBITDA
10.4
10.4
EBIT
4.5
4.9
Net income
1.9
2.7
P/E (x)
28.1
20.1
EV/EBITDA (x)
6.6
6.6
Source: Company data, BZ WBK Brokerage research
2015E
101.2
11.3
5.8
4.1
13.2
6.1
2016E
106.5
12.6
7.1
5.2
10.4
5.5
11
ACEP.WA / ACE PW
230.1
21.2
Free float (%)
82.7%
0.1
1M
3M
YTD
Price performance
-4.5%
-9.7%
-33.9%
Fig. 1. ACE: DCF valuation
EUR in millions, unless otherwise stated
DCF valuation
2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E beyond
EBIT
5.8
7.1
7.1
7.1
7.1
7.1
7.1
7.1
7.1
7.1
7.1
Tax rate
19%
19%
19%
19%
19%
19%
19%
19%
19%
19%
19%
Taxes on EBIT
-1.1
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
NOPLAT
4.7
5.7
5.7
5.7
5.7
5.7
5.7
5.7
5.7
5.7
5.7
Depreciation
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
Capital expenditures
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
4.5
5.5
Change in working capital
0.4
0.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Free cash flow
5.4
6.2
6.7
6.7
6.7
6.7
6.7
6.7
6.7
6.7
Terminal growth rate
93.7
Terminal value
Discount factor
Discounted free cash flow at 31.12.2014
0.93
0.87
0.81
0.76
0.71
0.66
0.62
0.58
0.54
0.50
0.47
5.0
5.4
5.5
5.1
4.8
4.4
4.1
3.9
3.6
3.4
47.1
Enterprise value
92.3
Net debt at 31.12.2014
14.3
Minorities
0.0
Proceeds from non-core assets
0.0
Fair value at 31.12.2014
78.0
Number of shares
21.2
Fair value per share at 31.12.2014
Cost of equity
3.7
9.0%
12M Target Price in EUR
4.0
EUR/PLN rate
4.2
12M Target Price in PLN
16.5
Curren value per share
Up/downside
5.7
1.0%
10.7
54.3%
PV FCF/PV TV
49%
2015E P/E @ TP (x)
20.4
2015E EV/EBITDA @ TP (x)
8.7
Source: Company data, BZ WBK Brokerage
Fig. 2. ACE: Comparable valuation
P/E
EV/EBITDA
2014E
2015E
2016E
2014E
2015E
2016E
BREMBO SPA
14.5
12.9
11.7
6.6
5.9
5.4
ELRINGKLINGER AG
15.0
13.2
11.7
6.7
6.1
5.6
FISCHER (GEORG)-REG
11.9
10.2
9.5
5.6
5.1
4.8
SOGEFI
15.3
8.5
6.9
2.1
1.7
1.5
VALEO SA
12.7
10.9
9.6
5.0
4.4
4.0
LE BELIER
8.8
7.7
6.8
4.4
3.8
3.4
13.2
12.0
11.0
6.2
5.7
5.2
TRW AUTOMOTIVE HOLDINGS CORP
POLYTEC HOLDING AG
9.8
7.9
6.9
4.0
3.2
2.9
AKEBONO BRAKE INDUSTRY CO
22.6
15.7
9.8
n/a
2.8
2.3
CIE AUTOMOTIVE SA
18.2
12.4
10.6
4.9
4.1
3.7
NISSIN KOGYO CO LTD
10.2
10.0
8.8
4.3
4.0
3.6
Median international peers
13.2
10.9
9.6
4.9
4.1
3.7
ACE
20.1
13.2
10.4
6.6
6.1
5.5
Premium/discount
53%
21%
8%
34%
49%
48%
Implied value (in PLN per share)
7.0
Source: BZ WBK Brokerage research, company data, Bloomberg
8.8
9.9
10.0
9.1
9.1
12
Fig. 3. ACE: 3Q14 results preview
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
22.8
25.3
27.2
26.0
23.1
22.3
26.1
26.7
24.1
24.0
26.6
25.5
22.8
-5.3%
-10.5%
-15.5%
2.5
2.7
2.1
2.5
1.7
1.9
2.0
2.8
2.2
3.4
3.1
2.7
2.3
3.7%
11%
11%
8%
10%
7%
9%
8%
11%
9%
14%
11%
10%
10%
0.9
-0.6
1.1
1.1
0.8
1.3
0.6
0.4
0.8
1.6
0.9
1.2
1.7
1.3
0.9
-2.3%
-35.0%
5%
4%
3%
5%
3%
2%
3%
6%
4%
5%
7%
5%
4%
0.1
-1.4
-0.1
0.5
0.8
0.3
0.7
0.6
0.2
0.7
0.6
0.5
1.0
0.6
0.5
-8.1%
-6.7%
Net margin
-1%
2%
3%
1%
3%
3%
1%
2%
2%
2%
4%
2%
2%
-0.1
0.1
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. ACE: Forecast changes
2014E
New Previous
98.1
n/a
Sales
10.4
n/a
EBITDA
4.9
n/a
EBIT
2.7
n/a
Net profit
New
101.2
11.3
5.8
4.1
Change
n/a
n/a
n/a
n/a
2015E
Previous
n/a
n/a
n/a
n/a
New
106.5
12.6
7.1
5.2
Change
n/a
n/a
n/a
n/a
2016E
Previous
n/a
n/a
n/a
n/a
Change
n/a
n/a
n/a
n/a
Fig. 5. ACE: Valuation changes
New
16.5
9.0
DCF valuation
Fig. 6. ACE: Income statement forecast
Previous
n/a
n/a
Weight
100%
0%
Change
n/a
n/a
Fig. 7. ACE: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
98.6
100.8
98.1
101.2
106.5
Current assets
36.0
31.2
30.0
30.9
32.4
-81.6
-81.4
-76.1
-77.4
-81.2
Fixed assets
47.1
45.6
45.8
44.9
44.0
17.0
19.5
22.0
23.8
25.3
Total assets
83.1
76.8
75.9
75.8
76.4
-15.4
-15.8
-17.7
-18.0
-18.2
Current liabilities
20.4
21.9
22.6
21.9
22.3
1.5
0.8
0.6
0.0
0.0
3.5
5.2
7.0
6.1
4.7
EBITDA
8.3
10.4
10.4
11.3
12.6
22.1
17.2
18.0
16.1
13.3
18.5
14.0
14.8
12.9
10.0
40.7
37.7
35.2
37.7
40.9
3.2
Net sales
COGS
Gross profit
SG&A
Operating profit
bank debt
3.1
4.5
4.9
5.8
7.1
-0.4
-1.1
-0.8
-0.8
-0.6
2.7
3.3
4.1
5.1
6.5
share capital
3.2
3.2
3.2
3.2
Income tax
-0.3
-1.4
-1.4
-1.0
-1.2
Minority Interest
0.0
0.0
0.0
0.0
0.0
Net profit
2.4
1.9
2.7
4.1
5.2
83.1
76.8
75.9
75.8
76.4
11.2
6.6
19.3%
22.4%
23.5%
23.8%
Net debt
9.5
11.5
14.3
17.2%
EBITDA margin
8.4%
10.3%
10.6%
11.2%
11.8%
Operating margin
3.1%
4.4%
5.0%
5.8%
6.6%
Net profit margin
2.4%
1.9%
2.8%
4.1%
4.9%
Profit before tax
Gross margin
bank debt
Equity
Total liabilities
Fig. 8. ACE: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
3.8
8.2
9.0
9.4
11.4
CF from investment
-11.5
-5.1
-5.8
-4.5
-4.5
-1.0
-7.8
-3.5
-4.7
-6.5
Net change in cash
-8.7
-4.8
-0.2
0.2
0.4
CF from financing
13
This page has been left intentionally blank.
14
IT Distribution
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ACTION
BUY (MAINTAINED)
In line with official guidance
 3Q14 Results Preview. Most of the growth in 3Q14 sales
two large contracts for hardware shipments with science
universities in Krakow and Gdynia worth PLN41.0mn and
PLN30.6mn, respectively. CEO Mr. Piotr Bielinski recently
sold 150k shares at PLN47/share. According to his
statement, the cash will be used to capitalise game
developer Action Game Labs (Action 40% subsidiary).
 2014 guidance. The company sees its 2014 revenues at
PLN5.45bn and the net profit at PLN70.9mn. 1H14 results
account for 46% of the forecasted FY14 sales and 47% on
the net level. Our forecasts for 2014 are higher than the
guidance by 3% both on the top-line and the net level.
12-month Target Price for Action at PLN69.7 and maintain
our Buy rating for the stock. The comparative valuation
points to PLN39.40 per share.
Sell
TP
70
60
50
40
ACT
30
20
WIG Relative
10
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Oct-11
 Recent developments. The company has recently signed
Hold
80
Jan-12
at Action, as was the case in the previous quarter, should
come from operations abroad. For 3Q14, we expect export
sales to expand by 42% y/y and the domestic sales, in line
with the market, by 3% y/y. Overall, we expect the
company’s sales at PLN1.33bn (+17% y/y). We see the
gross margin at 6.10% vs. 6.02% in 3Q13 and estimate the
SG&A costs at PLN59.0mn (SG&A/sales ratio at 4.43%).
The EBIT should reach PLN21.3mn and the net profit
PLN15.7m (+12% y/y, net margin at 1.17%). Outcome:
POSITIVE.
STOCK PERFORMANCE
Buy
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
0.9
Buy
10-23-2014
46.0
69.7
1.3%
Buy
7-9-2014
43.0
69.7
7.0%
1.8
Buy
4-28-2014
46.9
65.0
-8.3%
-6.6
Buy
1-30-2014
49.0
69.0
-4.3%
-6.6
MAIN SHAREHOLDERS
% of votes
Mr. Piotr Bielinski
Mrs. Aleksandra Matyka
Generali pension fund
Mr. Wojciech Wietrzykowski
Aviva pension fund
20.9%
18.6%
10.8%
7.2%
5.9%
COMPANY DESCRIPTION
One of the largest IT distribution company in Poland.
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
4,749
91
82
62
12.9
9.5
2014E
5,640
110
98
73
10.9
7.9
2015E
6,619
135
118
90
8.9
6.4
2016E
7,396
143
127
97
8.2
6.1
15
Free float (%)
1M
Price performance
-0.8%
ACT.WA / ACT PW
774
16.6
53.2%
0.6
3M
YTD
12.7%
-2.9%
Fig. 1. Action: 3Q14 results preview
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
669
1,023
788
752
827
1,148
1,132
989
1,140
1,488
1,324
1,197
1,333
y/y
q/q
16.9% 11.3%
16.5
24.0
18.0
16.9
18.8
25.9
22.6
21.1
21.1
26.6
25.8
24.1
23.8
12.6%
2.5%
2.3%
2.3%
2.2%
2.3%
2.3%
2.0%
2.1%
1.8%
1.8%
1.9%
2.0%
1.8%
-0.1
-0.2
13.7
21.0
15.1
14.0
16.0
23.1
20.3
18.8
18.7
24.2
23.5
21.6
21.3
13.8%
-1.4%
2.1%
2.1%
1.9%
1.9%
1.9%
2.0%
1.8%
1.9%
1.6%
1.6%
1.8%
1.8%
1.6%
0.0
-0.2
Net profit
10.1
15.0
11.1
Net margin
1.5%
1.5%
1.4%
9.3
11.0
16.8
15.0
13.3
14.0
19.3
17.3
15.9
15.7
12.0%
-1.5%
1.2%
1.3%
1.5%
1.3%
1.3%
1.2%
1.3%
1.3%
1.3%
1.2%
-0.1
-0.2
EBITDA
EBITDA margin
EBIT
EBIT margin
Fig. 2. Action: Forecasts changes
2014E
New Previous
Sales
5,640
5,640
EBITDA
109.7
109.7
EBIT
98.2
98.2
Net profit
72.5
72.5
New
6,619
134.9
118.2
89.6
Change
0.0%
0.0%
0.0%
0.0%
2015E
Previous
6,619
134.9
118.2
89.6
New
7,396
143.4
126.8
97.2
Change
0.0%
0.0%
0.0%
0.0%
2016E
Previous
7,396
143.4
126.8
97.2
-1.3%
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. Action: Valuation changes
New
69.7
39.4
DCF valuation
Previous
69.7
39.4
Change
0.0%
0.0%
Fig. 4. Action: Income statement forecast
Fig. 5. Action: Balance sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
3,515
4,749
5,640
6,619
7,396
Current assets
763
1,021
1,090
1,157
1,229
COGS
3,288
4,452
5,293
6,220
6,957
Fixed assets
138
151
182
171
159
Gross profit
226.8
297.1
347.8
399.2
439.1
Total assets
901
1,172
1,273
1,328
1,389
SG&A
158.5
210.5
247.9
279.3
310.7
Current liabilities
636
854
902
952
1,011
0.0
-4.6
-1.7
-1.7
-1.7
107
107
107
107
107
EBITDA
79.6
91.4
109.7
134.9
143.4
5
23
55
55
56
Operating profit
68.3
82.1
98.2
118.2
126.8
0
20
50
50
50
-7.3
-5.2
-7.2
-7.7
-6.7
260
295
316
320
322
Profit before tax
60.9
76.9
91.0
110.6
120.0
share capital
2
2
2
2
2
Income tax
12.7
16.1
18.5
21.0
22.8
Minority Interest
0
0
0
0
0
Net profit
48.3
61.6
72.5
89.6
97.2
Total liabilities
901
1,172
1,273
1,328
1,389
143
160
178
Gross margin
6.5%
6.3%
6.2%
6.0%
5.9%
EBITDA margin
2.3%
1.9%
1.9%
2.0%
1.9%
Operating margin
1.9%
1.7%
1.7%
1.8%
1.7%
Net profit margin
1.4%
1.3%
1.3%
1.4%
1.3%
2016E
bank debt
bank debt
Equity
Net debt
99
44
Fig. 6. Action: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
14.7
102.4
-24.4
13.2
2.0
CF from investment
-5.9
-21.9
-43.3
-5.3
-4.8
CF from financing
-9.3
-6.0
-0.7
-25.6
-15.1
-68.4
-17.6
-17.9
Net change in cash
-0.5
74.5
16
Industrials
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ALUMETAL
BUY (INITIATION)
Automotive shift to CEE
Equity Story. Alumetal is the fourth biggest secondary aluminium
STOCK PERFORMANCE
(aluminium casting alloys) producer in Europe, enjoying superior
Buy
metal
46
management system, its modern facilities and lower staff costs. The
44
company is capitalising on the shift of the automotive industry production
42
to the CEE region from Western Europe. According to OICA data, the
40
share of the CEE5 countries (Poland, Hungary, Czech Republic, Slovakia
38
and Slovenia) in EU engine and gearbox production (main use for
36
aluminium casting alloys) rose to 13% in 2012 from 1% in 2005 and this
34
trend continues. Following the second stage of the Nowa Sol project,
32
another 60kt (to 225kt), starting from 4Q16. We believe that this a good
30
Nov-14
greenfield investment in Hungary, which will expand its capacities by
WIG Relative
Oct-14
reach a nearly 93% utilisation this year. The company decided to launch a
AML
Oct-14
which expanded capacities by additional 33kt, we expect Alumetal to
Oct-14
advanced
Sep-14
an
Sep-14
to
Sep-14
thanks
Sell
Aug-14
competitors
Aug-14
its
Hold
Aug-14
over
Jul-14
profitability
Jul-14

move for Alumetal as it has a dominant position on the domestic market
(with a 50% market share) and has already established a base of clients
in Southern Europe (Hungary is, for instance, its third biggest export
market so far). The Hungarian project should allow Alumetal to grow by
leaps and bounds once more. The strong balance sheet and cash
generation will enable it to finance this project (CAPEX of PLN120mn)
and to simultaneously maintain its 50% dividend payout and safe
indebtedness levels (net debt/EBITDA’16 at 1.2x)

Financials. We assumed the alloy-to-scrap spread at PLN1,365/t for the
COMPANY DESCRIPTION
Company is a biggest polish and 4th biggest in Europe
manufacturer of secondary aluminium casting alloys used
primarily in automotive sector.
forecasted period, in line with the historical average. Having said that, the
company should be able to maintain its 8.5% gross profit margin. We also
expect the new capacities in Hungary to be utilised in 65% in the first full
year of their running (though this will cannibalise the previous Hungarian
sales).

Main shareholders
Ipopema 30 FIZAN
Aviva pension fund
ING pension fund
% of votes
40.0%
10.0%
5.5%
Triggers/Risks. The company is heavily exposed to the automotive
segment (90% of sales), so any worsening environment in this industry
will have a negative impact on the company’s financials. The company
ANALYST
has a good track record of utilising new capacities but the Hungarian
Tomasz Kucinski
project is Alumetal’s first greenfield investment.

+48 22 534 16 10
Valuation & recommendation. Our DCF model points to a TP of
tomasz.kucinski@bzwbk.pl
PLN52.4 per share. The comparative valuation points to PLN41.8 but
since the peer group is flawed (no listed close peers), we have set our TP
at PLN52.4, implying a 19% upside potential.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
1015.3
54.0
37.1
35.8
18.5
2014E
1197.3
75.4
56.2
55.8
11.9
2015E
1263.3
90.1
69.0
62.1
10.7
2016E
1322.7
93.7
68.2
60.5
11.0
13.6
9.8
8.5
8.3
17
Market capitalisation (PLNmn)
Number of shares (mn)
Free float (%)
1M
Price performance
7.6%
AMT.WA / AML PW
663.3
15.1
42.5%
0.7
3M
YTD
25.8%
n.a.
Fig. 1. Alumetal: DCF valuation
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
1,197.3 1,263.3 1,322.7 1,547.7 1,578.7 1,610.3 1,642.5 1,667.1 1,692.1 1,717.5
56.2
67.0
66.2
82.1
83.7
85.4
87.1
88.4
89.8
91.1
0.0
2.7
2.6
2.6
2.7
2.7
13.2
13.4
14.3
17.3
56.2
64.3
63.5
79.5
81.1
82.7
73.9
75.0
75.4
73.8
19.2
21.1
25.5
26.3
26.3
26.3
26.3
26.3
26.3
26.3
31.8
11.6
10.5
39.6
5.5
5.6
5.7
4.3
4.4
4.5
10.0
70.0
52.0
26.3
26.3
26.3
26.3
26.3
26.3
26.3
22.6
60.6
37.0
39.6
5.5
5.6
5.7
4.3
4.4
4.5
78.7
3.8
26.6
39.8
75.6
77.1
68.2
70.7
71.0
69.3
8.2%
320.5
1.0%
976.7
481.8
802.3
74.8
727.5
15.1
48.3
11.0
47.9
52.4
Revenues
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Change in operating WC
Net investment
Free cash flow
WACC
PV FCF 2014-2023
Terminal growth
Terminal value (TV)
PV TV
Total EV
Net debt
Equity value
Value per share (PLN, 31 Dec 2014)
Month
Curent value per share (PLN)
12M target price
Fig. 2. Alumetal: Comparable valuation
Price
Alumetal SA
43.6
AMAG Austria Metall AG
26.99
Hindalco Industries Ltd
156.1
Alcoa Inc
16.33
United Co RUSAL PLC
4.25
Grupa Kety SA
288.05
Impexmetal SA
2.75
Median
Premium/discount vs. median
Mkt cap
(EURmn)
155
951.8
4,224
15,483
6,699
639
130
P/E
EV/EBITDA
2014E
2015E
2016E
2014E
11.9
20
11.3
20.0
14.8
14.0
9.2
14.4
-15.0%
10.7
16.1
9.1
15.3
6.9
13.1
9.2
11.1
16.7%
11.0
13.1
7.3
13.5
6.5
12.7
9.2
10.9
-17.4%
9.8
9.1
8.3
8.4
14.4
8.7
7.4
8.5
-3.9%
Source: BZ WBK Brokerage research, company data
18
2015E
8.5
7.6
7.0
6.7
10.3
8.4
6.8
7.3
0.6%
2016E
8.3
6.7
6.3
6.1
9.5
8.1
6.5
6.6
14.9%
Fig. 3. Alumetal: 3Q14 results review
3Q11
n.a.
4Q11
n.a.
1Q12
n.a.
2Q12
n.a.
3Q12
n.a.
4Q12
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
9.2
9.4
16.4
18.4
22.8
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
3.8%
4.2%
6.0%
6.8%
7.3%
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
5.2
5.4
12.4
14.1
18.0
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2.1%
2.4%
4.5%
5.2%
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
5.7
4.8
12.4
12.9
n.a.
n.a.
n.a.
Net margin
n.a.
n.a.
n.a.
2.3%
2.1%
4.5%
4.8%
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Alumetal: Forecast changes
2014E
New Previous
Sales
1197.3
n.a.
EBITDA
75.4
n.a.
EBIT
56.2
n.a.
Net profit
55.8
n.a.
Change
n.a.
n.a.
n.a.
n.a.
1Q13
244.1
New
1263.3
90.1
69.0
62.1
2Q13
225.4
3Q13
274.2
4Q13
271.6
1Q14
311.4
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2Q14
305.2
3Q14
292.3
y/y
6.6%
q/q
-4.2%
13.3
19.7
20.1%
48.1%
4.4%
6.7%
0.8
2.4
8.5
14.9
20.2%
75.3%
5.8%
2.8%
5.1%
0.6
2.3
17.2
10.7
14.0
12.9%
30.8%
5.5%
3.5%
4.8%
0.3
1.3
New
1322.7
93.7
68.2
60.5
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Alumetal: Valuation changes
New
52.4
41.8
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Alumetal: Income statement forecast
Net sales
Fig. 7. Alumetal: Balance Sheet forecast
2012
845
2013
1015
2014E
1197
2015E
1263
2016E
1323
Current assets
2012
237
2013
272
2014E
345
2015E
340
2016E
351
784
953
1096
1156
1210
Fixed assets
196
210
201
250
296
Gross profit
61
62
101
107
112
Total assets
432
483
547
591
647
SG&A
25
28
38
40
46
Current liabilities
140
165
210
195
199
4
3
-4
2
2
56
60
92
72
70
EBITDA
53
54
75
90
94
43
33
33
57
80
Operating profit
39
37
56
69
68
18
11
11
37
44
4
2
2
4
5
249
285
304
338
368
248
284
302
336
366
0
0
0
0
0
433
483
547
591
647
75
103
114
COGS
bank debt
bank debt
Equity
37
36
55
65
63
share capital
Income tax
3
1
0
3
3
Minority Interest
Net profit
34
36
56
62
61
Gross margin
7.2%
6.2%
8.5%
8.5%
8.5%
EBITDA margin
6.3%
5.3%
6.3%
7.1%
7.1%
Operating margin
4.7%
3.6%
4.7%
5.5%
5.2%
4.1%
3.5%
Net profit margin
4.7%
4.9%
4.6%
Profit before tax
Total liabilities
72
70
Net debt
Fig. 8. Ambra:: Cash flow forecast
CF from operations
2012
52
2013
36
2014E
43
2015E
72
2016E
76
CF from investment
-13
-35
-10
-72
-55
CF from financing
-39
-2
-5
-22
-25
28
-22
-4
0
-1
Net change in cash
19
20
FMCG
Poland
NOVEMBER 12, 2014
RECOMMENDATION
AMBRA
BUY (INITIATION)
Growing on cider



Equity Story. Ambra is the leading wine and strong, non-vodka
alcohol distributor in Poland with a high c.50% share of own
brands in its portfolio. Ambra also distributes its products in
Romania (c.13% share) and the Czech Republic (c.10%). The
company’s portfolio includes popular brands, such as: Dorato,
Cin&Cin, Piccolo, ElSol, Fesco and Cydr Lubelski. Ambra offers
investors exposition to the continuously growing wine market (c-45% pa), despite the recent slowdown to just 0-1% in 2014. The
company has recently invested in cider production and a new
brand ‘Cydr Lubelski’ to benefit from the rising popularity of this
soft apple drink in Poland. The cider market is likely to grow to
40mn litres in the next five years, which would constitute just
c.1% of the beer market. Ambra can be distinguished from other
WSE companies by a good FcF profile. Since its managers
turned the company around from when it faced problems with
foreign investments in 2008, Ambra generates a stable OCF (avg.
conversion ratio at 0.8x), which, along with the limited CAPEX,
makes it possible to deliver an attractive FcF yield (11.5% in
2008-13 on average). This has allowed Ambra to start paying
attractive DY since 2012, which should, in our view, continue in
the coming years.
Financials. We expect the 2014/15E results to be pretty much
flat y/y, with growth appearing in 2015/16E on the rising positive
impact of ‘Cydr Lubelski’. We expect Ambra to earn a net profit of
PLN16mn and an EBITDA of PLN42mn on sales of PLN468mn
(+12% y/y due to the rising sales of cider). In regards to the cider
project, we expect an EBIT loss of PLN2mn on sales of 29mn in
2014/15E, which will turn into an EBIT profit of PLN2mn next
year. In the long run (2018/19E), we estimate that cider might
give a PLN6mn boost to Ambra’s bottom line.
STOCK PERFORMANCE
COMPANY DESCRIPTION
Ambra is one of the largest Polish beverage manufacturers
and distributors.
Main shareholders
Sektkellerei Schloss-Wachenheim
Aviva pension fund
Mr. Nick Gunther Reh
Free float
% of votes
61.1%
7.6%
1.3%
30.0%
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
tomasz.sokolowski@bzwbk.pl
Valuation & recommendation. Ambra is currently trading with a
PE of 14x and 11x in 2014/15-15/16, respectively, which implies a
premium vs. fair PE (c.10x). On the other hand, we believe that
the relatively high FcF yield justifies such a premium. Based on
our DCF model, we arrived at a 12-month TP of PLN12.0 per
share, which implies a 38% upside potential. We initiate Ambra’s
coverage with a Buy rating.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013/14
418.2
41.0
30.2
16.5
13.4
7.5
2014/15E
467.9
41.7
30.5
15.8
14.0
7.7
2015/16E
479.5
46.2
34.6
19.6
11.3
6.8
2016/17E
492.9
47.4
35.4
21.1
10.5
6.6
21
Free float (%)
1M
Price performance
-4.9%
AMB.WA / AMB PW
222
25.2
37.3%
0.1
3M
YTD
-3.5%
-13.4%
Fig. 1. Ambra: DCF valuation
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
WACC (2014-23)
PV FCF 2014-23
Terminal growth
Terminal Value (TV)
PV TV
Total EV
Net debt
minorities
Equity value
Value per share (PLN, 1 Jan 2014/15)
Month
Current value per share (PLN)
Year-end target price (PLN)
2014/15E
2015/16E
2016/17E
2017/18E
2018/19E
2019/20E
2020/21E
2021/22E
2022/23E
2023/24E
468
31
5
26
11
13
10
14
8.0%
157
2.5%
447
207
364
86
4
274
25.2
10.9
11
11.0
12.0
479
35
6
29
12
2
11
27
493
35
6
30
12
3
17
22
507
36
6
30
12
3
13
26
523
35
6
29
13
3
14
25
531
35
6
29
13
1
14
26
537
33
6
27
14
1
15
25
543
32
6
26
14
1
15
24
550
31
5
26
14
1
16
23
557
30
5
25
15
1
16
22
Fig. 2. Ambra: Comparable valuation
P/E
Name
2014E
2015E
EV/EBITDA
2016E
2014E
2015E
ROE
2016E
2014E
2015E
g'13-15E
2016E
Sales
EBITDA
PEG2Y
net
WHOLESALE
METRO
15.4
12.6
10.5
4.9
4.7
4.5
10%
12%
13%
0%
-4%
-324%
0.0
BOOKER
26.4
21.9
19.5
16.7
14.3
12.9
17%
19%
20%
2%
9%
7%
3.1
SYSCO
21.7
20.1
18.7
10.7
10.1
9.4
19%
19%
20%
5%
7%
10%
2.0
SIAM MAKRO
36.7
29.2
23.7
23.4
18.7
15.3
44%
49%
54%
15%
25%
22%
1.3
BIZIM
28.9
22.1
17.7
9.4
8.0
6.6
17%
21%
24%
12%
14%
1%
23.2
Median
26.4
21.9
18.7
10.7
10.1
9.4
17%
19%
20%
5%
9%
7%
2.0
Ambra
14.0
11.3
10.5
7.7
6.8
6.6
7%
9%
9%
14.7%
12.8%
18.6%
0.6
-47%
-48%
-44%
-28%
-33%
-30%
vs. wholesalers
22
Fig. 3. Ambra: 3Q14 results review
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
84.3
187.2
71.2
86.4
80.0
188.7
65.8
90.0
86.1
174.8
68.8
88.5
86.8
0.7%
-1.9%
7.0
33.4
4.6
1.8
7.9
34.5
-0.7
0.7
9.8
31.3
-0.2
0.0
9.0
8.3%
17.8%
6.4%
2.0%
9.9%
18.3%
-1.1%
0.8%
11.3%
17.9%
-0.2%
0.0%
10.1%
4.5
30.7
-3.2
-1.0
5.3
31.9
-3.1
-2.2
7.1
28.6
-2.8
-2.7
5.4%
16.4%
-4.5%
-1.2%
6.7%
16.9%
-4.7%
-2.4%
8.2%
16.4%
-4.1%
-3.0%
2.7
20.7
-4.8
-2.6
1.6
20.7
-3.2
-2.6
3.4
20.3
-3.4
5.8
Net margin
3.3% 11.0% -6.7%
-3.0%
2.0%
11.0%
-4.9%
-2.9%
3.9%
11.6%
-4.9%
6.5%
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
n.a.
479
n.a.
n.a.
493
n.a.
n.a.
n.a.
46
n.a.
n.a.
47
n.a.
n.a.
n.a.
34
n.a.
n.a.
35
n.a.
n.a.
n.a.
19
n.a.
n.a.
21
n.a.
n.a.
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Ambra: Forecast changes
2014E
New Previous
Sales
468
n.a.
EBITDA
41
n.a.
EBIT
30
n.a.
Net profit
15
n.a.
-7.9% 47168.4%
-122
1008
6.3 -11.0%
-334.2%
7.1%
-106
1016
2.4 -28.1%
-57.9%
3.4%
-54
-314
Fig. 5. Ambra: Valuation changes
New
12.0
15.4
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Ambra: Income statement forecast
12/13
Fig. 7. Ambra: Balance Sheet forecast
12/13
13/14
14/15E
15/16E
16/17E
Net sales
425
13/14 14/15E 15/16E 16/17E
418
468
479
493
Current assets
229
222
243
258
267
COGS
284
286
320
327
338
Fixed assets
190
197
196
196
201
Gross profit
141
132
148
152
155
Total assets
420
419
439
454
468
SG&A
105
101
118
117
119
Current liabilities
149
142
160
162
165
-4
-1
0
0
0
72
73
83
83
83
EBITDA
42
41
42
46
47
30
23
23
23
23
Operating profit
32
30
31
35
35
26
20
20
20
20
-7
-6
-6
-5
-4
212
226
224
233
240
Profit before tax
93
bank debt
bank debt
Equity
25
24
25
29
31
share capital
93
93
93
93
Income tax
9
-2
9
10
10
Minority Interest
29
28
32
36
40
Net profit
17
26
16
20
21
Total liabilities
420
419
439
454
468
100
90
88
Gross margin
33.1%
31.6%
31.7%
31.7%
31.4%
EBITDA margin
10.0%
9.8%
8.9%
9.6%
9.6%
7.5%
7.2%
6.5%
7.2%
7.2%
3.4%
4.1%
4.3%
16/17E
Operating margin
Net profit margin
3.9%
6.2%
Net debt
84
86
Fig. 8. Ambra: Cash flow forecast
12/13
13/14
14/15E
15/16E
CF from operations
27
29
10
27
28
CF from investment
-5
-18
-10
-11
-17
-13
-18
-4
-7
-9
-4
9
2
CF from financing
Net change in cash
8
-7
23
24
Industrials
Poland
NOVEMBER 12, 2014
RECOMMENDATION
AMICA
BUY (INITIATION)
CURRENT PRICE: PLN109
TARGET PRICE: PLN149
Hot investment

Equity Story. Following the 2010 plans sale to Samsung, we estimate
that 2014 will be the fourth year in a row with EBITDA growth exceeding
20%. This year could mark, however, a turnaround for Amica and be the
STOCK PERFORMANCE
Buy
Hold
Sell
130
first year of strong growth without a contribution from the Russian market
that used to be the main driver in the past. Amica is doing extraordinarily
well on the Polish market, taking full advantage of the good market
110
90
environment, Mastercook’s bankruptcy, and combining these two factors
50
AMC
all). We believe that exports, mainly to the Western markets, and growth
equipment in Poland. We believe that Amica is a company that doesn’t
bite off more than it can chew – it picks new markets wisely and enters
Jul-14
Oct-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Oct-12
10
Apr-12
with retaining a very high (ca. 60%) market share in free-standing heating
Oct-11
offsetting the likely further slowdown on the Russian market and problems
WIG Relative
30
Jan-12
in the non-heating segment in Poland should in the coming years be
Jan-13
dynamically on some of the Western markets (Germany and UK above
70
Jul-12
with a successful marketing campaign. It has also started to grow
them cautiously, yet effectively. It does so without taking too much risk –
either by entering big distribution channels without huge marketing
expenditures or by making opportunistic acquisitions. What is more,
Amica has strong balance sheet, with its net debt*/EBITDA at 0.9x –
much lower than its peers.

Financials. We estimate Amica’s 2014 y/y sales growth at 17.3%
(domestic market up by 26% y/y, and the Russian, PLN-denominated
COMPANY DESCRIPTION
sales down 4% y/y), which implies an EBITDA of PLN155mn (+23.8% y/y)
Amica is a producer of household appliances. Company
specializes in heating equipment and is a clear leader on the
Polish market in free-standing segment.
and a net profit of PLN80.6mn. We estimate the 2015 and 2016 sales
growth at 5.8% and 3.7%, respectively, which translates into an EPS 1416 CAGR of 9.3%.

Triggers/Risks. The Russian market remains the key risk for Amica – the
Russian economy is deteriorating and further RUB depreciation could be
Main shareholders
Holding Wronki
ING pension fund
% of votes
56.3%
8.4%
at some point impossible to be passed onto the final consumer. The
situation with Fagor’s assets in Poland could be an additional risk but we
don’t believe Mastercook brand will be able to make a comeback.

Valuation & recommendation. Based on our DCF model, we arrived at
ANALYST
the 12 month TP at PLN149 per share, which implies a 37% upside
Tomasz Kucinski
potential. Amica is currently trading with a P/E’14 of 10.5x (please also
+48 22 534 16 10
note that the company’s PnL and cash tax rates differ significantly) and
the EV/EBITDA’14 at 6.4x, i.e. with significant discounts to its international
peers. The comparative valuation yields a similar result and points to
PLN150.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)*
2013
1,656
125
96
89
9.5
8.2
2014E
1,942
155
2015E
2,055
160
2016E
2,131
172
123
81
10.5
6.4
128
93
9.1
6.1
133
96
8.8
5.5
AMCP.WA / AMC PW
891.4
7.8
Free float (%)
35.8%
1.3
1M
3M
YTD
Price performance
3.8%
23.9%
2.4%
*taking into account factoring of PLN100mn in 2014 (growing accordingly to sales growth afterwards)
25
Fig. 1. Amica: DCF valuation
Revenues
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Net investment
Free cash flow
WACC
PV FCF 2014-2023
Terminal growth
Terminal value (TV)
PV TV
Total EV
Net debt
Equity value
Month
12M target price
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
1,941.9 2,054.8 2,130.8 2,167.5 2,217.3 2,268.3 2,320.6 2,363.4 2,407.1 2,451.7
122.7
127.6
132.8
137.2
140.4
143.6
147.0
149.8
145.3
148.1
8.3
9.3
22.2
23.1
5.0
5.6
6.3
25.5
24.6
25.1
114.4
118.4
110.5
114.1
135.4
138.0
140.7
124.3
120.7
122.9
32.2
32.8
39.3
39.8
40.3
40.8
41.3
46.8
52.4
53.1
32.0
16.5
11.2
5.4
7.3
7.5
7.7
6.3
6.4
6.5
40.0
85.0
43.2
43.8
44.3
44.9
85.5
91.5
57.7
58.4
39.8
68.8
15.1
9.4
11.3
11.6
51.8
51.0
11.7
11.8
74.6
49.6
95.4
104.7
124.0
126.4
88.9
73.3
109.1
111.1
9.1%
573.8
1.0%
1,388.6
635.2
1,208.9
143.6
1,065.4
7.8
137.0
11.0
136.0
149.0
Fig. 2. Amica: Comparable valuation
Price
Amica Wronki
108
Indesit
11.0
Arcelik
13.2
Electrolux
206.7
Whirlpool
175.8
Gorenje
6.6
De' Longhi
15.2
Median
Mkt cap
(EURmn)
199
1,253
3,162
6,925
11,011
161
2,275
P/E
EV/EBITDA
2014E
2015E
2016E
2014E
2015E
2016E
10.5
33.1
13.1
19.6
15.1
19.6
18.3
18.9
-44.6%
9.2
19.5
11.7
14.5
12.4
10.7
15.6
13.4
-31.4%
8.8
16.1
10.1
12.2
10.8
5.6
14.0
11.5
-23.6%
6.4
8.6
n.a.
9.1
8.2
6.3
9.3
8.6
-25.9%
6.1
7.4
n.a.
7.0
6.3
5.7
8.4
7.0
-12.4%
5.5
6.6
n.a.
6.1
5.2
5.1
7.7
6.1
-9.2%
26
Fig. 3. Amica: 3Q14 results preview
Sales
3Q11
404.3
4Q11
437.6
1Q12
360.5
2Q12
329.5
3Q12
427.0
4Q12
447.9
1Q13
346.7
2Q13
364.3
3Q13
445.6
4Q13
497.1
1Q14
427.6
2Q14
449.9
3Q14E
521.4
y/y
17.0%
q/q
15.9%
7.6%
22.9
25.2
18.7
14.8
38.9
28.1
25.3
18.2
33.6
46.0
34.0
38.7
41.6
23.8%
5.7%
5.8%
5.2%
4.5%
9.1%
6.3%
7.3%
5.0%
7.5%
9.3%
7.9%
8.6%
8.0%
0.4
-0.6
17.7
19.3
12.8
8.7
32.8
21.2
18.7
10.4
26.4
38.6
25.5
31.0
33.6
27.2%
8.7%
4.4%
4.4%
3.6%
2.7%
7.7%
4.7%
5.4%
2.9%
5.9%
7.8%
6.0%
6.9%
6.5%
0.5
-0.4
20.6
60.5
12.3
0.3
17.6
16.2
12.9
5.4
41.4
29.6
13.1
20.6
23.9 -42.3%
16.0%
5.1% 13.8%
3.4%
Net margin
0.1%
4.1%
3.6%
3.7%
1.5%
9.3%
6.0%
3.1%
4.6%
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Amica: Forecast changes
2014E
New Previous
Sales
1942
n.a.
EBITDA
155
n.a.
EBIT
123
n.a.
Net profit
81
n.a.
New
2055
160
128
93
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
New
2131
172
133
96
4.6%
-4.7
0.0
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Amica: Valuation changes
New
149
150
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Amica: Income statement forecast
Net sales
Fig. 7. Amica: Balance Sheet forecast
2012
1565
2013
1656
2014E
1942
2015E
2055
2016E
2131
Current assets
2012
485.4
2013
535.3
2014E
621.8
2015E
653.9
2016E
702.9
1129.6
1141.4
1324.1
1403.2
1454.7
Fixed assets
353.5
397.8
391.0
428.2
429.2
Gross profit
435.4
514.6
617.8
651.6
676.1
Total assets
838.8
933.1
1012.8
1082.1
1132.0
SG&A
363.8
422.0
493.5
524.0
543.4
Current liabilities
368.7
410.3
438.2
445.9
455.4
2.7
3.6
-1.7
0.0
0.0
81.5
60.7
69.1
62.1
61.9
EBITDA
99.2
125.2
154.9
160.4
172.1
49.2
51.6
49.0
42.0
41.9
Operating profit
74.3
96.3
122.7
127.6
132.8
35.0
37.8
35.2
28.2
28.1
11.8
15.2
23.2
13.2
13.9
421.6
472.2
525.6
594.1
634.8
Profit before tax
62.5
81.0
99.5
114.5
118.8
share capital
406.1
456.7
510.0
578.6
619.2
Income tax
16.5
-8.0
18.9
21.7
22.6
Minority Interest
-0.7
-1.0
0.0
0.0
0.0
Net profit
46.4
89.4
80.6
92.7
96.3
Total liabilities
838.8
933.1
1012.8
1082.1
1132.0
44
29
0
27.8%
31.1%
31.8%
31.7%
31.7%
EBITDA margin
6.3%
7.6%
8.0%
7.8%
8.1%
Operating margin
4.7%
5.8%
6.3%
6.2%
6.2%
3.0%
5.4%
Net profit margin
4.1%
4.5%
4.5%
COGS
Gross margin
bank debt
bank debt
Equity
41
73
Net debt
Fig.8. Amica: Cash flow forecast
CF from operations
2012
95
2013
81
2014E
81
2015E
109
2016E
124
CF from investment
-69
-74
-25
-70
-40
26
-57
-20
-38
-56
35
1
28
CF from financing
52
-50
Net change in cash
27
28
Industrials
Poland
NOVEMBER 12, 2014
RECOMMENDATION
APATOR
HOLD (INITIATION)
Obstacles for growth?

Equity Story. Apator has a long track record of growth, attributable to
STOCK PERFORMANCE
successful acquisitions and growth of the traditional meters’ market. Now
Buy
that the markets seem either mature or declining, its products’ offer is
45
comprehensive and market share high, the company needs to come up
40
with something new. Apator sees significant opportunities in the smart
35
meter market (hence the idea of the Elkomtech acquisition). According to
Hold
Sell
30
EU guidelines, each country should replace 80% of all the electricity
25
APT
however, to do so (five EU countries also decided to implement intelligent
20
gas meters) and others (including most of Poland’s neighbours) decided
15
most important criterion, aggressive. The situation on the export markets
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Apr-12
like this will be a producer’s market – competition is high and pricing, the
10
Oct-11
poor value for money. So far, based on the first tenders, it does not look
Jan-12
against a massive rollout, claiming that it is, at least to a significant extent,
WIG Relative
Oct-12
meters with a smart version by 2020. Only 16 EU countries decided,
does not look much different either. Apator just signed its first electricity
smart metering contract, but it looks like conquering this potentially
attractive market will not be a piece of cake, even for such an experienced
company.

Financials. We are of the opinion that Apator will not reach its
management’s sales forecast, likely reporting PLN711mn. It will, however,
in our opinion exceed the net profit forecast of PLN75-78mn (+22.8% y/y,
COMPANY DESCRIPTION
roughly flat, however, if adjusting for Elkomtech and other operating
Apator is a polish leading Polish supplier of metering
systems for all the utility services and also low voltage
switchgear.
income). The upcoming years will bring slow growth (EPS14-16 CAGR
assumed at 5.1%), with only 2019-2020 finally offering a pickup in the
company’s results due to the smart metering project’s reaching its final
and most valuable stages.

Triggers/Risks. The main risk for Apator’s future is the shape of the
smart metering market, mainly in Poland but also on the company’s export
markets, and, more specifically, the factors that will drive this market.
Please note also that Apator has quite a significant exposure to the
Main shareholders
Mariusz Lewicki
Tadeusz Sosgórnik
Danuta Guzowska
Zbigniew Jaworski
Apator Mining
Janusz Marzyglinski
% of votes
9.8%
8.7%
7.8%
6.4%
6.4%
6.2%
Russian market – 9.2% of its consolidated sales in 1H14

Valuation & recommendation. We are initiating coverage with a
Hold recommendation and a TP of PLN42.4 (adding back the interim
ANALYST
dividend that will be paid in December). The comparative valuation points
Tomasz Kucinski
to PLN41.1, treating the treasury shares as a cash equivalent (without the
possible tax impact, however) or PLN43.7, assuming the treasury shares
+48 22 534 16 10
get cancelled.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
684.0
107.2
86.5
68.1
18.5
10.9
2014E
710.9
130.3
108.1
83.7
15.0/13.4
9.2
2015E
744.6
136.6
112.0
88.1
14.3/12.8
8.5
2016E
777.7
141.3
116.7
92.4
13.6/12.1
8.1
29
APTP.WA / APT PW
1,257.4
33.1
Free float (%)
51.5%
0.3
1M
3M
YTD
Price performance
1.3%
10.1%
3.7%
Fig. 1. Apator: DCF valuation
Revenues
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Net investment
Free cash flow
WACC
PV FCF 2014-2023
Terminal growth
Terminal value (TV)
PV TV
Total EV
Net debt
Minority interests
Equity value
Month
interim dividend per share
12M target price
2014E
710.9
108.1
15.8
92.2
22.2
11.2
134.9
123.9
-31.7
8.4%
598.0
1.0%
1,281.1
618.3
1,216.4
-58.6
1.5
1,273.5
33.1
38.5
11.0
38.2
0.3
42.4
2015E
744.6
112.0
16.6
95.4
24.6
7.8
24.6
7.8
87.6
2016E
777.7
116.7
17.5
99.2
24.6
7.9
24.6
7.9
91.3
2017E
782.9
117.8
17.7
100.1
24.6
1.2
24.6
1.2
98.9
2018E
810.4
121.8
18.4
103.3
24.6
6.5
24.6
6.5
96.8
2019E
836.4
125.9
23.9
101.9
24.6
6.2
24.6
6.2
95.8
2020E
849.6
128.3
21.1
107.3
24.6
3.1
24.6
3.1
104.2
2021E
759.4
116.6
18.8
97.8
24.6
-21.6
24.6
-21.6
119.4
2022E
766.0
117.5
19.0
98.5
24.6
1.6
24.6
1.6
96.9
2023E
772.7
118.3
22.5
95.9
24.6
1.6
24.6
1.6
94.3
Fig. 2. Apator: Comparable valuation
Price
Apator SA
38.28
Aplisens SA
13.2
Schneider Electric SE
61.75
Osaki Electric Co Ltd
707
Vaisala OYJ
22.09
Badger Meter Inc
57.1
Itron Inc
41.28
Median
Currency
300
42
36,037
191
403
664
1,297
P/E
2014E
2015E
15.0
12.0
16.3
19.8
21.3
27.2
25.2
20.6
-27.1%
14.4
n.a.
14.5
13.4
16.7
22.7
18.9
16.7
-14.0%
30
EV/EBITDA
2016E
14.1
n.a.
13.0
11.7
13.3
20.2
15.5
13.3
6.0%
2014E
2015E
2016E
9.2
7.3
11.1
8.8
3.9
14.5
10.8
9.8
-6.1%
8.7
n.a.
10.1
7.1
3.7
12.3
9.3
9.3
-6.0%
8.4
n.a.
9.3
6.7
6.7
n.a.
8.0
7.3
14.5%
Fig. 3. Apator: 3Q14 results preview
Sales
3Q11
145.1
4Q11
164.8
1Q12
163.1
2Q12
146.9
3Q12
188.8
4Q12
170.0
1Q13
167.4
2Q13
173.5
3Q13
162.7
4Q13
175.5
1Q14
152.9
2Q14
181.9
3Q14E
179.8
y/y
10.5%
q/q
-1.1%
0.9%
29.2
24.9
26.1
22.9
48.1
18.7
22.4
28.2
32.8
24.8
26.9
33.3
33.6
2.6%
20.1%
15.1%
16.0%
15.6%
25.5%
11.0%
13.4%
16.2%
20.1%
14.1%
17.6%
18.3%
18.7%
-1.4
0.4
25.0
20.7
21.9
18.4
43.5
13.7
17.3
23.0
27.5
19.6
21.8
27.6
27.9
1.5%
1.0%
17.2%
12.5%
13.4%
12.5%
23.0%
8.0%
10.3%
13.3%
16.9%
11.2%
14.3%
15.2%
15.5%
-1.4
0.3
16.8
15.5
16.3
33.5
34.3
10.8
12.9
16.9
21.7
16.8
16.1
21.9
21.7
-0.4%
-1.2%
11.6%
9.4% 10.0%
Net margin
22.8%
18.2%
6.3%
7.7%
9.8%
13.4%
9.6%
10.5%
12.1%
12.0%
-1.3
0.0
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Apator: Forecast changes
2014E
New Previous
Sales
710.9
n.a.
EBITDA
130.3
n.a.
EBIT
108.1
n.a.
Net profit
83.7
n.a.
New
736.6
135.6
110.9
87.2
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
New
751.3
137.9
113.3
89.5
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Apator: Valuation changes
New
42.4
41.1
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Apator: Income statement forecast
Fig. 7. Apator: Balance Sheet forecast
2012
669
2013
684
2014E
711
2015E
745
2016E
778
COGS
484
482
489
510
532
Gross profit
185
202
222
235
245
SG&A
107
113
118
123
129
20
-2
5
2
2
116
107
130
137
141
98
87
108
112
117
6
3
5
3
3
Profit before tax
92
83
103
109
114
Income tax
-4
14
20
21
22
Net profit
95
68
84
88
92
Total liabilities
Gross margin
27.6%
29.5%
31.3%
31.0%
31.0%
EBITDA margin
17.4%
15.7%
18.3%
18.3%
18.2%
Operating margin
14.7%
12.6%
15.2%
15.0%
15.0%
14.2% 10.0%
Net profit margin
11.8%
11.8%
11.9%
Net sales
EBITDA
Operating profit
2012
255
2013
261
2014E
337
2015E
360
2016E
373
Fixed assets
249
258
346
341
337
Total assets
504
519
683
701
710
Current liabilities
159
168
169
172
174
44
51
51
51
51
45
29
129
109
89
15
11
111
91
71
298
325
388
424
450
share capital
18
18
18
18
18
Minority Interest
0
0
0
0
0
503
519
683
701
710
78
46
23
Current assets
bank debt
bank debt
Equity
15
42
Net debt
Fig. 8. Apator: Cash flow forecast
CF from operations
2012
139
2013
64
2014E
95
2015E
105
2016E
109
CF from investment
-64
-42
-111
-20
-20
CF from financing
-56
-47
80
-73
-86
64
12
3
20
-24
Net change in cash
31
32
IT
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ASSECO SEE
BUY (INITIATION)
Overcoming headwinds



Financials. From the beginning of 2014, the company has been
switching its payments business into a full outsourcing model.
This leads to higher CAPEX on payment terminals, which is
mostly financed by bank debt. The P&L impact is a higher top-line
and EBITDA, flat EBIT. In our opinion, the mix of organic growth
and acquisitions will allow ASE to continue the recovery that
started in 2014. The payments business unit should report the
fastest pace of growth, while the share of the least marginable
integration segment in revenues should shrink. We expect ASE to
report a net profit of PLN36.4mn and PLN37.7mn in 2014E and
2015E, respectively, which implies the 2014E P/E at 11.1x and
2015E P/E 10.4x. We expect the dividend pay-out at 60% of the
net profit, which gives an attractive DY close to 6%. At our TP,
Asseco SEE still offers an attractive 4% DY.
Triggers/Risks. The company is a play for the macro recovery in
the SEE region. It has had troubles coping with the difficult market
conditions in the last couple of years. The macro rebound should,
however, be very positive to ASE’s business. We have not
factored in any solid recovery into our model and are, therefore,
leaving it as a pure upside for the company’s shareholders.
Valuation & recommendation. Based on our DCF model, we
arrived at a 12 month TP of PLN10.30 per share, which implies a
37% upside potential. In our model, we applied a beta of 1.2 due
to the presence on the less developed Balkan markets. The
comparative valuation points to PLN8.9 per share.
STOCK PERFORMANCE
Buy
Hold
Sell
13
12
WIG Relative
11
ASE
10
9
8
7
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
6
Oct-11
Equity Story. Asseco South Eastern Europe (ASE) operates in
11 Balkan countries and in three segments – banking systems,
payments and integration. The company is a regional leader and,
in countries like Serbia, has a market position as strong as
Asseco Poland on the Polish market. ASE was created from a
merger of many smaller local companies and it remains active on
the M&A field. It has a relatively good track record in acquisitions
and has a transparent capital group structure. It successfully
carried out buyouts of minority stakes at the acquired companies,
something that Asseco Poland seems unable to do. ASE
operates on markets that are less developed than in Poland and
which should yield higher growth rates in the long-term. But the
poor macro environment has so far not allowed the positive
scenario to materialise.
Jan-12

COMPANY DESCRIPTION
Asseco South Eastern Europe is a developer of IT solutions
for business.
MAIN SHAREHOLDERS
% of votes
Asseco Poland
EBRD
Liatris
Aviva pension fund
51.1%
9.3%
7.4%
7.4%
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNmn
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
471.7
56.1
42.1
35.9
10.9
5.0
2014E
475.5
66.3
44.2
37.7
10.4
4.4
2015E
503.7
76.7
47.9
38.9
10.1
3.8
2016E
529.1
81.9
51.7
41.9
9.4
3.5
33
ASEP.WA / ASE PW
390
51.9
Free float (%)
32.3%
0.0
1M
3M
YTD
Price performance
-3.7%
-1.1%
-19.1%
Fig. 1. Asseco South Eastern Europe: DCF valuation
2014E 2015E
Net sales
475.5
503.7
EBIT
44.2
47.9
Cash taxes on EBIT
7.1
9.1
NOPAT
37.1
38.8
Depreciation
22.2
28.8
0.3
3.6
Capital expenditure
50.8
42.2
Free cashflow
8.1
21.7
WACC (2014-23)
9.0%
PV FCF 2014-23
193.6
Terminal growth
1.0%
Terminal Value (TV)
541.0
PV TV
228.5
Total EV
422.2
Net debt
-54.7
Equity value
460.1
51.89
8.87
Month
11
9.53
12-month target price (PLN)
10.30
2016E
529.1
51.7
9.8
41.9
30.2
3.3
42.4
26.4
2017E
549.1
54.2
10.3
43.9
31.8
2.6
41.4
31.7
2018E
567.5
55.8
10.6
45.2
33.3
2.3
37.3
38.9
2019E
583.4
56.5
10.7
45.8
35.0
2.0
39.1
39.8
2020E
595.9
56.4
10.7
45.6
36.8
1.5
40.9
40.0
2021E
609.0
56.1
10.7
45.5
38.6
1.6
42.9
39.6
2022E
622.9
55.9
10.6
45.3
40.5
1.7
44.9
39.2
2023E
637.5
55.6
10.6
45.1
42.6
1.8
47.1
38.7
Fig. 2. Asseco South Eastern Europe: Comparable valuation
Market
Cap
Company
Price
Currency
(EURmn)
Asseco South Eastern Europe
7.51
PLN
92
Peers
Asseco Poland
49.71
PLN
976
Asseco Business Solutions
12.30
PLN
97
Asseco Central Europe
16.05
PLN
81
Comp
60.30
PLN
84
Sygnity
17
PLN
47
GFI Informatique
5.06
EUR
276
Neurones
14
EUR
330
Reply
56.70
EUR
530
Cap Gemini
52
EUR
8,302
Computacenter
622.00
GBp
1,106
SAP
54
EUR
66,216
Indra Sistemas
8
EUR
1,329
Median
Implied share price vs. peers (PLN)
Implied price (PLN)
2014E
10.3
P/E
2015E
10.0
2016E
9.3
2014E
5.2
EV/EBITDA
2015E
2016E
4.5
4.1
11.7
13.8
7.6
9.9
10.7
12.5
17.5
12.6
14.6
13.2
15.6
11.2
12.6
13.3
13.6
6.8
10.6
8.5
10.4
17.0
10.9
13.1
12.5
14.5
9.8
10.7
12.4
13.0
n.a.
14.4
8.0
9.5
17.3
8.8
11.8
11.7
13.3
8.8
11.7
4.3
7.5
n.a.
6.3
5.1
5.7
5.9
6.3
7.0
6.2
10.9
7.1
6.3
4.2
7.4
n.a.
5.4
4.1
5.1
5.4
5.5
6.1
5.6
9.5
6.4
5.5
3.8
7.0
n.a.
6.4
3.5
4.7
5.0
4.9
5.3
5.1
8.2
5.9
5.1
9.1
8.0
9.4
8.9
9.1
9.0
8.9
34
Fig. 3. Asseco South Eastern Europe: 3Q14 results review
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
116.1
146.3
105.3
116.5
103.4
137.3
100.6
113.0
107.3
150.8
99.3
121.0
115.2
7.3%
-4.8%
11.8%
17.2
21.3
14.8
14.7
14.5
19.3
13.1
12.5
13.2
17.2
12.6
16.2
18.1
37.0%
14.8%
14.5%
14.1%
12.7%
14.0%
14.1%
13.0%
11.1%
12.3%
11.4%
12.7%
13.4%
15.7%
3.4
2.3
15.0
18.8
12.3
12.1
11.9
16.3
9.9
9.0
9.8
13.5
8.0
10.5
11.9
22.0%
12.9%
12.9%
12.8%
11.7%
10.4%
11.5%
11.8%
9.8%
8.0%
9.1%
8.9%
8.1%
8.7%
10.3%
1.2
1.6
13.3
18.3
12.7
11.0
11.0
15.0
7.8
7.4
8.6
12.2
7.0
9.1
9.2
7.3%
1.4%
Net margin
11.4% 12.5% 12.1%
9.4%
10.6%
10.9%
7.8%
6.5%
8.0%
8.1%
7.1%
7.5%
8.0%
0.0
0.5
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Asseco South Eastern Europe: Forecast changes
2014E
New Previous
Change
Sales
475.5
n.a.
n.a.
EBITDA
66.3
n.a.
n.a.
EBIT
44.2
n.a.
n.a.
Net profit
37.7
n.a.
n.a.
New
503.7
76.7
47.9
38.9
2015E
Previous
n.a.
n.a.
n.a.
n.a.
New
529.1
81.9
51.7
41.9
Change
n.a.
n.a.
n.a.
n.a.
2016E
Previous
n.a.
n.a.
n.a.
n.a.
Change
n.a.
n.a.
n.a.
n.a.
Fig. 5. Asseco South Eastern Europe: Valuation changes
New
10.3
8.9
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Asseco SEE: Income statement forecast
Fig. 7. Asseco SEE: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
462.5
471.7
475.5
503.7
529.1
Current assets
218.7
214.0
230.2
252.9
265.2
COGS
337.9
354.2
359.4
381.1
400.0
Fixed assets
541.1
563.4
592.1
605.7
618.0
Gross profit
124.6
117.5
116.1
122.6
129.0
Total assets
759.8
777.4
822.3
858.5
883.2
72.6
75.6
71.9
74.7
77.3
89.1
116.0
124.3
137.6
143.5
0.7
0.2
0.0
0.0
0.0
0.5
6.3
13.3
20.0
20.0
EBITDA
63.4
56.1
66.3
76.7
81.9
5.8
12.4
28.2
34.8
35.0
Operating profit
52.6
42.1
44.2
47.9
51.7
0.8
7.9
23.6
30.0
30.0
2.0
1.3
0.8
0.1
0.0
664.7
648.8
669.9
686.1
704.7
518.9
518.9
518.9
518.9
518.9
0.2
0.2
0.0
0.0
0.0
759.8
777.4
822.3
858.5
883.2
-46.9
-47.7
-52.3
2016E
SG&A
Profit before tax
Current liabilities
bank debt
bank debt
Equity
54.6
43.4
44.9
48.0
51.7
share capital
Income tax
5.1
7.4
7.2
9.1
9.8
Minority Interest
Net profit
49.6
35.9
37.7
38.9
41.9
Gross margin
26.9%
24.9%
24.4%
24.3%
24.4%
EBITDA margin
13.7%
11.9%
13.9%
15.2%
15.5%
Operating margin
11.4%
8.9%
9.3%
9.5%
9.8%
Net profit margin
10.7%
7.6%
7.9%
7.7%
7.9%
Total liabilities
Net debt
-82.3
-54.7
Fig. 8. Asseco SEE: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
54.2
40.5
59.8
65.9
70.4
CF from investment
-54.9
-25.6
-50.9
-42.4
-42.6
CF from financing
-28.2
-30.0
6.0
-9.6
-23.3
14.9
13.9
4.5
Net change in cash
-28.9
-15.0
35
36
IT
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ASSECO BUSINESS SOLUTIONS
BUY (INITIATION)
Programmed to generate cash

Financials. In our opinion 1) the supportive ERP market, which is
correlated with the overall macro situation in Poland and 2) the
company’s foreign expansion with the FMCG application should
allow it to sustain mid-single digit y/y growth pace for the next
three-four years. Asseco BS trades at 2014E P/E 13.9x and
2015E P/E 13.5x, with a premium vs. the parent company, for
example, but offers an attractive DY at above 7%. At our TP,
Asseco BS still offers a decent 5% DY.

Triggers/Risks. In our opinion, the foreign expansion with the
FMCG-dedicated products is the major valuation driver for
Asseco BS. It aims to sustain growth in the segment now that the
local market is already saturated. Asseco BS is planning to
expand in two directions and in cooperation with other companies
in the Asseco group – Western Europe with Asseco Solutions and
Russia with R-Style. The company has already signed its first
large contract in this regard. That said, we also see a potential
upside from further distribution of the cash surplus to its
shareholders – in addition to the 100% dividend, the company
can easily afford to launch a share buyback program.

33% upside potential. In our opinion, due to the attractive product
mix, high DY and strong balance sheet, ABS fully deserves the
premium vs. its peers. The comparative valuation points to
PLN10.3 per share.
STOCK PERFORMANCE
Buy
Hold
Sell
16
15
14
WIG Relative
13
12
11
10
ABS
9
8
7
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
6
Oct-11
Equity Story. Asseco Business Solutions (ABS) is a unique
company in the Asseco group. It is a product company, not a
simple software integrator, and this is why it is able to generate
one of the highest margins in the Asseco group. The company
operates in two segments – ERP systems and FMCG-dedicated
mobile applications – that both have a similar share in the
revenues. ABS is one of market leaders in the saturated FMCG
mobile applications market in Poland. To maintain growth in this
segment, ABS decided this year to start selling its Mobile Touch
product abroad. The company is a typical cash cow. It has low
CAPEX and working capital requirements, it generates stable and
high FCFs. It also has a strong balance sheet despite its dividend
payouts of 100% of the net profit for the last couple of years.
Jan-12

COMPANY DESCRIPTION
Asseco Business Solutions is a developer of IT solutions for
business.
MAIN SHAREHOLDERS
Asseco Poland
Metlife pension fund
Aviva pension fund
% of votes
46.5%
10.5%
9.8%
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNmn
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
146.0
43.4
31.8
26.8
15.2
6.9
2014E
155.2
47.3
35.1
29.8
13.7
6.3
2015E
164.0
48.3
35.5
30.1
13.6
6.2
2016E
173.4
50.8
37.4
31.7
12.9
5.9
37
ABSP.WA / ABS PW
411
33.4
Free float (%)
47.2%
0.0
1M
3M
YTD
Price performance
0.6%
10.6%
-5.4%
Fig. 1. Asseco Business Solutions: DCF valuation
2014E 2015E
Net sales
155.2
164.0
EBIT
35.1
35.5
Cash taxes on EBIT
6.7
6.7
NOPAT
28.5
28.7
Depreciation
12.2
12.8
2.1
1.2
Capital expenditure
13.8
13.5
Free cashflow
24.8
26.9
WACC (2014-23)
8.0%
PV FCF 2014-23
201.9
Terminal growth
1.0%
Terminal Value (TV)
519.9
PV TV
240.8
Total EV
442.7
Net debt
-54.7
Equity value
470.7
33.42
14.08
Month
11
15.14
16.40
2016E
173.4
37.4
7.1
30.3
13.4
1.3
14.1
28.3
2017E
180.1
38.7
7.3
31.3
14.1
0.9
14.8
29.7
2018E
187.0
40.0
7.6
32.4
14.8
0.9
15.5
30.7
2019E
192.6
41.0
7.8
33.2
15.5
0.8
16.3
31.7
2020E
198.3
42.1
8.0
34.1
16.3
0.8
17.1
32.5
2021E
204.1
43.4
8.2
35.1
17.1
0.8
18.0
33.5
2022E
210.2
44.7
8.5
36.2
18.0
0.8
18.8
34.5
2023E
216.4
46.0
8.7
37.2
18.9
0.9
19.8
35.5
Fig. 2. Asseco Business Solutions: Comparable valuation
Company
Asseco Business Solutions
Peers
Asseco Poland
Asseco South Eastern Europe
Asseco Central Europe
Comp
Sygnity
GFI Informatique
Neurones
Reply
Cap Gemini
Computacenter
SAP
Indra Sistemas
Median
Price
12.30
Currency
PLN
Market
Cap
(EURmn)
97
49.71
7.51
16.05
60.30
17
5.06
14
56.70
52
622.00
54
8
PLN
PLN
PLN
PLN
PLN
EUR
EUR
EUR
EUR
GBp
EUR
EUR
976
92
81
84
47
276
330
530
8,302
1,106
66,216
1,329
Implied price (PLN)
2014E
13.8
P/E
2015E
13.6
2016E
13.0
2014E
7.5
EV/EBITDA
2015E
2016E
7.4
7.0
11.7
10.3
7.6
9.9
10.7
12.5
17.5
12.6
14.6
13.2
15.6
11.2
12.6
13.3
10.0
6.8
10.6
8.5
10.4
17.0
10.9
13.1
12.5
14.5
9.8
10.7
12.4
9.3
n.a.
14.4
8.0
9.5
17.3
8.8
11.8
11.7
13.3
8.8
11.7
4.3
5.2
n.a.
6.3
5.1
5.7
5.9
6.3
7.0
6.2
10.9
7.1
6.3
4.2
4.5
n.a.
5.4
4.1
5.1
5.4
5.5
6.1
5.6
9.5
6.4
5.5
11.2
9.7
11.1
10.6
9.7
3.8
4.1
n.a.
6.4
3.5
4.7
5.0
4.9
5.3
5.1
8.2
5.9
5.1
9.4
10.3
38
Fig. 3. Asseco Business Solutions: 3Q14 results review
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
31.5
45.8
37.3
33.0
32.1
36.9
33.7
32.6
31.3
48.5
39.1
31.2
32.6
4.2%
4.4%
8.9%
9.0
12.4
10.4
7.7
9.8
13.0
10.6
8.4
10.0
14.4
12.0
9.4
10.2
2.2%
28.5%
27.2%
28.0%
23.2%
30.5%
35.2%
31.4%
25.8%
32.0%
29.7%
30.8%
30.1%
31.4%
-0.6
1.3
6.5
10.4
7.7
5.0
7.3
10.6
7.7
5.5
7.1
11.5
9.2
6.3
7.3
2.2%
15.2%
20.7%
22.8%
20.7%
15.3%
22.8%
28.7%
22.7%
17.0%
22.8%
23.7%
23.5%
20.3%
22.4%
-0.4
2.1
5.6
8.8
6.8
4.6
6.2
9.0
6.7
4.8
5.9
9.4
7.7
5.4
6.1
3.7%
13.6%
Net margin
17.8% 19.2% 18.1%
13.9%
19.4%
24.3%
19.9%
14.8%
18.8%
19.4%
19.7%
17.2%
18.7%
-0.1
1.5
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Asseco Business Solutions: Forecast changes
2014E
New Previous
Change
Sales
155.2
n.a.
n.a.
EBITDA
47.3
n.a.
n.a.
EBIT
35.1
n.a.
n.a.
Net profit
29.8
n.a.
n.a.
New
164.0
48.3
35.5
30.1
2015E
Previous
n.a.
n.a.
n.a.
n.a.
New
173.4
50.8
37.4
31.7
Change
n.a.
n.a.
n.a.
n.a.
2016E
Previous
n.a.
n.a.
n.a.
n.a.
Change
n.a.
n.a.
n.a.
n.a.
Fig. 5. Asseco Business Solutions: Valuation changes
New
16.4
10.3
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Asseco BS: Income statement forecast
Fig. 7. Asseco BS: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
139.3
146.0
155.2
164.0
173.4
Current assets
COGS
94.0
100.1
102.5
109.7
116.4
Gross profit
45.3
45.9
52.7
54.3
SG&A
15.0
13.9
18.0
0.4
-0.1
EBITDA
40.9
Operating profit
Net sales
Profit before tax
2012
2013
2014E
2015E
2016E
80.4
96.9
98.6
100.0
102.6
Fixed assets
196.2
194.5
196.2
197.0
197.9
57.0
Total assets
276.6
291.4
294.8
297.0
300.4
18.8
19.6
Current liabilities
17.7
32.0
29.3
31.3
33.1
0.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
43.4
47.3
48.3
50.8
0.3
0.4
0.4
0.4
0.5
30.7
31.8
35.1
35.5
37.4
0.0
0.0
0.0
0.0
0.0
2.4
1.7
1.7
1.7
1.7
258.6
259.0
265.0
265.3
266.9
167.1
167.1
167.1
167.1
167.1
0.0
0.0
0.0
0.0
0.0
276.6
291.4
294.8
297.0
300.4
-57.2
-56.2
-56.2
2016E
bank debt
bank debt
Equity
33.1
33.5
36.8
37.2
39.1
share capital
Income tax
6.5
6.7
7.0
7.1
7.4
Minority Interest
Net profit
26.5
26.8
29.8
30.1
31.7
Gross margin
32.5%
31.4%
34.0%
33.1%
32.9%
EBITDA margin
29.4%
29.7%
30.5%
29.4%
29.3%
Operating margin
22.0%
21.8%
22.6%
21.6%
21.6%
Net profit margin
19.0% 18.4%
19.2%
18.4%
18.3%
Total liabilities
Net debt
-48.5
-54.7
Fig. 8. Asseco BS: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
31.4
42.5
40.1
42.4
44.4
CF from investment
-7.8
-9.9
-13.9
-13.6
-14.3
-32.1
-26.4
-23.8
-29.8
-30.1
2.5
-1.0
0.0
CF from financing
Net change in cash
-8.5
6.2
39
40
Construction & Real Estate
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ATREM
BUY (MAINTAINED)
CURRENT PRICE: PLN 4.9
TARGET PRICE: PLN 7.1 (MAINTAINED)
Waiting for margin recovery



Equity story: The long-awaited margin rebound in the
construction niches where Atrem operates is not materialising and
it is unlikely to emerge any time soon. In our view, we will take a
little longer before better times arrive for Atrem in terms of
generating margins on contracts. On the other hand, we do not
change our overall view on Atrem. For us, Atrem operates in
attractive niches of the construction market (mainly automatics
and high-voltage power engineering), which offers an exposure to
the new round of EU funds’ flows, and is well-balanced, with an
estimated FY’14 net cash of PLN7mn. In this light, we believe
Atrem is well-prepared for a rebound in margins, which we expect
to finally materialise some time ahead.
3Q14 Results Preview. 3Q14 was another weak period for
Atrem. Despite the fact that its sales are still growing nicely, the
company continues to suffer from low margins, which makes it
impossible to make money from its core business. Sales should
be by 27%y/y higher at PLN25mn, with the gross margin at 9.0%
or PLN2.2mn in 3Q14. We expect the SG&A costs at PLN3.1mn
(12.4% vs. 12.6%) and PLN1.5mn of other operating gains in
3Q14 due to the release of provisions. Overall, we expect a
positive EBITDA of PLN1.4mn. On an adj. basis, EBITDA would
turn negative to a tiny loss of PLN0.1mn, compared to positive
PLN0.9mn last year. With no major changes in financials or taxes,
this should result in a bottom line of PLN0.5mn or a loss of
PLN0.7mn on an adj. basis. Outcome: NEGATIVE.
Change in valuation & recommendation. We maintain our Buy
recommendation. Our DCF-based valuation points to
PLN7.10/share.
The
comparative
valuation
points
to
PLN5.20/share.
PUBLICATION DATE
NOVEMBER 14, 2014
3Q14 RESULTS PREVIEW
3Q14E
24.9
1.4
0.7
0.5
Sales
EBITDA
EBIT
Net profit
y/y (%)
26.7
-0.1
-0.8
-1.0
q/q (%)
60.9
3.4
2.7
1.8
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Buy
10/22/2014
4.8
7.1
2.9%
2.4
Hold
4/28/2014
6.3
7.6
-24.6%
-27.9
Buy
1/30/2014
8.7
8.5
-27.1%
-29.4
Buy
10/23/2013
6.6
8.8
31.2%
36.8
COMPANY DESCRIPTION
Atrem is an engineering company with a wide range of
products and services related to industrial process
automation, telemetrics, regulation, electronics and
metrology.
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
106.9
5.4
2.6
1.9
24.5
7.6
2014E
126.5
6.9
3.8
3.2
14.4
5.6
2015E
126.5
5.1
1.9
1.7
26.5
7.3
2016E
142.3
7.5
4.3
3.7
12.4
4.8
41
ATRP.WA / ATR PW
45
9.2
Free float (%)
27.4
0.0
1M
3M
YTD
Price performance
-4.1%
0.4%
-28.9%
Fig. 1. Atrem: 3Q14 results preview
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
26.7
60.9
41.2
27.6
27.5
33.1
20.1
23.5
26.5
36.8
20.1
35.0
24.9
-6.1% -28.8%
1.9
-4.4
-2.7
-5.1
0.9
0.7
1.2
2.5
1.4
1.8
1.4
8.9% -24.1%
-9.9% -15.5%
4.6%
3.1%
4.7%
6.9%
7.2%
5.1%
5.4%
-5.9
0.2
0.0
0.5
1.8
0.8
1.1
0.7
2.8% -18.6% -12.6% -17.7%
-0.1
3.4
-0.4%
5.7%
-0.8
2.7
-3.1%
4.5%
-1.0
1.8
4.6% -16.0%
1.1
-5.1
-3.5
1.1%
0.1%
2.0%
5.0%
3.8%
3.2%
2.6%
-4.9
0.1
0.1
0.3
1.3
0.6
0.7
0.5
Net margin
-3.9%
2.9%
1.4% -16.9% -11.2% -14.8%
0.7%
0.5%
1.0%
3.6%
3.0%
2.0%
2.1%
Net profit
0.6
-4.7
Fig. 2. Atrem: Forecast changes
2014E
New Previous
Sales
126.5
126.5
EBITDA
6.9
6.9
EBIT
3.8
3.8
Net profit
3.2
3.2
-3.1
New
126.5
5.1
1.9
1.7
Change
0.0%
0.0%
0.0%
0.0%
2015E
Previous
126.5
5.1
1.9
1.7
New
142.3
7.5
4.3
3.7
Change
0.0%
0.0%
0.0%
0.0%
y/y (%)
75
q/q (%)
33
21.4% -40.9%
59
-54
99.6% -23.7%
112
2016E
Previous
142.3
7.5
4.3
3.7
14
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. Atrem: Valuation changes
New
7.1
5.2
DCF valuation
Previous
7.1
5.1
Change
n.a.
+1.9%
Fig. 4. Atrem: Income statement forecast
Fig. 5. Atrem: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
129.3
106.9
126.5
126.5
142.3
Current assets
64
66
69
66
74
COGS
119.9
90.2
111.8
109.9
121.7
Fixed assets
38
36
38
37
37
9.5
16.8
14.7
16.6
20.6
Total assets
109
107
113
110
118
SG&A
16.1
14.1
14.7
14.7
16.4
Current liabilities
37
37
43
38
43
-6.7
0.0
3.8
0.0
0.0
2
0
0
0
0
EBITDA
-10.4
5.4
6.9
5.1
7.5
3
2
2
2
2
Operating profit
-13.3
2.6
3.8
1.9
4.3
2
0
0
0
0
1.4
0.0
-0.1
-0.2
-0.3
60
61
64
66
70
5
Gross profit
Profit before tax
bank debt
bank debt
Equity
-14.7
2.7
3.9
2.1
4.5
share capital
5
5
5
5
Income tax
-2.6
0.8
0.7
0.4
0.9
Minority Interest
0
0
0
0
0
Net profit
-12.1
1.9
3.2
1.7
3.7
Total liabilities
109
107
113
110
118
-7
-9
-10
Gross margin
7.3%
15.7%
11.6%
13.1%
14.5%
-8.1%
5.1%
5.4%
4.0%
5.3%
-10.3%
2.5%
3.0%
1.5%
3.0%
Net profit margin
-9.3%
1.7%
2.5%
1.4%
2.6%
2016E
EBITDA margin
Operating margin
Net debt
-3
-4
Fig. 6. Atrem: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
15.4
0.8
8.9
3.8
4.5
CF from investment
0.9
1.0
-6.2
-2.4
-3.6
-13.1
-3.5
0.1
0.0
0.0
2.9
1.4
1.0
CF from financing
Net change in cash
3.2
-1.8
42
FINANCIALS
Poland
NOVEMBER 12, 2014
RECOMMENDATION
BANK BPH
BUY (INITIATION)
Who’s going to buy?
TARGET PRICE: PLN 59.80




Dividend prospects. We expect no dividends in the 2013-15 period.
Valuation. Based on our 2014E estimates, BPH trades at 35.6x
earnings and P/Book of 0.77x, while offering a 2% ROE. These
multiples may seem very expensive for a financial investor (high P/E)
and very cheap for a strategic investor (P/BV). When calculating the
valuation for a strategic investor, we used a regression model of ROE
and P/BV of the recent M&A bank transactions. Assuming the ROE at
4%, the valuation should be at around P/BV 1.2x. We used a residual
income model for the financial investor.
Price target and recommendation. We set our TP at PLN59.75
(15.4% upside potential), deriving it from a 50/50 blend of two
methodologies – regression of P/BV and ROE from the recent M&A,
from which we get fair P/BV 1.2x and PLN78.11 (53% upside
potential), as well as a residual income model. We used a RFR of
3.0% (3-month average), Beta of 0.9, risk premium of 5% and g of
1.0% and got PLN 41.40 (19% downside potential).
Triggers/Risks. BPH has been in a state of permanent restructuring
ever since its takeover by GE but with no positive result. The bank’s
C/I is currently one of the highest in the sector (80%+) and its loans’
portfolio is shrinking pretty much every quarter. We suspect that BPH
might be a good bridge for a foreign bank that wants to enter the
Polish market and we expect that the transaction could be closed by
the end of next year, offering a trigger for the stock’s price. If GE
changed its mind and did not sell it, BPH’s share price would stand at
around PLN41.
Hold
Sell
80
70
WIG Relative
60
50
BPH
40
30
20
10
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
0
Apr-12
Earnings outlook. Following the 43% fall in earnings in 2014E, we
expect earnings to drop further to PLN25mn (down 80% y/y) in 2015E
and to improve to PLN103mn in 2016E. We expect the drop in 2014
to be mainly caused by a lower NII due to interest rate cuts in Poland.
Our estimates show that the bank has around PLN4bn in cash loans
and most of these are at 16%. BPH’s CFO Andras Bende said, when
commenting on the bank’s 2Q14 results, that if interest rates fell by
25 bp, with both loans and deposits repriced by 25bp ceteris paribus,
the NII would fall by more than PLN25mn. We assume that the bank
will continue its restructuring process, leading to a probable fall in the
cost of risk (BPH shows very good results in AQR tests).
STOCK PERFORMANCE
Buy
Oct-11

Equity story. We are initiating our coverage of Bank BPH with a Buy
rating and a TP of PLN 59.75 (15% upside potential). The bank is not
a technology leader and does not offer strong growth prospects, but it
is officially up for sale by GE. Our calculations show that banks in
Poland were generally sold between P/BV 1.11x (BGZ) and 1.77x
(Santander CB), while BPH is currently trading at P/BV 0.7x, which
implies PLN72-115. Our TP is based equally on weight valuation for a
strategic investor (PLN78.11) and for a financial investor (PLN41.39).
Jan-12

Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
BPH is Poland 12th largest bank by assets. The bank was
established in its current shape back in 2009 when a
slimmed-down BPH was merger with GE Money Bank..
Main shareholders
% of votes
GE capital group
89.1%
ANALYSTS
Andrzej Bieniek
(+48) 22 586 85 21 andrzej.bieniek@bzwbk.pl
Dariusz Górski
(+48) 22 586 81 00 dariusz.gorski@bzwbk.pl
Company Data
PLNmn
NII
Total income
Provisions
Net profit
P/E (x)
P/BV (x)
2013
980
1,536
-139
192
20.3
0.79
2014E
878
1,333
-63
110
35.6
0.77
2015E
703
1,164
-37
25
156.2
0.77
2016E
794
1,260
-57
103
38.1
0.75
43
BPH.WA /BPHR PW
3,910
76.7
Free float (%)
10.9%
0.34
1M
3M
YTD
Price performance
16.7%
23.6%
-6.4%
Fig. 5. Bank BPH: Residual Income valuation
Net profit
Equity (YE)
ROE
COE
Excess return
Residual income
PV of residual income (2014-16E)
Transition period (2017-2023E)
Perpetuity
Total intrinsic value
# of shares (m)
Value per share
Last reported BVPS
Fair value (Jan'14)
Month
Fair value (current)
2014E
2015E
2016E
110
5,070
2.2%
7.5%
-5.3%
-266
-784
Growth (CAGR)
18.8%
1.0%
-2,212
77
-28.9
65.1
36.2
10
38.5
25
5,095
0.5%
7.5%
-7.0%
-356
103
5,198
2.0%
7.5%
-5.5%
-283
ROE (avg.)
4.7%
5.7%
Pay-out (avg.)
91%
95%
Upside potential
41.4
Upside potential
-19%
Total value
-1,094
-1,612
PV
-701
-728
Fig. 6. Bank BPH: Peers for M&A transactions
P/BV
P/E
Polbank
1.68
n.a.
Kredyt Bank
1.38
13.7
Nordea
1.31
20.1
Santander CB
1.77
6.8
BGZ
1.11
28.2
Meritum
1.35
29.3
Median
1.36
20.1
avg.
1.44
19.6
Market cap weight
1.42
15.2
Implied BPH price from Median
88.78
50.43
Implied BPH price from average
93.43
49.25
Implied BPH price from market cap weight
92.76
38.10
Implied BPH price from ROE regression
78.11
n.a.
Upside potential
53%
Fig. 7. Bank BPH: Regression of P/BV and ROE for banks M&A transactions
25%
R² = 0.9186
ROE (Y-1)
25%
R² = 0.3936
ROE (current)
Santander CB
20%
20%
15%
15%
Meritum
Santander CB
Kredyt Bank
10%
10%
Nordea
BGZ
Kredyt Bank
BGZ
5%
5%
BPH
Meritum
Nordea
P/BV
Bank BPH
P/BV
0%
0%
1.0
1.2
1.4
1.6
1.8
1.0
2.0
44
1.2
1.4
1.6
1.8
2.0
Fig. 8. Bank BPH: Sensitivity analysis to P/BV multiple
P/BV
1.10
1.20
1.30
1.40
1.50
1.60
1.70
Price
45.6
52.1
58.6 65.1
71.6
78.1
84.6
91.1
97.6
104.2
110.7
0.70
0.80
0.90
1.00
Fig. 9. Bank BPH: 3Q14 results preview
1Q12 2Q12 3Q12
NII
320
321
315
F&C
139
128
98
Other income
4
12
22
Revenues
463
461
435
Operating costs
-352
-372
-312
Operating profit
111
89
123
Provisions
-30
-39
-3
Net profit
61
36
93
4Q12
296
111
30
437
-298
138
-47
69
1Q13
261
99
25
385
-305
80
-22
42
2Q13
244
94
26
364
-269
95
-34
45
3Q13
234
94
60
388
-290
98
-16
63
4Q13
241
142
16
399
-267
131
-67
43
1Q14
235
92
16
343
-292
51
-11
28
2Q14
232
88
24
343
-276
68
-20
34
3Q14
233
78
29
340
-261
79
-22
40
y/y
0%
-18%
-51%
-12%
-10%
-20%
40%
-37%
q/q
1%
-12%
24%
-1%
-5%
16%
12%
18%
Fig. 10. Bank BPH: Forecast changes
2014E
New Previous
NII
878
n.a.
F&C
359
n.a.
Other income
96
n.a.
Total income
1,333
n.a.
Opex
-1,117
n.a.
Provisions
-63
n.a.
Net profit
110
n.a.
Change
0%
0%
0%
0%
0%
0%
0%
New
703
366
95
1,164
-1,087
-37
25
2015E
Previous
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
New
794
371
95
1,260
-1,067
-57
103
Change
0%
0%
0%
0%
0%
0%
0%
2016E
Previous
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Change
0%
0%
0%
0%
0%
0%
0%
Fig. 11. Bank BPH: Valuation changes
New
41.4
78.1
59.8
Residual income
M&A peers transaction
Blended average target price
Previous
n.a.
n.a.
n.a.
Change
0%
0%
0%
Fig. 12. Bank BPH: Income statement forecast
NII
F&C
Fig. 13. Bank BPH: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
1,252
980
878
703
794
Cash/interbank
5,377
1,073
1,021
970
966
430
429
359
366
371
Customer loans
25,376
22,862
21,264
21,331
21,118
Debt securities
Other income
114
127
96
95
95
Total income
1,797
1,536
1,333
1,164
1,260
Total assets
Due to banks
Total opex
-1,335
-1,132
-1,117
-1,087
-1,067
EBIT (pre-prov.)
462
404
216
77
193
Customer deposits
Net provisions
-120
-139
-63
-37
-57
Equity
0
0
0
0
0
Pre-tax
342
265
153
41
Income tax
-73
-60
-35
Net profit
259
192
NIM (IEA)
4.0
Risk adjusted NIM (IEA)
3.6
Non-interest income/assets
Total income/assets
2016E
5,085
6,841
7,598
6,157
5,690
34,416
33,004
32,440
31,039
30,384
377
315
217
212
208
13,015
13,361
13,290
12,622
12,570
4,767
4,960
5,070
5,095
5,198
Loans (yoy, %)
-9%
-10%
-7%
0%
-1%
136
Deposits (yoy, %)
-4%
3%
-1%
-5%
0%
-8
-26
Assets (yoy, %)
-7%
-4%
-2%
-4%
-2%
110
25
103
L/D
195
171
160
169
168
3.2
2.9
2.4
2.8
2.8
2.7
2.3
2.6
Fig. 10. Bank BPH: Key ratios
1.5
1.6
1.4
1.5
1.5
2012
2013
2014E
2015E
2016E
5.0
4.6
4.1
3.7
4.1
NPLs
11
11
12
12
12
Cost/income ratio
74
74
84
93
85
Coverage
83
80
79
78
77
Cost/assets
3.7
3.4
3.4
3.4
3.5
ROE
5.5
4.0
2.2
0.5
2.0
Cost of risk (bps)
41
53
26
63
64
0.3
0.1
0.3
Effective tax rate
-21.2
-22.7
-23.1
-19.0
-19.0
Other
Key ratios (%)
ROA
0.7
0.6
45
46
Other
Poland
NOVEMBER 12, 2014
RECOMMENDATION
BENEFIT SYSTEMS
BUY (MAINTAINED)
TARGET PRICE: PLN391 (MAINTAINED)
Strong momentum
 3Q14 Results Review. Benefit Systems reported 3Q14
Hold
 Expansion of the fitness club chain. Affiliated fitness
club chains recently opened several new locations.
Calypso Fitness now operates 20 fitness clubs (new clubs
in Siedlce and Pila), Fabryka Formy – 10 clubs (new clubs
in Torun and Zielona Gora), Fitness Academy – 5 clubs
(unchanged). The newest chain in the BFT group – Zdrofit
- operates in 9 locations.
12-month Target Price for Benefit Systems at PLN391 and
maintain our Buy rating for the stock. The comparative
valuation points to PLN299.2 per share.
TP
350
300
250
200
WIG Relative
BFT
150
Jul-14
Oct-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Oct-12
Jan-13
Jul-12
Apr-12
Oct-11
100
 Recent developments. The company issued 68.72k new
shares of the C series as part of a motivational scheme.
Insiders sold 32.35k shares between Sept.29 and Oct. 2.
Benefit Systems hired Grzegorz Haftarczyk as its
management’s foreign expansion advisor.
Sell
400
Jan-12
results visibly above expectations. Revenues stood at
PLN109.8mn vs. expectations of PLN107-108mn;
company maintained sales y/y growth pace at 22%, which
is slightly higher than in previous quarters. Number of
active sport cards at the end of 3Q14 increased by 71.4k
y/y to 489.0k, 4.7k lower q/q, but seasonality effect was
lower than we expected. Gross margin came at record high
31.9% vs. our expectation of 30.1% and 30.6% in 3Q13; in
sport cards segment gross margin reached 33.5% vs.
31.5% in 3Q13, over 1.3pp higher than our assumptions.
Sport cards segment generated PLN105.3mn revenues
and PLN27.3mn EBIT; contribution of new products was
sales of PLN3.1mn and EBIT loss PLN4.6mn. EBITDA
stood at PLN23.6mn, +34% y/y, above our expectations
and market consensus, while net result came at
PLN17.7mn, also above expectations.
STOCK PERFORMANCE
Buy
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
1.9
Buy
7-9-2014
279.0
391.0
7.5%
Buy
4-28-2014
261.8
383.0
6.6%
8.2
Buy
1-30-2014
314.0
383.0
-16.6%
-18.9
MAIN SHAREHOLDERS
% of votes
Mr. James Van Bergh
Benefit Invest
Mr. Marek Kamola
ING pension fund
24.2%
23.2%
12.9%
10.5%
8.2%
COMPANY DESCRIPTION
The Company provides fringe benefit system solutions
including flagship MultiSport Scheme.
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
383.4
37.8
33.1
28.5
24.4
13.0
2014E
441.0
48.3
43.3
36.2
19.3
11.3
2015E
489.7
58.4
53.4
44.8
15.8
9.2
2016E
529.8
66.7
61.6
51.9
13.9
7.8
47
Free float (%)
1M
Price performance
7.5%
BFT.WA / BFT PW
766
2.6
42.1%
0.4
3M
YTD
18.0%
-4.8%
Fig. 1. Benefit Systems: 3Q14 results review
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
60.1
67.5
74.3
81.6
77.7
86.4
90.0
98.5
91.7
103.0
108.6
114.5
109.8
22.0%
-4.1%
EBITDA
EBITDA margin
11.5
19.1%
7.1
10.5%
3.6
4.8%
11.9
14.6%
16.3
21.0%
8.1
9.4%
4.3
4.7%
8.9
9.0%
17.5
19.1%
7.0
6.8%
4.3
4.0%
13.2
11.5%
23.6
21.5%
33.8%
1.9
79.0%
10.0
EBIT
EBIT margin
10.8
17.9%
6.4
9.5%
2.8
3.7%
11.0
13.4%
15.4
19.8%
7.0
8.0%
3.2
3.5%
7.8
7.9%
16.4
17.9%
5.7
5.6%
2.9
2.6%
11.9
10.4%
22.3
20.3%
35.9%
2.1
87.6%
9.9
Net profit
8.9
17.2
2.4
Net margin
14.9% 25.5%
3.2%
9.8
12.0%
12.2
15.7%
5.0
5.8%
2.9
3.2%
6.2
6.3%
12.6
13.8%
4.5
4.4%
2.7
2.5%
9.2
8.0%
17.7
16.1%
39.7%
2.0
92.5%
8.1
Sales
Fig. 2. Benefit Systems: Forecasts changes
2014E
New Previous
Sales
441.0
441.0
EBITDA
49.6
49.6
EBIT
44.2
44.2
Net profit
36.8
36.8
New
489.7
60.5
54.2
45.3
Change
0.0%
0.0%
0.0%
0.0%
2015E
Previous
489.7
60.5
54.2
45.3
New
529.8
68.5
62.4
52.5
Change
0.0%
0.0%
0.0%
0.0%
2016E
Previous
529.8
68.5
62.4
52.5
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. Benefit Systems: Valuation changes
New
391.0
299.2
DCF valuation
Previous
391.0
299.2
Change
0.0%
0.0%
Fig. 4. Benefit Systems: Income statement forecast
Fig. 5. Benefit Systems: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
320.0
383.4
441.0
489.7
529.8
Current assets
49.1
60.1
62.5
90.9
120.6
COGS
248.9
298.7
345.3
380.4
409.3
Fixed assets
86.1
129.3
133.3
136.8
140.1
Gross profit
71.1
84.7
95.7
109.2
120.5
Total assets
135.3
189.5
195.8
227.7
260.8
SG&A
36.5
52.6
52.4
55.9
58.9
36.6
64.6
53.3
59.2
64.0
1.4
0.9
0.0
0.0
0.0
0.1
23.1
0.1
0.1
0.1
EBITDA reported
39.9
37.8
48.3
58.4
66.7
0.5
2.4
1.7
1.7
1.8
EBITDA exc. SOP
42.9
46.2
51.6
61.7
70.0
0.1
1.4
1.4
1.4
1.4
Operating profit reported
36.1
33.1
43.3
53.4
61.6
98.2
122.5
140.8
166.8
195.0
Operating profit exc. SOP
39.1
41.5
46.6
56.7
64.9
share capital
2.4
2.5
2.5
2.5
2.5
2.7
3.2
1.4
1.9
2.5
Minority Interest
-0.1
-0.6
-0.6
-0.6
-0.6
135.3
189.5
Profit before tax
Current liabilities
bank debt
bank debt
Equity
38.8
36.2
44.7
55.3
64.1
Total liabilities
195.8
227.7
260.8
Income tax
9.3
8.4
8.5
10.5
12.2
-150.3
-181.6
Net profit
29.8
28.5
36.2
44.8
51.9
Net debt
-77.7
-94.4
-120.9
Gross margin
22.2%
22.1%
21.7%
22.3%
22.7%
EBITDA margin
12.5%
9.8%
10.9%
11.9%
12.6%
Operating margin
11.3%
8.6%
9.8%
10.9%
11.6%
Net profit margin
9.3%
7.4%
8.2%
9.1%
9.8%
Fig. 6. Benefit Systems: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
33.9
35.2
48.4
51.6
58.4
CF from investment
-36.5
-54.1
-9.0
-8.5
-8.4
CF from financing
-13.3
8.7
-40.7
-18.8
-23.7
-1.4
24.3
26.3
Net change in cash
-15.9
-10.2
48
FINANCIALS
Poland
NOVEMBER 12, 2014
RECOMMENDATION
BOS BANK
BUY (INITIATION)
Is ecology trendy enough?





Earnings outlook. We expect a 17% CAGR in the 2014E-16E earnings,
mainly driven by ecological products. In 2013, the National Fund for
Environmental Protection and Water Management (NFOSiGW) did not
subsidise retail clients in their installations of ecological equipment at
home. This slowed down the entire retail ecological market and we expect
that this programme will start next year, adding PLN20mn in 2015E and
PLN15mn in 2016E in fees. In the core revenues, we expect improvement
in NIM to 176bp and 195bp in 2015E-16E. In 2016E, we expect to see the
biggest improvement in the funds’ costs, when the bank will be paying off
its high-yield bond. The F&C should increase with a 2% CAGR 2014E16E. Opex should increase by a mere 2% CAGR 2014-16E, mainly due to
cost optimisation projects that are in progress (back office centralisation,
change of the sales model in branches). The cost of risk used to be at
very low levels (17-46bp), but it should rise to 60bp in 2016. This,
however, would still be a very low level relative to other banks.
Dividend prospects. We expect no dividends in the 2014-16E period.
Triggers/Risks. We assume that the market of green power for retail will
move on and add PLN20mn in 2015 and PLN15mn in 2016. If the market
remains frozen, the bank will trade at P/E 12.6 for 2015 and P/E 9.8x for
2016.
Valuation. Based on our sub-consensus 2014E estimates, BOS trades at
11.4x P/E and P/Book of 0.6x, which is below the sector’s average. The
subsequent years should bring a drop in the multiples, with P/E falling to a
single digit territory and ROE rising to 6% from 4% in 2013.
Price target and recommendation. We set our TP at PLN49.10 (18%
upside potential, Buy), deriving it from a 50/50 blend of two methodologies
– residual income and warranted equity value. We used a RFR of 3.00%
(3-month average), Beta of 1.0, risk premium of 5% and g of 2.0%.
STOCK PERFORMANCE
Buy
90
Hold
80
Sell
WIG
Relative
70
BOS
60
50
40
30
20
10
Oct-14
Jul-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Jan-12
Equity story. We are initiating our coverage of BOS with a Buy rating and
TP of PLN49.1 (18% upside potential). The bank has been transformed
by its new management that took over in 2008. The share of the
brokerage house’s net profit fell to 17% in the group’s earnings from 50%
in 2009. The new management realised it would be hard to earn like a
universal bank and began to specialise in ecological products and
ecological investments. BOS is also relatively insensitive to interest rate
changes. It loses its margin when interest rates are volatile but stabilises
when interest rates are calm. The management expects the ecological
awareness to grow in Poland in the years ahead, with ecological heating
and electricity becoming more popular. It plans to offer comprehensive
services for ecological projects (both retail and corporate). For this
reason, the group has launched companies that will supply ecological
products (solar, wind power etc.), install and service them. Media also
speculate that the bank plans to buy FM bank, which, in our opinion,
would be positive. FM Bank could increase the scale of operations, add
know-how in the SME and smart bank (mobile technology) segments,
while BOS could reprice deposits lower.
Oct-11

Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
n.a.
relative
(p.p)
n.a.
COMPANY DESCRIPTION
BOS is Poland 18th largest bank by assets. Bank is creating
innovative banking products in environmental protection field.
It also finance corporates in environmental investments and
support their business development.
Main shareholders
% of votes
NFOSiGW
ING OFE
56.6%
5.2%
ANALYSTS
Andrzej Bieniek
Dariusz Górski
Company Data
PLNmn
NII
Total income
Provisions
Net profit
P/E (x)
P/BV (x)
2013
278
501
-60
66
14.1
0.6
2014E
286
522
-44
81
11.4
0.6
2015E
328
564
-71
90
10.3
0.6
2016E
369
599
-79
107
8.7
0.5
49
Free float (%)
1M
Price performance
-5.0%
BOS.WA / BOS PW
938
22.9
53.4%
1.2
3M
YTD
-4.3%
-12.8%
Fig. 14. BOS Bank: Residual Income model
Net profit
Equity (YE)
ROE
COE
Excess return
Residual income
Perpetuity
# of shares (m)
Value per share
Last reported BVPS
Fair value (Jan'14)
Month
2013
2014E
2015E
2016E
66
1,481
4.5%
8.0%
-3.5%
-52
-102
Growth (CAGR)
6.5%
2.0%
-515
23
-22.5
66.4
43.9
10
46.8
81
1,566
5.2%
8.0%
-2.8%
-43
90
1,656
5.4%
8.0%
-2.6%
-42
107
1,763
6.0%
8.0%
-2.0%
-33
ROE (avg.)
6.6%
6.5%
Pay-out (avg.)
21%
50%
Total value
-224
-660
12-month target price
50.6
Upside potential
25%
PV
-130
-283
Fig. 15. BOS Bank: Warranted Equity Valuation
2016E ROE (%)
COE (%)
g (%)
Implied fair P/B (x)
YE16E BVPS
Fair value (YE16)
PV of fair value
DPS14E
DPS15E
DPS16E
PV of 2014-16E DPS
PV of equity + DPS (Jan'14)
Month
PV (current)
6.0
8.0
2.0
0.7
77.1
52.0
41.3
0.0
0.0
0.0
0.0
41.3
10
44.0
12-month price target
47.6
Upside potential
18%
Fig. 16. BOS Bank: COE calculation
RFR* (%)
Risk premium (%)
Beta
COE (%)
3.0
5.0
1.0
8.0
50
Fig. 17. BOS Bank: 3Q14 results review
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
Net interest income
68
70
74
71
66
66
69
77
75
76
Fee income
26
25
26
30
25
26
28
31
27
24
71
2%
-7%
26
-5%
Other income
13
30
15
22
21
35
19
38
17
7%
37
39
90%
Revenues
107
126
115
122
112
128
116
146
6%
118
137
135
16%
-1%
Operating costs
-88
-94
-91
-101
-83
-93
-91
Operating profit
20
32
24
21
29
35
25
-99
-91
-96
-91
4%
-5%
47
27
41
44
52%
8%
Provisions
-5
-20
-13
-17
-8
-5
Net profit
12
11
7
6
17
23
-28
-20
-11
-14
-14
-48%
1%
16
30
12
23
23
2076%
1%
Fig. 18. BOS Bank: Forecast changes
2014E
2015E
2016E
New
Previous
Change
New
Previous
Change
New
Previous
Change
NII
286
n.a.
0%
328
n.a.
0%
369
n.a.
0%
F&C
106
n.a.
0%
112
n.a.
0%
118
n.a.
0%
Other income
130
n.a.
0%
125
n.a.
0%
112
n.a.
0%
Total income
522
n.a.
0%
564
n.a.
0%
599
n.a.
0%
-381
n.a.
0%
-383
n.a.
0%
-388
n.a.
0%
-44
n.a.
0%
-71
n.a.
0%
-79
n.a.
0%
Net profit
81
n.a.
0%
90
n.a.
0%
107
n.a.
0%
Opex
Provisions
Fig. 19. BOS Bank: Valuation changes
New
50.6
47.6
49.1
Residual income
WEV
Previous
n.a.
n.a.
n.a.
Change
0%
0%
0%
Fig. 20. BOS Bank: Income statement forecast
Fig. 21. BOS Bank: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
NII
284
278
286
328
369
Cash/interbank
1,050
893
776
776
776
F&C
106
110
106
112
118
Customer loans
11,122
12,055
12,440
12,725
12,892
Other income
76
113
130
125
112
Debt securities
Total income
466
501
522
564
599
Total assets
Due to banks
Total opex
-374
-366
-381
-383
-388
EBIT (pre-prov.)
93
135
142
181
211
Customer deposits
Net provisions
-52
-60
-44
-71
-79
Equity
Pre-tax
40
75
98
111
132
Loans (yoy, %)
Income tax
-5
-9
-17
-21
-25
Deposits (yoy, %)
Net profit
35
66
81
90
107
Assets (yoy, %)
3,937
4,670
5,700
5,700
5,700
18,867
18,417
19,646
19,931
20,097
466
443
300
500
700
11,816
13,196
14,774
14,627
14,324
1,442
1,481
1,566
1,656
1,763
-2%
8%
3%
2%
1%
4%
12%
12%
-1%
-2%
7%
1%
1%
84
87
90
21%
-2%
L/D
94
91
Key ratios (%)
2016E
NIM (IEA)
1.9
1.7
1.6
1.8
2.0
Risk adjusted NIM (IEA)
1.5
1.3
1.4
1.4
1.5
Non-interest income/assets
1.1
1.2
1.2
1.2
1.1
Total income/assets
2.7
2.7
2.7
2.9
3.0
2012
2013
2014E
2015E
2016E
Cost/income ratio
80
73
73
68
65
NPLs
Cost/assets
7.8
6.7
6.7
6.7
6.6
3.7
4.7
5.7
6.7
7.7
Coverage
Cost of risk (bps)
33
37
37
37
37
45
51
35
55
60
ROE
Effective tax rate
-12.3
-11.7
2.5
4.5
5.2
5.4
6.0
-17.1
-19.0
-19.0
0.43
0.45
0.53
Fig. 22. BOS Bank: Key ratios (%)
ROA
0.21
0.35
51
52
Poland
November 12, 2014
RECOMMENDATION
BUDIMEX
HOLD (MAINTAINED)
‘First choice’ contractor




Equity story. Budimex is the rare example of a WSE-listed
general contractor, which managed to make money on large road
contracts over the last few years. GDDKiA, the sector’s key
investor, is now starting to distribute motorway and express road
contracts co- financed by EU 2014-2020 funds and this should
shortly translate into spending growth. As in the past, we think
Budimex should be able to take full advantage of the rising road
expenditures and gradually boost its profits from 2016, when
growth in road expenditures should accelerate. 2016 is also when
the Turow power contract should start contributing. The rise in
earnings should also be accompanied by cash generation and
dividend payments. Overall, as the largest and the most liquid
WSE-listed construction company, Budimex should remain the
‘first choice’ company in the sector, in our view. However, in light
of the <15% fundamental upside, we maintain our
recommendation at Hold.
STOCK PERFORMANCE
Rec.
Change in forecasts. We maintain our financial forecast intact.
We expect flattish y/y earnings in 2015, and earnings growth in
2016, in which we project accumulation in construction works.
Triggers & risks. Triggers include: 1) backlog q/q growth in 4Q
since Budimex won a few tenders by offering the cheapest offers
(likely the signing of the PLN1.32bn contract for Ostroleka road
bypass construction), 2) we expect GDDKiA to continue to
distribute contracts that are co-financed by EU2014-20 funds,
which should secure further backlog growth in 2015 and result in
strong profits momentum in 2016E, 3) the housing boom opens
room for gradual growth in flats’ sale volumes by the Budimex
Nieruchomosci subsidiary, 4) probable high dividend payout next
year. Risks include: 1) growth in construction costs (probable
result of accumulation in construction works in Poland) may put
pressure on margins, 2) new regulations prioritising
subcontractors may have a slightly negative effect on the
company’s cash position in 2015 and beyond.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Hold
10-22-2014
136.5
153.0
-1.2%
-1.7
Hold
7-9-2014
117.1
130.0
16.6%
11.5
Hold
4-28-2014
139.8
144.0
-16.3%
-14.6
Hold
1-30-2014
133.0
129.0
5.1%
2.8
Hold
10-23-2013
126.8
121.0
4.9%
10.5
COMPANY DESCRIPTION
Budimex is a general contractor, residential project developer
and timber frame houses producer. It has a leading position
among contractors specialising in comprehensive general
construction works in Poland, with a focus on road building.
Main shareholders
Valivala Holdings BV
Aviva pension fund
% of votes
59.1%
7.1%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
adrian.kyrcz@bzwbk.pl
Change in Valuation & Recommendation. We maintain our
Target Price based on a DCF valuation at PLN153. We also
maintain Hold recommendation.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
4 749.5
362.2
333.3
300.5
11.5
5.1
2014E
4 734.1
225.3
193.2
169.2
20.4
10.4
2015E
4 749.8
240.0
208.0
176.5
19.5
9.5
2016E
5 645.7
315.0
283.0
238.0
14.5
6.5
53
BDXP.WA / BDX PW
3 444
25.5
Free float (%)
40.9%
1.1
1M
3M
YTD
Price performance
-1.1%
15.8%
2.2%
Fig. 1. Budimex: 3Q14 results review
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
Sales
1 574
1 694
1 083
1 800
1 697
1 497
853
1 235
1 368
1 294
834
EBITDA
EBITDA margin
99
-93
50
34
65
83
50
54
62
196
59
6.3%
-5.5%
4.7%
1.9%
3.8%
5.6%
5.8%
4.4%
4.6%
15.2%
7.0%
92
-102
37
19
53
73
43
46
55
190
53
5.8%
-6.0%
3.4%
1.1%
3.1%
4.9%
5.0%
3.7%
4.0%
14.6%
Net profit
74
-118
37
Net margin
4.7% -7.0%
3.4%
-15
55
109
35
33
43
189
-0.8%
3.2%
7.3%
4.1%
2.7%
3.2%
14.6%
EBIT
EBIT margin
Fig. 2. Budimex: Forecasts changes
2014E
New Previous
Sales
4734
4734
EBITDA
225
225
EBIT
193
193
Net profit
169
169
New
4750
240
208
177
Change
0%
0%
0%
0%
2015E
Previous
4750
240
208
177
3Q14
y/y (%)
q/q (%)
1 319 1 559.6
2Q14
14.0%
18.2%
63
72.0
15.6%
14.1%
4.8%
4.6%
0.0
0.0
57
66.3
20.3%
15.3%
6.3%
4.4%
4.3%
0.1
0.0
43
44
47.9
10.9%
8.5%
5.1%
3.3%
3.1%
0.0
-0.1
New
5646
315
283
238
Change
0%
0%
0%
0%
2016E
Previous
5646
315
283
238
Change
0%
0%
0%
0%
Fig. 3. Budimex: Valuation changes
New
153
106
DCF valuation
Comparable valuation
Previous
153
106
Change
0%
0%
Fig. 4. Budimex: Income statement forecast
Fig. 5. Budimex: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
6078
4749
4734
4750
5646
Current assets
2012
2013
2014E
2015E
2016E
2888
3065
2565
2609
COGS
5618
4354
4350
4350
5167
3112
Fixed assets
560
622
619
619
Gross profit
460
395
384
400
619
479
Total assets
3448
3687
3184
3228
3732
SG&A
218
191
191
-60
129
0
192
196
Current liabilities
2517
2574
2191
2193
2515
0
0
18
20
20
20
EBITDA
233
362
20
225
240
315
498
468
481
483
566
Operating profit
182
20
333
193
208
283
-2
16
10
11
Profit before tax
Income tax
203
331
209
218
294
Total liabilities
-17
-30
-40
-41
-56
186
300
169
177
238
Net debt
-1224
-1605
Net profit
Gross margin
7.6%
8.3%
8.1%
8.4%
8.5%
EBITDA margin
3.8%
7.6%
4.8%
5.1%
5.6%
Operating margin
3.0%
7.0%
4.1%
4.4%
5.0%
Net profit margin
3.1%
6.3%
3.6%
3.7%
4.2%
bank debt
bank debt
Equity
76
34
34
34
34
433
645
512
553
650
3448
3687
3184
3228
3732
-1112
-1154
-1394
Fig. 6. Budimex: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
-44
315
-179
198
401
CF from investment
-99
158
7
-2
1
-291
-154
-320
-153
-162
-493
42
240
CF from financing
Net change in cash
-434
319
54
Retail
Poland
NOVEMBER 12, 2014
RECOMMENDATION
BYTOM
BUY (INITIATION)
FRUITS OF RESTRUCTURING



Equity Story. Following the gung-ho management’s turn-around
of the troubled company through a manufacturing site spin-off and
closing of the loss-making subsidiaries, Bytom became a clean
retailer of men’s formal clothing, which expects to operate 79
stores in its retail chain or 8,053 sqm selling area in 2014E. The
coming years should also bring further growth of the retail chain
to reach a long-term target of 10,000k sqm. We think that Bytom,
with the restructured balance sheet (net cash of PLN2mn), as well
as the redesigned store interior and collection, is on the right
track to achieve its target. Apart from its organic growth, Bytom
mulls takeovers to speed up its growth. The company looks for a
brand that offers men’s fashion at a rather low price, something
that would be more affordable for a wider audience. We view this
to be a rational move and the potential success should create a
great opportunity for growth on another mass market for the
company.
Financials. We expect Bytom to add 910/1,040/1,000 sqm in
2014-16E, respectively. We expect the LfL at 10%, 4% and 4% in
2014-16E, respectively. Based on these assumptions, we expect
Bytom to report sales of PLN101mn/PLN114mn and PLN130mn
in 2014-16E. We expect the gross margin to grow to 62.7%
(+207bps), 53.3% (+52bps) and 53.1% (down 12bps) in 201416E. In regards to SG&A, we expect the SG&A/avg. sqm at
PLN6,070 (+2.0% y/y), PLN5,952 (-1.9% y/y) and PLN5,977
(+0.4% y/y). Overall, we expect Bytom to earn an EBITDA of
PLN10.2mn, PLN12.7mn and PLN14.8mn, while its net profit
should come in at PLN7.2mn, PLN9.7mn and PLN9.4mn in 201416E, respectively.
STOCK PERFORMANCE
COMPANY DESCRIPTION
Bytom is a retail company selling mens’ formalwear. The
company operates 79 stores retail chain.
Main shareholders
% of votes
Forum mutual fund
Investors mutual fund
Mr. Jan Pilch
Mr. Michal Wojcik
Free float
18.4%
13.1%
11.2%
2.6%
54.7%
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Valuation & recommendation. Bytom is currently trading with a
PE of 14x and 11x in 2014-15E. Taking into account its growth,
the high ROE (29%-30%) and the clean balance sheet, we
believe that PE at c.15-16x would be more fair, in our view.
Assuming that we are correct with our FY’14-15 forecasts, the
FY15 still leaves a nearly 30% upside to these levels. Based on
our DCF model, we arrived at a 12 month TP of PLN2.0 per
share, which implies a 33% upside potential. We initiate coverage
with a Buy rating.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
85.3
4.1
1.3
1.0
99.9
23.8
2014E
101.4
10.2
7.2
7.2
13.9
9.3
2015E
114.0
12.7
9.5
9.7
10.5
7.4
2016E
129.6
14.8
11.3
9.4
10.9
6.4
55
Free float (%)
1M
Price performance
9.4%
BTM.WA / BTM PW
99.8
71.3
72.3%
0.3
3M
YTD
27.3%
1.4%
Fig. 1. Bytom: DCF valuation
2014E
101.4
10.2
7.2
0.0
7.2
3.0
3.1
3.2
3.9
8.0%
45
2.5%
167
78
123
-6
128
73.1
1.8
11
1.9
2.0
Revenues
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Net investment
Free cash flow
WACC (2014-2023, %)
PV FCF 2013-2023
Terminal growth (%)
Terminal Value (TV)
PV TV
Total EV
Net debt
Equity value
Value per share (PLN, 1 Jan 2014)
Month
12 month target price (PLN)
2015E
114.0
12.7
9.5
0.0
9.5
3.2
0.8
4.6
7.3
2016E
129.6
14.8
11.3
2.1
9.2
3.5
1.0
5.0
6.6
2017E
131.3
12.5
8.9
1.7
7.2
3.7
0.1
3.5
7.3
2018E
131.3
12.1
8.3
1.6
6.7
3.8
0.0
4.3
6.2
2019E
132.6
12.4
8.4
1.6
6.8
3.9
0.1
4.4
6.3
2020E
135.7
13.6
9.5
1.8
7.7
4.1
0.2
4.5
7.1
2021E
138.9
14.7
10.5
2.0
8.5
4.3
0.2
4.6
7.9
2022E
141.5
15.5
11.1
2.1
9.0
4.4
0.2
4.7
8.6
2023E
144.2
15.9
11.3
2.1
9.1
4.6
0.2
4.8
8.8
Fig. 2. Bytom: Comparable valuation
P/E
Name
EV/EBITDA
PEG
ROE
DY
2014E
2015E
2016E
2014E
2015E
2016E
1Y
2Y
2014E
2015E
2016E
2014E
2015E
2016E
LPP
33.1
28.7
22.2
20.3
17.7
13.8
1.5
0.7
30.2%
28.9%
30.6%
1.0%
1.2%
1.4%
Monnari
11.0
11.9
13.8
8.4
7.4
6.8
0.8
2.6
26.4%
19.3%
14.9%
0.0%
0.0%
5.0%
Bytom
13.9
10.5
10.9
9.3
7.4
6.4
0.02
0.01
29.3%
32.0%
27.5%
0.0%
4.9%
6.7%
average
19.3
17.1
15.6
12.7
10.8
9.0
0.8
1.1
28.6%
26.8%
24.4%
0.3%
2.0%
4.4%
CCC
26.2
19.9
16.9
18.1
14.1
12.2
0.9
0.4
28.7%
31.2%
1.2%
1.9%
2.5%
0.0%
Wojas
10.1
10.6
10.1
6.1
5.9
5.5
14.5
-2.5
14.8%
12.3%
11.4%
1.3%
1.9%
0.0%
Gino Rossi
20.5
13.4
12.3
8.4
7.2
6.6
0.1
0.0
10.5%
14.2%
13.5%
0.0%
0.0%
0.0%
average
18.9
14.6
13.1
10.9
9.1
8.1
5.1
-0.7
18.0%
19.2%
8.7%
1.1%
1.5%
0.0%
Total - average
19.1
15.9
14.4
11.8
10.0
8.5
3.0
0.2
23.3%
23.0%
16.5%
0.7%
1.7%
2.2%
56
Fig. 3. Bytom: 3Q14 results review
Sales
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13E
1Q14
2Q14
3Q14
y/y
q/q
15.9
18.9
17.4
19.7
16.7
21.4
22.1
25.1
21.0
25.0
26.7
21.2%
7.1%
-7.3%
-1.5
-0.6
-0.6
-0.6
-0.9
2.2
1.0
1.9
-0.1
2.8
2.6
159.2%
-9.4%
-3.1%
-3.3%
-3.2%
-5.7%
10.1%
4.5%
7.6%
-0.3%
11.1%
9.6%
513
-149
-2.2
-1.3
-1.2
-1.4
-1.6
1.5
0.4
1.0
-0.7
2.1
1.9
398.7%
-9.6%
-13.8%
-6.9%
-7.0%
-7.2%
-9.5%
6.9%
1.7%
4.0%
-3.4%
8.2%
7.0%
527
-128
-2.0
-1.5
-1.1
-0.7
-2.0
0.7
0.3
2.0
-0.9
2.1
1.5
447.5%
-29.7%
Net margin
-12.9%
-8.2%
-6.4%
-3.3%
-11.9%
3.4%
1.2%
7.9%
-4.5%
8.3%
5.4%
423
-284
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Bytom: Forecast changes
New
2014E
Previous
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
101
n.a.
n.a.
114
n.a.
n.a.
130
n.a.
n.a.
10
n.a.
n.a.
12
n.a.
n.a.
14
n.a.
n.a.
7
n.a.
n.a.
9
n.a.
n.a.
10
n.a.
n.a.
7
n.a.
n.a.
9
n.a.
n.a.
9
n.a.
n.a.
Sales
EBITDA
EBIT
Net profit
Fig. 5. Bytom: Valuation changes
New
2.0
1.9
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Bytom: Income statement forecast
Fig. 7. Bytom: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
72
85
101
114
130
COGS
37
42
48
53
Gross profit
35
43
53
SG&A
39
42
-2
EBITDA
Operating profit
Profit before tax
2012
2013
2014E
2015E
2016E
Current assets
28
32
39
45
50
61
Fixed assets
23
17
17
19
20
61
69
Total assets
51
49
56
64
70
46
51
57
Current liabilities
27
26
26
29
33
0
0
0
0
6
0
0
0
0
-3
4
10
13
15
3
2
2
2
2
-6
1
7
9
11
1
0
0
0
0
1
-1
0
0
0
20
21
28
33
35
72
bank debt
bank debt
Equity
-5
0
7
10
12
share capital
72
72
72
72
Income tax
0
-1
0
0
2
Minority Interest
0
0
0
0
0
Net profit
-5
1
7
10
9
Total liabilities
51
49
56
64
70
-6
-8
-8
Gross margin
48.4%
50.7%
52.7%
53.3%
53.1%
EBITDA margin
-4.6%
4.8%
10.0%
11.2%
11.4%
Operating margin
-8.5%
1.5%
7.1%
8.3%
8.7%
7.1%
8.5%
7.2%
Net profit margin
-7.5%
1.2%
Net debt
6
-2
Fig. 8. Bytom: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
3
6
7
12
12
CF from investment
-4
1
-3
-5
-5
0
-6
0
-5
-7
4
3
0
CF from financing
Net change in cash
0
1
57
58
TMT
Poland
NOVEMBER 12, 2014
RECOMMENDATION
CD PROJEKT
BUY (MAINTAINED)
Counting down to Witcher 3 release
STOCK PERFORMANCE
 3Q14 Results Preview. We expect CD Projekt to report
Hold
Sell
20
18
16
14
12
10
CDR
TP
8
WIG Relative
6
4
2
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Oct-11
0
Jan-12
weak quarterly results for several reasons: seasonally low
sales in all segments, costs connected with the launch of
The Witcher 3 (like participating in video game exhibitions)
and costs of new features at GOG (Galaxy and movie
distribution). In digital distribution we expect a c. 10% sales
increase y/y, the gross margin at 35.0% vs. 27.2% in 3Q13
and the SG&A costs at PLN3.5mn vs. PLN1.5mn year ago.
We expect the game development segment to report
PLN4.0mn in revenues, which is unlikely to cover the rise
in SG&A. The segment’s net loss, the first since 1Q11,
should equal to PLN2.2mn. The retail distribution segment
should suffer a 33% fall in sales (weaker catalogue).
Overall, we see the 3Q14 revenues at PLN30.1mn, an
EBITDA of PLN-1.3mn, an EBIT of PLN-2.1mn and a net
loss of PLN1.4mn. Outcome: NEGATIVE.
Buy
 The Witcher 3 remains high across all the pre-order
rankings. According to VGChartz, more than 166k
customers in the US alone have pre-ordered the game so
far across all the three platforms.
Rec.
Date
 Recent Developments. The Company appealed against
the court’s verdict in the Optimus case. The court decided
that CD Projekt will get PLN1.1mn and PLN1.2mn in
interest, much below the demanded PLN35.7mn plus
interest. The Company also performed an intra-group
transaction for The Witcher brand, which should lead to
several PLNmn in tax savings in next five years.
Price
12-month Target Price for CD Projekt at PLN18.0 and
absolute
relative
(p.p)
Buy
10-20-2014
16.3
18.0
2.9%
0.7
Buy
7-9-2014
15.2
17.7
6.8%
3.3
Hold
4-28-2014
14.9
16.7
2.2%
3.9
Hold
3-31-2014
15.3
16.7
-2.7%
-1.2
U.R.
3-12-2014
15.0
n.a.
2.1%
-1.5
Hold
1-30-2014
18.2
19.0
-17.7%
-17.9
 4Q14 outlook. Two smaller projects are due for release in
4Q14 – a board game - The Witcher The Adventure Game
- and a mobile MOBA game – The Witcher Battle Arena.
We expect their contribution in 4Q14 to sit at a low, singledigit PLNmn.
Price performance
on issue 12 month
date
target
MAIN SHAREHOLDERS
% of votes
Shareholders’ agreement
PKO mutual fund
Aviva pension fund
35.8%
9.5%
6.3%
5.2%
COMPANY DESCRIPTION
CD Projekt is a game developer and distributor.
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
142.2
18.0
14.9
14.9
99.2
79.8
2014E
150.8
10.7
6.0
6.0
245.8
135.2
2015E
330.1
123.1
118.4
101.5
14.6
11.0
2016E
375.9
125.8
121.1
107.3
13.9
10.1
59
Free float (%)
1M
Price performance
-1.3%
CDR.WA / CDR PW
1,589
95.0
60.9%
1.2
3M
YTD
10.9%
-4.6%
Fig. 1. CD Projekt: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
25.9
29.7
17.7
53.8
42.1
50.9
27.8
35.2
40.2
38.9
30.8
43.8
30.1 -25.2% -31.2%
EBITDA
EBITDA margin
5.6
21.8%
-0.5
-1.7%
0.7
4.0%
14.2
26.5%
6.5
15.4%
9.6
18.8%
3.3
12.0%
5.2
14.7%
5.8
14.3%
3.7
9.6%
1.4
4.7%
5.2
11.9%
-1.3 -122.8% -125.2%
-4.4%
-18.7
-16.3
EBIT
EBIT margin
5.2
20.1%
-1.0
-3.4%
0.2
0.9%
13.6
25.4%
5.8
13.7%
8.8
17.3%
2.6
9.4%
4.4
12.4%
4.9
12.3%
2.9
7.6%
0.6
2.0%
3.4
7.7%
-2.1 -143.2% -163.1%
-7.1%
-19.4
-14.8
Net profit
4.8
-1.3
0.5
Net margin
18.4% -4.2%
2.7%
13.3
24.8%
5.8
13.7%
8.5
16.8%
4.1
14.6%
3.6
10.3%
4.4
11.0%
2.8
7.1%
1.5
4.9%
3.0
7.0%
-1.4 -132.2% -146.8%
-4.7%
-15.7
-11.7
Sales
Fig. 2. CD Projekt: Forecasts changes
2014E
New Previous
Sales
150.8
150.8
EBITDA
10.7
10.7
EBIT
6.0
6.0
Net profit
6.0
6.0
New
330.1
123.1
118.4
101.5
Change
0.0%
0.0%
0.0%
0.0%
2015E
Previous
330.1
123.1
118.4
101.5
New
375.9
125.8
121.1
107.3
Change
0.0%
0.0%
0.0%
0.0%
3Q14E
y/y
2016E
Previous
375.9
125.8
121.1
107.3
q/q
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. CD Projekt: Valuation changes
New
18.00
11.45
DCF valuation
Previous
18.00
11.45
Change
0.0%
0.0%
Fig. 4. CD Projekt: Income statement forecast
Fig. 5. CD Projekt: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
164.0
142.2
150.8
330.1
375.9
Current assets
COGS
89.6
88.8
101.0
162.7
199.4
Gross profit
74.4
53.3
49.8
167.4
176.5
SG&A
38.3
35.2
46.6
51.8
58.2
-7.7
-3.2
2.8
2.8
2.8
EBITDA
31.0
18.0
10.7
123.1
125.8
Operating profit
28.4
14.9
6.0
118.4
121.1
-0.1
2.3
2.1
2.7
6.3
Profit before tax
Net sales
2012
2013
2014E
2015E
2016E
108.7
122.6
131.5
251.4
362.3
Fixed assets
94.2
95.0
95.0
95.0
95.0
Total assets
202.9
217.6
226.5
346.4
457.2
43.8
45.0
48.1
66.4
70.0
4.7
0.3
0.0
0.0
0.0
7.6
5.3
5.1
5.1
5.1
7.6
5.1
5.1
5.1
5.1
151.5
167.4
173.4
274.9
382.1
95.0
Current liabilities
bank debt
bank debt
Equity
28.3
17.2
8.1
121.0
127.5
share capital
95.0
95.0
95.0
95.0
Income tax
0.2
2.3
1.8
19.5
20.2
Minority Interest
0.0
0.9
0.9
0.9
0.9
Net profit
28.1
14.9
6.0
101.5
107.3
202.9
217.6
226.5
346.4
457.2
-30.6
-121.0
-239.7
Gross margin
45.4%
37.5%
33.0%
50.7%
47.0%
EBITDA margin
18.9%
12.7%
7.1%
37.3%
33.5%
Operating margin
17.3%
10.5%
4.0%
35.9%
32.2%
Net profit margin
17.1% 10.5%
4.0%
30.7%
28.5%
Total liabilities
Net debt
-23.0
-39.2
Fig. 6. CD Projekt: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
28.4
21.8
-4.0
95.1
123.4
CF from investment
-6.0
-6.5
-4.7
-4.7
-4.7
CF from financing
-8.7
-3.3
-0.5
0.0
0.0
-9.1
90.4
118.7
Net change in cash
13.7
12.0
60
Chemicals
Poland
NOVEMBER 12, 2014
RECOMMENDATION
CIECH
BUY (MAINTAINED)
3Q14: not that bad, upward trend ahead

3Q14 Results Preview. We expect Ciech to report revenues at
PUBLICATION DATE
PLN702mn (-14% q/q and -15% y/y). The y/y drop in revenues is caused
NOVEMBER 14, 2014
by 2% lower soda ash volumes (due to maintenance stoppages),
discontinued operations in organic/agro segments and contract end in
3Q14E
702
113
59
25
sulphur trading with Siarkopol. Despite the drop in revenues y/y,
improvement in restructuring and profitability in the soda business should
lift the EBITDA margin to 16% (up 3p.p. y/y). We, therefore, expect the
EBITDA to reach PLN113mn (+4% y/y), the normalised EBITDA at
Sales
EBITDA
EBIT
Net profit
PLN116mn (-10% y/y). All in all, we expect the EBIT at PLN59mn (-29%
q/q
-14%
-15%
-29%
20%
STOCK PERFORMANCE
q/q and +7% y/y). We also assume a negative net financial result of
PLN28mn, the effective tax rate at 19%, and the net profit in 3Q14 at
y/y
-15%
4%
7%
293%
Buy
Hold
Sell
55
TP
50
PLN25mn. Outlook: NEUTRAL.
45
We expect the soda
40
segment to deliver the reported EBITDA at PLN 97m (-18% q/q, -7%
35
y/y). We also assume soda ash/baking soda volumes at 463kt/30kt, -2%/-
30
3% y/y. The y/y drop in soda volumes is due to small production
25
stoppages in 3Q14, observed in the German and Romanian plants. On
20
the other hand, we assume that average soda prices were 4% higher y/y.
15
We expect the organic segment to report the EBITDA at PLN11mn
10
report a lower EBITDA y/y of PLN6mn (vs. PLN9mn in 3Q13). Other
products &eliminations should consume PLN1mn.

Strategy update for 2014-2019. Company’s strategy assumes the avg.
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Rec.
Date
annual normalized EBITDA at PLN660mn (margin at 17%), substantial
Price
Price performance
on issue 12 month
date
target
debt reduction (net debt / EBITDA ratio at below 1.0x in 2019) and avg.
DY at 3%. The strategy targets are to be achieved by development of the
Oct-12
WIG Relative
Oct-11
compared to PLN8mn in 3Q14. The Agro&silicate segment is set to
CIE
Apr-12
EBITDA from the segment’s point of view:
Jan-12

absolute
relative
(p.p)
Buy
10/27/2014
40.1
51.4
5.5%
5.3
Buy
9/23/2014
39.1
51.0
2.6%
4.6
soda ash and crop protection plant segments. The strategy is also based
on the assumption that the impact of the trona supply from Turkey to
Europe is not material. The strategy goals are ambitious, however not
unrealistic given bullish soda ash market outlook.

Change in forecasts. We made no changes to our forecasts for 2014E
and beyond. We leave our financial forecasts unchanged.

COMPANY DESCRIPTION
Ciech is the second largest soda ash producer in Europe.
Change in Valuation & Recommendation. We keep our DCF-based
ANALYST
Tomasz Kasowicz
(+48) 22 586 81 55
Target Price unchanged at PLN51.4 per share (21.5% upside potential).
That said, we uphold our BUY recommendation for Ciech.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
3,501
356
140
49
45.1
10.2
2014E
3,050
472
263
72
31.1
7.7
2015E
3,046
520
297
143
15.5
7.0
2016E
3,204
590
362
200
11.1
6.1
Source: Company data, Bloomberg, BZ WBK Brokerage
61
CECH.WA / CIE PW
2,160
52.7
Free float (%)
48.8%
1.3
1M
3M
YTD
Price performance
+1.2%
+7.3%
+32.0%
Fig. 1. Ciech: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
1,018
1,019
1,173
1,120
1,065
1,020
993
889
823
795
845
814
702
-15%
-14%
89
74
134
-242
79
82
124
93
109
22
118
133
113
4%
-15%
8.7%
7.3%
11.4% -21.6%
7.4%
8.0%
12.4%
10.5%
13.2%
2.8%
14.0%
16.4%
16.1%
2.9
-0.3
33
16
-303
23
24
71
41
55
-36
68
83
59
7%
-29%
3.2%
1.6%
6.1% -27.1%
2.2%
2.4%
7.2%
4.6%
6.7%
-4.5%
8.0%
10.2%
8.4%
1.7
-1.8
Net profit
8
-9
11
-348
Net margin
0.8% -0.9%
0.9% -31.1%
-25
-89
38
15
6
-22
6
21
25
293%
20%
-2.3%
-8.7%
3.8%
1.7%
0.8%
-2.8%
0.8%
2.5%
3.5%
2.8
1.0
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
72
Fig. 2. Ciech: Forecast changes
2014E
New Previous
Sales
3,050
3,050
EBITDA
472
472
EBIT
263
263
Net profit
72
72
New
3,046
520
297
143
Change
0%
0%
0%
0%
2015E
Previous
3,046
520
297
143
New
3,204
590
362
200
Change
0%
0%
0%
0%
3Q14E y/y chg. q/q chg.
2016E
Previous
3,204
590
362
200
Change
0%
0%
0%
0%
Fig. 3. Ciech: Valuation changes
New
51.4
36.0
DCF valuation
Previous
51.4
36.0
Weight
100%
0%
Change
0%
0%
Fig. 4. Ciech: Income statement forecast
Net sales
COGS
Gross profit
Fig. 5. Ciech: Balance sheet forecast
2012
2013E
2014E
2015E
2016E
4,378
3,501
3,050
3,046
3,204
2012
2013E
2014E
2015E
Current assets
1,182
910
814
809
-3,781
-2,894
-2,398
-2,352
848
-2,435
Fixed assets
2,546
2,300
2,394
2,515
2,577
Total assets
3,728
3,211
3,209
3,324
3,425
Current liabilities
1,028
697
2,037
2,009
1,911
63
11
1,478
1,456
1,336
1,786
1,617
263
263
262
1,499
1,308
7
7
7
886
911
924
1,067
1,267
288
288
288
288
288
-6
-14
-15
-15
-15
3,728
3,211
3,209
3,324
3,425
Net debt
1,480
1,213
1,393
1,371
1,246
2016E
596
607
652
694
769
SG&A
-479
-387
-363
-383
-394
-314
-81
-26
-14
-13
40
356
472
520
590
Operating profit
-196
140
263
297
362
-262
-146
-158
-120
-114
Profit before tax
-457
-6
105
177
247
share capital
22
46
34
34
47
Minority Interest
-431
49
72
143
200
13.6%
17.3%
21.4%
22.8%
24.0%
0.9%
10.2%
15.5%
17.1%
18.4%
-4.5%
4.0%
8.6%
9.8%
11.3%
Net profit margin
-9.8%
1.4%
2.4%
4.7%
6.3%
EBITDA
Income tax
Net profit after minorities
Gross margin
EBITDA margin
Operating margin
bank debt
bank debt
Equity
Total liabilities
2016E
Fig. 6. Ciech: Cash flow forecast
2012
2013E
2014E
2015E
CF from operations
98
291
329
485
525
CF from investment
-287
-25
-291
-343
-286
124
-252
-52
-143
-234
Net change in cash
-65
14
-14
0
5
CF from financing, incl.
62
Poland
November 12, 2014
RECOMMENDATION
DOM DEVELOPMENT
HOLD (MAINTAINED)
All priced in





Equity story. We are positive on the Polish residential sector.
The sale volumes of housing developers have been rising since
the beginning of 2009 and we expect the trend to continue in
2015. Low interest rates should be supportive here (as the past
correlation suggests), as is the case with the expected rise in
mortgage originations and the likely rise in price limits in the MdM
scheme. Nevertheless, we believe that this outlook is already
reflected in the current valuation of DOM. Note, for example, that
the company is trading at a P/BV of 1.36x, at a premium
compared with the sector’s median and estimated fair P/BV of
Dom that we currently see at 1.25x (on the basis of the estimated
2015E ROE at c. 9.3%). With our TP close to current share
market price, we maintain our neutral view on DOM.
Residential market continued recovery in 3Q14. The eight
reviewed developers sold a total of 2,511 flats, up 21% y/y and
12% q/q. In 9M14, they improved the volume by 36% y/y and they
also all reported a double-digit y/y volume growth, with the growth
rate ranging between 19% (Dom Development) and 109%
(Budimex). The aggregate volume of the reviewed developers is
also 39% higher y/y, taking into account the last four quarters.
The annualised 9M14 aggregate sales volume implies a healthy
24% y/y growth in FY14.
Sale volume of DOM relatively weak. The company announced
that it had sold 495 housing units in 3Q14 (+7% q/q, +20% y/y),
the most since the start of 2010. In 9M14 overall, the company
sold 1,358 units in total, up 19% y/y, which, on the other hand, is
a relatively weak result (the aggregate volume of the WSE
developers rose 36% y/y). The annualised 9M14 aggregate
volume of sales implies a 24% y/y rise in FY14, with the pace at
Dom at a meagre 13%. In the long term, we expect the company
to sell/hand over 2.0-2.1k units annually, which is above the
implied FY14 sales volume and slightly above the 3Q annualised
sale volume.
Change in forecasts. We slightly decline our 2015-2017 profits
forecast, as we assume slightly lower margin at residential
projects. We assume notary sales in 2014 at 1,950. We expect
Dom to sell/hand over c. 2.0-2.1k apartments annually after 2014.
Target Price for DOM intact at PLN45.1. We also maintain our
Hold recommendation intact.
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Hold
10-22-2014
44.9
45.1
1.1%
0.5
Sell
7-9-2014
43.6
45.1
3.0%
-2.1
Sell
4-28-2014
48.0
45.1
-9.2%
-7.5
Sell
1-30-2014
53.8
45.1
-10.8%
-13.1
Sell
10-23-2013
41.5
38.7
29.6%
35.2
COMPANY DESCRIPTION
Dom Development is a residential developer, focussing on
Warsaw market.
Main shareholders
Dom Development BV
Aviva pension fund
Mr. Jaroslaw Szanajca
Mr. Grzegorz Kielpsz
% of votes
59.5%
6.8%
6.2%
5.2%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
676.4
76.5
73.3
54.5
20.5
16.2
2014E
818.4
73.8
70.6
54.1
20.7
16.9
2015E
870.0
108.2
105.1
83.8
13.3
10.2
2016E
870.0
107.5
104.4
83.9
13.3
10.3
63
DOMP.WA / DOM PW
1124
24.8
Free float (%)
27.2%
0.0
1M
3M
YTD
Price performance
3.2%
8.0%
-11.0%
Fig. 1. Dom Development: 3Q14 results review
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y (%)
q/q (%)
201.5
211.0
141.9
164.0
305.1
238.3
220.3
119.9
123.6
212.6
198.7
163.0
159.9
29.4%
-1.9%
EBITDA
EBITDA margin
47.4
23.5%
47.9
22.7%
19.3
13.6%
19.8
12.1%
44.4
14.5%
32.8
13.8%
33.8
15.3%
2.7
2.2%
3.6
2.9%
36.4
17.1%
9.6
4.8%
3.7
2.3%
21.1 482.9% 463.4%
13.2%
3.5
4.7
EBIT
EBIT margin
46.9
23.3%
47.2
22.4%
18.5
13.1%
19.1
11.6%
43.9
14.4%
32.1
13.5%
33.0
15.0%
1.9
1.6%
2.8
2.3%
35.7
16.8%
8.9
4.5%
3.0
1.8%
20.3 619.9% 579.8%
12.7%
4.6
5.9
Net profit
36.6
39.0
14.6
Net margin
18.1% 18.5% 10.3%
15.7
9.5%
35.5
11.6%
25.5
10.7%
26.3
11.9%
1.1
0.9%
1.1
0.9%
25.9
12.2%
9.3
4.7%
1.6
1.0%
Sales
Fig. 2. Dom Development: Forecasts changes
2014E
New Previous
Change
818
Sales
818
0%
74
EBITDA
74
0%
71
EBIT
71
0%
54
Net profit
54
0%
New
870
108
105
84
2015E
Previous
870
123
120
96
New
870
108
104
84
Change
0%
-12%
-12%
-12%
15.3
9.6%
n.m. 840.4%
9.5
2016E
Previous
870
121
118
95
8.6
Change
0%
-11%
-12%
-12%
Fig. 3. Dom Development: Valuation changes
New
45.1
33.8
DCF valuation
Comparable valuation (based on P/BV)
Previous
45.1
33.8
Change
0%
0%
Fig. 4. Dom Development: Income statement forecast
Fig. 5. Dom Development: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
851.4
676.4
818.4
870.0
870.0
Current assets
COGS
647.4
519.3
661.7
669.9
669.9
Fixed assets
8.2
7.5
7.4
7.2
7.1
Gross profit
204.0
157.1
156.8
200.1
200.1
Total assets
1759.7
1728.9
1381.0
1484.2
1503.3
SG&A
85.2
82.5
86.1
95.0
95.7
414.6
383.7
330.3
442.9
445.1
Other operating income. net
-5.2
-1.2
0.0
0.0
0.0
37.3
3.8
3.8
3.8
3.8
EBITDA
116.5
76.5
73.8
108.2
107.5
452.7
488.6
194.6
144.6
144.6
Operating profit
113.5
73.3
70.6
105.1
104.4
397.0
444.0
150.0
100.0
100.0
0.0
-3.6
-3.9
-1.7
-0.8
892.4
856.5
856.1
896.6
913.5
Profit before tax
113.5
69.7
66.8
103.4
103.6
Total liabilities
1759.7
1728.9
1381.0
1484.2
1503.3
Income tax
-22.3
-15.2
-12.7
-19.6
-19.7
-15.1
-6.5
91.2
54.5
54.1
83.8
83.9
Net debt
23.6
120.4
124.9
Net profit
Gross margin
24.0%
23.2%
19.2%
23.0%
23.0%
EBITDA margin
13.7%
11.3%
9.0%
12.4%
12.4%
Operating margin
13.3%
10.8%
8.6%
12.1%
12.0%
Net profit margin
10.7%
8.1%
6.6%
9.6%
9.6%
Current liabilities
bank debt
bank debt
Equity
2012
2013
2014E
2015E
2016E
1751.5
1721.4
1373.7
1477.0
1496.2
Fig. 6. Dom Development: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
125.6
-8.7
62.5
190.4
64.1
CF from investment
-238.2
231.5
-1.2
-2.3
-1.9
-91.8
-76.5
-359.8
-98.1
-70.9
Net change in cash
-204.3
146.3
-298.5
90.1
-8.6
CF from financing
64
Poland
November 12, 2014
RECOMMENDATION
ECHO INVESTMENT
BUY (MAINTAINED)
FX rates to support 3Q profits



3Q14 Results Preview. We expect Echo to post quite a good set
of results in 3Q14. We expect a flat q/q profit from rental activities
and assume no completion of new project or changes in rent
levels. We do, however, expect as much as PLN11.6mn in profit
from selling flats on high notary sales volume. And so we project
18% q/q gross profit growth to PLN78.6mn. We also expect a
revaluation gain of approx. PLN13.8mn, purely caused by the
EUR/PLN q/q appreciation (+0.4% q/q). For the very same
reason, we expect Echo to recognise a loss of PLN6.6mn in its
financial activity (some loans are EUR denominated). All in all, we
forecast Echo to earn PLN26.6mn, much more than in 2Q14
(PLN16.5mn) and 3Q13 (5.4mn). The forecasted profit growth
would, however, only increase Echo’s NAV by 1% q/q, which is
why we expect market reaction to be neutral. Outcome:
NEUTRAL.
Financial forecasts. We maintain our financial forecasts. We
expect 4Q14 and the 2015-2016 results outlook to be quite
positive. In 4Q14, we expect Echo to recognise the first
revaluation gains from the nearly completed Katowice Business
Park and the Wroclaw West Gate office projects. In 2015, we
expect Echo to recognise approx. PLN200mn in positive
revaluation from the continuation of the two aforementioned
projects, extra gains from the Gdansk Tryton office project and
gains from the scheduled enlargement of a shopping mall in
Jelenia Gora. For 2016, we forecast revaluations of approx.
PLN160mn, solely from the Q22 office building in Warsaw.
Target Price for Echo at PLN7.65 (weighted average of
discounted 2016E NAV and peer comparison) and maintain our
Buy recommendation on fundamental upside. The company
trades at P/BV of 0.84x, which is close to its WSE peer GTC
(0.80x P/BV), though it used to be traded at a more significant
premium in the past. We also think that the premium over GTC is
justified because GTC may decide again to issue new shares (for
acquisitions), which we would view negatively with respect to the
uncertainty regarding the number, size and operating data of the
potential acquisition targets. We forecast Echo to rise its BVPS by
17% to PLN9.01 in 2016E from PLN7.7 in 2Q14. The discounted
2016E NAV (12M forward) sits at PLN7.96, which offers an
upside to the current share price. At the top of that the spread
between Warsaw prime office yields and T-bond 2Y yields
significantly widened recently, which might be supportive for the
share market price of Echo (as in the past).
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Buy
10-22-2014
6.2
7.7
3.9%
3.3
Buy
7-9-2014
6.6
7.7
-4.9%
-10.0
Buy
4-28-2014
5.8
7.7
13.5%
15.2
Buy
1-30-2014
6.2
8.1
-6.9%
-9.2
Buy
10-23-2013
7.2
8.3
-14.1%
-8.6
COMPANY DESCRIPTION
Echo is a real estate and residential developer with focus on
Polish market. Office and retail buildings constitute majority
of assets.
Main shareholders
Mr. Michal Solowow
Aviva pension fund
ING pension fund
PZU pension fund
% of votes
45.9%
10.0%
9.4%
5.4%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
Company Data
PLNm
Sales
EBIT
Adj. EBIT
Net income
BV
P/BV (x)
2013
528
497
224
331
2765
0.97
2014E
488
677
197
489
3240
0.82
2015E
640
452
252
255
3496
0.76
2016E
689
445
283
222
3717
0.72
Source: Company data, DM BZ WBK estimates, *adjusted for revaluation gains/losses
65
Free float (%)
1M
Price performance
3.9%
ECH.WA / ECH PW
2 670
412.7
53.9%
0.6
3M
YTD
3.2%
-3.4%
Fig. 1. Echo Investment: 3Q14 results preview
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y (%)
q/q (%)
109.4
115.2
153.8
122.9
158.7
148.2
140.5
125.4
140.7
122.2
111.8
111.5
155.0
10.2%
39.0%
n.m.
90.4%
-18.7
0.4
n.m.
93.2%
EBITDA
EBITDA margin
324.7
296.7%
49.8
-27.3
43.2% -17.7%
103.2
-39.4 158.0 236.1 255.8
84.0% -24.8% 106.6% 168.1% 204.0%
-3.7
-2.6%
11.7 491.8
9.6% 439.8%
38.1
34.1%
72.5
46.8%
EBIT
EBIT margin
323.6
295.7%
48.6
-32.0
42.2% -20.8%
104.9
-40.5 156.8 235.1 254.1
85.3% -25.5% 105.9% 167.3% 202.7%
-5.4
-3.9%
10.0 490.1
8.2% 438.2%
36.9
33.1%
71.3
46.0%
Net profit
72.2
29.2
30.7
Net margin
66.0% 25.3% 19.9%
67.3
-19.5 332.3 156.1 146.0
54.8% -12.3% 224.3% 111.1% 116.5%
5.4
3.8%
1.7 408.3
1.4% 365.1%
16.5
14.8%
26.6
17.1%
Fig. 2. Echo Investment: Forecasts changes
2014E
New Previous
488
Sales
488
682
EBITDA
682
677
EBIT
677
177
Adj EBIT
177
489
Net profit
489
New
640
457
452
252
255
Change
0%
0%
0%
0%
0%
2015E
Previous
640
457
452
252
255
New
689
451
445
283
222
Change
0%
0%
0%
0%
0%
-12.9
0.4
n.m.
61.3%
3.5
0.2
2016E
Previous
689
451
445
283
222
Change
0%
0%
0%
0%
0%
Source: Company data, DM BZ WBK estimates, *adjusted for revaluation gains/losses
Fig. 3. Echo Investment: Valuation changes
New
7.65
6.0
SOTP valuation
Previous
7.65
6.0
Change
0%
0%
Fig. 4. Echo Investment: Income statement forecast
Fig. 5. Echo Investment: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
583
528
488
640
689
Current assets
1029
1534
1604
1351
1266
COGS
277
236
208
298
314
Fixed assets
4174
4596
5281
5829
6167
Gross profit
305
292
280
342
375
Total assets
5453
6224
6885
7180
7433
83
82
89
91
92
704
1231
1231
1231
1231
-33
327
500
201
163
550
562
562
562
562
EBITDA
195
502
682
457
451
2286
2194
2345
2347
2347
Operating profit
189
497
677
452
445
-6
-177
-141
-137
-172
Profit before tax
184
319
536
315
Income tax
190
12
-47
Net profit
374
331
Gross margin
52.4%
55.4%
EBITDA margin
33.5%
Operating margin
32.5%
SG&A
Current liabilities
bank debt
2223
2149
2300
2300
2300
Equity
2432
2765
3240
3496
3717
274
Total liabilities
5453
6224
6885
7180
7433
-60
-52
2328
2582
2666
489
255
222
Net debt
2397
2289
57.3%
53.5%
54.4%
95.1% 139.7%
71.4%
65.4%
94.1% 138.6%
70.6%
64.7%
2016E
Net profit margin
64.2% 62.7% 100.2%
39.9%
32.2%
bank debt
Fig. 6. Echo Investment: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
212
228
226
237
267
CF from investment
-468
65
-134
-355
-180
79
-250
20
-135
-172
112
-254
-85
CF from financing
Net change in cash
-176
43
66
Industrials
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ELEMENTAL HOLDING
BUY (INITIATION)
Building recycling tycoon
Equity Story. Elemental Holding is a company that operates through its
STOCK PERFORMANCE
three Polish subsidiaries – Syntom (non-ferrous metal trading), Tesla
Buy
Recycling (PCB recycling) and Terra Recycling (WEEE recycling) and
4
started from scratch just in 2009. The company is a clever mix of low
4
volumes - high margin recycling (PCB, WEEE) and high volumes-low
3
margin trading, which creates synergies for the whole group (bargaining
3
power, supply of raw materials). WEEE recycling is heavily regulated by
2
the EU, with the WEEE Directive setting the collection, recycling and
2
recovery targets for different electro-waste groups. The Polish law,
1
compliant with EU regulations, sets a collection target of 65% in 2021 of
1
Poland. Turkey, even if not an EU member, still regulates its market
similarly and collects only 0.5kg per resident at the moment (target of 4kg
Sell
WIG Relative
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
0
Jan-13
there are still markets that are far behind the current collection levels in
Jul-12
waste put one the market (vs. 35.3% in 2013 or 4.2kg per resident). But
Hold
EMT
Oct-12

in 2018). Elemental’s current strategy stipulates acquisitions of recycling
companies on underdeveloped markets in order to create a major CEE
player. The company finalised two deals this year - catalytic converters
and WEEE recycler from Lithuania – EMP and metal trading company
from Slovakia – Metal Holding, is finalizing third (Turkish Evciler) and
looking at the levels of financing that it had obtained, especially the new
PLN50mn bond issue, it will probably not stop at the three.

Financials. We expect the company’s results to grow rapidly next year,
mainly due to acquisitions (revenues up by 36.9% y/y, EBITDA up by
COMPANY DESCRIPTION
Elemental Holding specializes in non-ferrous metal collecting
and trading as well as PCB, WEEE and catalytic converter
recycling. Company is currently gaining access to foreign
markets through M&A’s.
36.6%). A further increase of the high margin recycling should also
gradually improve margins on the domestic market in the longer term.

Main shareholders
Triggers/Risks. The WEEE recycling markets, as many other recycling
markets, are heavily afflicted by the grey market. There are, however,
actions that could improve this, such as a distinction of refrigerators
instead of just MDA in the product groups. The company will cumulatively
Moearth Holdings Limited
Ibah Holdings Limited
Glaholm Investments Limited
EVF I Investments S.a.r.l
ING pension fund
% of votes
23.8%
18.2%
15.0%
10.1%
5.8%
acquire several companies in 2014, and aside from the obvious risks like
overpaying, it may take some time to put all these puzzles together

Valuation & recommendation. Using the DCF model, we set the
company’s
TP
at
PLN3.9
(37%
upside)
and
issued
a
Buy
ANALYST
Tomasz Kucinski
+48 22 534 16 10
recommendation.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
858.7
27.0
24.1
24.4
18.2
17.6
2014E
739.7
46.7
40.9
35.2
12.7
9.5
2015E
1013.0
63.8
53.2
40.9
10.9
6.6
2016E
1075.3
68.7
58.1
40.9
10.9
5.9
Fig.1. Elemental: DCF valuation
67
EMPT.WA / EMT PW
442.8
154.8
Free float (%)
25.8%
0.5
1M
3M
YTD
Price performance
-2.4%
31.2%
9.2%
Revenues
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Net investment
Free cash flow
WACC
PV FCF 2014-2023
Terminal growth
Terminal value (TV)
PV TV
Total EV
Net debt
Minority interests
Equity value
Month
12M target price
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
739.7 1,013.0 1,075.3 1,134.8 1,190.5 1,223.0 1,253.2 1,284.2 1,307.9 1,332.2
40.9
53.2
58.1
62.2
66.5
69.7
72.8
75.9
77.5
79.1
2.1
6.0
11.0
11.8
12.6
13.2
13.8
14.4
14.7
15.0
38.8
47.3
47.1
50.4
53.9
56.5
58.9
61.5
62.8
64.1
5.8
10.6
10.6
10.6
10.6
10.6
10.6
10.6
10.6
10.6
-6.8
7.4
11.0
11.2
11.2
8.8
8.8
9.1
8.4
3.3
70.5
10.6
10.6
10.6
10.6
10.6
10.6
10.6
10.6
10.6
57.9
7.4
11.0
11.2
11.2
8.8
8.8
9.1
8.4
3.3
-19.2
39.9
36.1
39.2
42.7
47.7
50.2
52.4
54.4
60.8
9.0%
272.0
1.0%
765.2
351.7
623.7
-4.0
56.1
571.6
158.9
3.6
11.0
3.6
3.9
Fig. 2. Elemental: Comparable valuation
Price
Elemental Holding SA
2.91
Krynicki Recykling SA
8.8
Aurubis AG
41.845
Waste Management Inc
49.45
Republic Services Inc
39.13
Waste Connections Inc
49.71
Jianxin Mining Co Ltd
7.08
Median
Mkt. cap
(EURmn)
107
35
1,881
18,213
11,190
4,963
1,058
P/E
EV/EBITDA
2014E
2015E
2016E
2014E
2015E
2016E
12.7
18.3
21.0
20.6
20.2
24.5
23.6
20.8
-47.2%
10.9
12.7
11.1
19.4
19.1
21.7
19.1
19.1
-40.3%
10.9
14.9
9.9
17.7
17.0
19.1
15.4
16.2
-32.8%
9.5
10.2
8.1
9.3
8.5
11.4
17.8
9.8
-22.3%
6.6
7.3
5.9
9.2
8.1
10.5
14.1
8.6
-15.6%
5.9
5.8
5.4
8.8
7.7
9.7
11.3
8.2
-15.0%
68
Fig. 3. Elemental: 3Q14 results preview
3Q11
n.a.
4Q11
n.a.
1Q12
n.a.
2Q12
n.a.
n.a.
n.a.
n.a.
n.a.
7.5
8.9
6.6
6.0
7.6
7.4
10.5
n.a.
n.a.
n.a.
n.a.
3.4%
3.9%
3.0%
3.0%
3.9%
3.1%
6.0%
n.a.
n.a.
n.a.
n.a.
6.9
8.2
6.0
5.4
6.8
6.5
9.6
n.a.
n.a.
n.a.
n.a.
3.1%
3.6%
2.7%
2.7%
3.5%
2.7%
n.a.
n.a.
n.a.
n.a.
4.7
5.7
5.5
7.4
7.1
4.5
n.a.
n.a.
n.a.
Net margin
n.a.
2.1%
2.5%
2.5%
3.7%
3.6%
1.9%
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Elemental: Forecast changes
2014E
New Previous
Sales
739.7
n.a.
EBITDA
46.7
n.a.
EBIT
40.9
n.a.
Net profit
35.2
n.a.
3Q12
220.2
Change
n.a.
n.a.
n.a.
n.a.
4Q12
226.5
1Q13
221.8
New
1013.0
63.8
53.2
40.9
2Q13
200.4
3Q13
196.9
4Q13
239.4
1Q14
174.2
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
2Q14
161.7
3Q14E
184.0
y/y
-6.6%
q/q
13.7%
9.5
12.0
57.3%
25.7%
5.9%
6.5%
2.6
0.6
8.1
10.5
53.8%
29.4%
5.5%
5.0%
5.7%
2.2
0.7
9.2
7.7
9.0
27.0%
17.1%
5.3%
4.7%
4.9%
1.3
0.1
New
1075.3
68.7
58.1
40.9
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Elemental: Valuation changes
New
3.9
4.1
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Elemental: Income statement forecast
Sales
Fig. 7. Elemental: Balance Sheet forecast
2012
895
2013
859
2014E
740
2015E
1013
2016E
1075
Current assets
2012
106
2013
205
2014E
297
2015E
317
2016E
335
868
835
699
1013
1075
Fixed assets
91
160
225
225
225
EBITDA
29
27
47
64
69
Total assets
197
366
523
542
560
Operating profit
27
24
41
53
58
Current liabilities
58
68
84
76
68
4
-1
4
2
2
34
36
55
44
35
23
25
37
51
57
14
40
89
89
89
Income tax
3
1
2
6
11
11
14
63
63
63
Net profit
18
24
35
41
41
125
258
305
328
348
103
155
167
167
167
EBITDA margin
3.2%
3.1%
6.3%
6.3%
6.4%
Minority Interest
0
0
45
50
55
Operating margin
3.0%
2.8%
5.5%
5.3%
5.4%
Total liabilities
197
366
523
542
560
2.1%
2.8%
Net profit margin
4.8%
4.0%
3.8%
40
29
Net debt
-4
-24
-39
2014E
47
2015E
44
2016E
40
operating costs
Profit before tax
bank debt
bank debt
Equity
share capital
Fig. 8. Elemental: Cash flow forecast
CF from operations
2012
0.
2013
12
CF from investment
-17
-32
-71
-11
-11
19
37
125
-24
-24
101
9
6
CF from financing
2
16
Net change in cash
69
70
FMCG
Poland
NOVEMBER 12, 2014
RECOMMENDATION
EMPERIA
BUY (MAINTAINED)
CURRENT PRICE: PLN 49
TARGET PRICE: PLN 81 (M AINTAINED)
Still slow

Equity Story: In our view, Emperia’s current market price values
Stokrotka at c.1.3x monthly sales, which we believe to be too low when
3Q14E
522.6
15.5
3.2
3.6
compared with the recent M&A transactions on the FMCG market. This
limits any downside. On the other hand, in order to cash in the potential
valuation gap, a positive decision of the management to put Emperia up
for sale is needed. This is the largest risk to our investment story.

Sales
EBITDA
EBIT
Net profit
y/y (%)
10.5%
n.a.
n.a.
n.a.
q/q (%)
4.0%
-45.3%
-80.1%
-74.2%
STOCK PERFORMANCE
3Q14 Results Preview. 3Q14 failed to bring about much change on the
FMCG market, which remained very slow. Emperia was not different from
this bleak picture. As far as its retail arm is concerned, we expected
Stokrotka’s LfL at negative 1%. But new space contribution pushed total
sales to +7% y/y to PLN494mn in 3Q14. We expect the gross margin at
25.5% and the SG&A costs at PLN130mn (26.3% of sales). The results
will be adversely hit by inventory shrinkage at PLN2.0mn, which will lead
to an EBITDA of PLN2.7mn vs. the previous year’s negative EBITDA of
PLN13mn. It must be remembered that 3Q13 was severely affected by a
shifts in the business model towards own logistics in exchange for
deliveries from Tradis. For the remaining segments, we assumed similar
EBITDA results to 2Q14 (real estate - EBITDA at PLN10mn, IT - EBITDA
at PLN3.4mn and other - EBITDA at PLN2.0mn). As far as the entire
Emperia Group is concerned, we expect the EBITDA to reach PLN15mn
(vs. the previous year’s loss of PLN1mn) and we expect the bottom line at
PLN4mn (vs. the previous year’s loss of PLN1mn) in 2Q14E. On cash
Rec.
Date
flow, we expect the OCF at c. ‘0’ and the buyback (PLN10mn) will

Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
diminish the net cash position to c.PLN106mn vs. PLN94mn in 3Q14.
Buy
10/23/2014
47.8
81.0
2.7%
2.2
Outcome: NEUTRAL.
Buy
9/7/2014
55.0
82.0
-13.2%
-11.2
Buy
4/28/2014
68.0
87.0
-19.1%
-24.6
Buy
1/30/2014
70.0
90.7
-2.8%
-5.1
Change in valuation & recommendation. We maintain our investment
story and our SOTP valuation for Emperia, which assumes cash account
COMPANY DESCRIPTION
at PLN106mn in 2Q14 (vs. the previous PLN120mn), PLN690mn for
Emperia has wholesale and retail operations in the FMCG
segment. These are backed by a commercial real estate
portfolio.
Stokrotka (3.9x 2014E sales of PLN2.097mn) and PLN368mn for real
estate. A comparable valuation points to PLN56.00/ share.
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
1,967
62
15
15
46.2
8.3
2014E
2,202
79
32
29
24.4
5.3
2015E
2,489
80
30
30
23.9
4.5
2016E
2,665
78
26
26
27.0
3.7
71
Free float (%)
1M
Price performance
-4.6%
EMP.WA / EMP PW
744
15.2
86.6%
0.5
3M
YTD
-17.0%
-34.7%
Fig. 1. Emperia: 3Q14 results preview
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
464.1
517.1
491.4
487.5
463.0
506.9
493.0
489.7
473.0
511.7
479.4
502.4
522.6
10.5%
4.0%
28.6
28.8
22.8
9.8
-27.3
20.4
23.7
19.1
-0.8
13.9
17.9
28.3
15.5
6.2%
5.6%
4.6%
2.0%
-5.9%
4.0%
4.8%
3.9%
-0.2%
2.7%
3.7%
5.6%
3.0%
11.6
11.9
11.6
-0.8
-37.7
11.1
13.5
10.4
-11.1
2.6
5.6
16.0
3.2
2.5%
2.3%
2.4%
-0.2%
-8.1%
2.2%
2.7%
2.1%
-2.3%
0.5%
1.2%
3.2%
0.6%
39.9
19.9
26.2
10.4
-28.4
11.6
13.7
10.9
-11.0
1.6
3.2
14.1
3.6
Net margin
8.6%
3.8%
5.3%
Source: Company data, DM BZ WBK estimates,
2.1%
-6.1%
2.3%
2.8%
2.2%
-2.3%
0.3%
0.7%
2.8%
0.7%
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 2. Emperia: Forecast changes
2014E
New
Previous
Sales
2,202
2,202
EBITDA
79
79
EBIT
32
32
Net profit
29
29
n.a. -45.3%
313
-267
n.a. -80.1%
296
-258
n.a. -74.2%
302
-211
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
0.0%
2,489
2,489
0.0%
2,665
2,665
0.0%
0.0%
80
80
0.0%
78
78
0.0%
0.0%
30
30
0.0%
26
26
0.0%
0.0%
30
30
0.0%
26
26
0.0%
Fig. 3. Emperia: Valuation changes
SOTP
New
81
Previous
81
Change
n.a.
56
57
-1.8%
Fig. 4. Emperia: Income statement forecast
Fig. 5. Emperia: Balance Sheet forecast
2012
2013
2014E
2015E
2015E
2012
2013
2014E
2015E
2015E
Net sales
1,949
1,967
2,202
2,489
2,665
Current assets
390
478
481
565
656
COGS
1,478
1,539
1,634
1,857
1,998
Fixed assets
589
587
573
563
521
Gross profit
471
428
567
631
667
Total assets
978
1,065
1,055
1,128
1,177
SG&A
Current liabilities
234
359
262
299
322
0
1
0
0
0
57
58
61
69
69
482
478
535
601
641
-5
3
0
0
0
EBITDA
28
62
79
80
78
Operating profit
-16
-46
32
30
26
-27
-5
-7
-9
-8
Profit before tax
bank debt
bank debt
Equity
0
3
0
0
0
688
648
731
761
787
14
11
-41
38
39
35
share capital
15
14
14
14
Income tax
-10
5
9
10
9
Minority Interest
0
0
0
0
0
Net profit
21
-46
29
30
26
978
1,065
1,055
1,128
1,177
-288
-345
-419
24.2%
21.8%
25.8%
25.4%
25.0%
1.4%
3.1%
3.6%
3.2%
2.9%
-0.8%
-2.4%
1.4%
1.2%
1.0%
Net profit margin
1.1%
-2.4%
1.3%
1.2%
1.0%
2015E
Gross margin
EBITDA margin
Operating margin
Total liabilities
Net debt
-215
-191
Fig. 6. Emperia: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
383
75
76
97
84
CF from investment
-307
-45
-34
-40
-10
CF from financing
-912
-51
50
0
0
92
58
74
Net change in cash
-836
-20
72
Poland
November 12, 2014
RECOMMENDATION
ERBUD
HOLD (INITIATION)
High reliance on developers



STOCK PERFORMANCE
Buy
Hold
Sell
40
35
30
WIG Relative
25
ERB
20
15
10
5
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Oct-11
Equity Story. Erbud offers exposition to the general construction
market in Poland, which we expect to recover thanks to some
economic growth acceleration and the flow of EU funds in the
2014-2020 period that should support public investments. The
company is, however, highly dependent on commercial
developers and here we see limited room for growth due to the
high market saturation in office and retail space (such deals
constitute as much as 40% of the company’s current backlog).
On the other hand, Erbud is present in the power segment
(service works), where prospects for growth look strong in the
short to mid-term (the company has recently secured key
employees, which should support this segment’s development).
We also like the company’s plan to start its first residential project
in Warsaw (so far it has only been present in Bydgoszcz and
Torun), probably the most attractive city for residential developers
at the moment. All in all, we are quite positive on the results’
outlook for Erbud, though we also believe its valuation to be
demanding.
Jan-12

Financials. We expect the net profit at a CAGR of 12% in 2014E2017E, supported by a gradual growth in sales from the road and
power businesses. Following the expected gross margin
compression in 2014E (-0,5pp to 6.9%), we forecast a margin
recovery in 2015-2017 and its stabilisation afterwards (at 7.7%).
Growth in the margin should be supported by further growth in the
construction capacity utilisation (data reported by the statistics
office GUS) and rising investments thanks to the 2014-2020 EU
funds.
Triggers/Risks. The key risks include: 1) a potential payment of
c. PLN24mn in compensation (PLN2.7/shr) for the investor of the
Modlin airport, and 2) potential provisions related to the Modlin
contract. That said, a trigger for Erbud’s share price could be the
completion of the Deptak retail/office scheduled for 2015, which
might be value-accretive (Erbud holds a 50% stake in JV) and
asset disposal (if any). The company’s claim for c. PLN20mn in
compensation from its subcontractors of the Modlin contract
(PLN1.6/shr) and any positive outcome in this regard could also
be a trigger.
Valuation
&
recommendation.
We
issue
a
Hold
recommendation for Erbud. Based on our DCF model, we arrived
at a 12 month TP of PLN29.6 per share. In the TP calculation, we
included a value assessment of the 50% stake in the retail/office
Deptak project (value net of CAPEX at PLN22mn or PLN1.7/shr).
The company is trading close to the peer median at the P/E
2015E multiple.
Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
Erbud is a general contractor and residential projects
developer. Company is focusing on general construction
works, roads construction, engineering works, and servicing
power sector.
Main shareholders
% of
votes
Wollf&Mueller Baubeteiligungen GmbH & Co. KG
Juladal Investment Limited
ING pension fund
AVIVA pension fund
Mr. Dariusz Grzeszkak
32.7%
22.2%
9.96%
9.3%
5.9%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
1 223.6
40.5
32.8
18.1
18.1
9.1
2014E
1 366.3
42.4
34.5
21.2
15.5
8.4
2015E
1 411.1
46.8
38.8
24.2
13.5
7.3
2016E
1 416.1
51.2
43.2
27.8
11.8
6.1
73
UERB.WA / ERB PW
325.4
12.7
Free float (%)
36.3%
0.1
3M
3M
YTD
Price performance
-4.6%
4.4%
-24.7%
Fig. 1. Erbud: DCF valuation
Net sales*
EBIT*
Cash taxes on EBIT
NOPAT*
Depreciation
Capital expenditure
Free cash flow
Sum of FCFFs PVs
Risk free rate
WACC
Residual growth of FCFFs
Residual value
Present value of the residual value
Erbud's EV
Cash and equivalents (2014 bop)
Interest-bearing debt (2014 bop)
Dividends
Equity value
No. of shares (m)
Equity value of Erbud per share (PLN)
Month
Current equity value of Erbud per
share (PLN)
12M equity value per share (PLN)
Real estate per share (PLN)**
12M TP inc. Real Estate (PLN)
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
1366
34
7
28
8
-86
-5
-55
98.1
3.0%
8.0%
1.0%
406
188
286
125
94
1407
36
7
29
8
-17
-5
15
1407
36
7
29
8
-9
-8
20
1389
36
7
29
8
-3
-8
26
1359
35
7
29
8
7
-8
35
1359
35
7
28
8
0
-8
28
1359
35
7
28
8
0
-8
28
1359
35
7
28
8
0
-8
28
1359
35
7
28
8
0
-8
28
1359
35
7
28
8
0
-8
28
8,9
307
12.8
24.0
11.0
25.9
27.9
1.7
29.6
Source: Company data, DM BZ WBK estimates, * excluding contribution of Deptak office/retail building,**see table below for details
Fig. 2. Erbud: Real estate value calculation
GLA
CAPEX
Estimated
Net per
Property
(ths
Estimated
total without
value net of
share
name
sqm)
NOI yield
value
land
Net CAPEX
CAPEX Stake
(PLN)
Deptak
1.7
retail/office
9.2
8.0 7.5%
106.0
74
62.9
43.1
50%
Fig. 3. Erbud: Comparable valuation
P/E
Name
2014E
Acciona
Astaldi
Bilfinger Berger
Eiffage
Ferrovial
Skanska
Strabag
Vinci
Hochtief
Median - Western peers
Atrem
Tesgas
Unibep
Trakcja
Budimex
Elektrobudowa
Median - Polish peers
Average implied share price of Erbud in PLN (Polish peers)
Average implied share price of Erbud in PLN (Western peers)
Average implied share price of Erbud (PLN)
51.2
5.8
12.7
12.7
33.7
17.2
13.0
12.6
17.5
13.0
13.1
13.3
11.4
20.7
15.3
13.3
22.0
21.4
Source: Bloomberg, BZ WBK research, company data
74
2015E
27.0
4.9
9.9
10.6
30.0
15.0
11.2
12.4
14.3
12.4
24.1
12.6
11.2
15.8
19.8
10.1
14.2
26.8
23.4
EV/EBITDA
2016E
18.6
4.3
8.7
8.9
25.9
13.9
9.8
11.6
11.8
11.6
11.3
7.9
12.1
12.4
14.7
8.5
11.7
25.4
25.2
24.1
2014E
8.8
5.6
6.0
7.8
20.1
11.3
3.6
7.5
4.3
7.5
5.0
6.1
8.9
7.7
10.6
6.3
7.0
20.8
25.6
2015E
8.4
5.2
4.9
7.6
19.2
10.2
3.4
7.4
4.1
7.4
6.5
4.8
7.4
8.9
9.8
4.7
7.0
24.5
25.6
2016E
8.1
4.9
4.4
7.3
18.3
9.7
3.3
7.2
3.9
7.2
4.3
2.8
7.5
7.2
6.7
4.2
5.5
23.0
25.6
Fig. 4. Erbud: 3Q14 results review
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
Sales
424.9
388.2
234.4
369.0
362.4
418.7
206.4
319.5
298.7
400.5
283.6
425.5
428.3
43.4%
0.7%
EBITDA
8.5
2.0%
10.5
2.7%
8.7
3.7%
9.2
2.5%
10.9
3.0%
8.2
1.9%
3.6
1.8%
8.2
2.6%
14.2
4.8%
14.1
3.5%
7.6
2.7%
13.1
3.1%
11.4 -19.7%
2.7%
-0.4
-13.0%
6.8
1.6%
8.4
2.2%
7.5
3.2%
6.7
1.8%
9.4
2.6%
5.9
1.4%
2.3
1.1%
5.8
1.8%
12.5
4.2%
11.8
2.9%
6.1
2.2%
10.5
2.5%
9.6 -23.3%
2.2%
-0.5
-8.3%
4.0
3.2
3.2
0.9%
0.8%
1.4%
Net margin
4.7
1.3%
4.1
1.1%
5.2
1.2%
0.4
0.2%
2.0
0.6%
7.7
2.6%
7.4
1.9%
1.3
0.5%
6.7
1.6%
7.0
1.6%
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 5. Erbud: Forecast changes
2014E
New Previous
Sales
1366
n.a
EBITDA
42
n.a
EBIT
34
n.a
Net profit
21
n.a
New
1411
47
39
24
Change
n.a
n.a
n.a
n.a
2015E
Previous
Change
n.a
n.a
n.a
n.a
n.a
n.a
n.a
n.a
New
1416
51
43
28
-0.1
-0.1
-8.7%
3.9%
-0.4
0.0
2016E
Previous
Change
n.a
n.a
n.a
n.a
n.a
n.a
n.a
n.a
Fig. 6. Erbud: Valuation changes
New
29.6
24.1
DCF valuation
Previous
-
Change
-
Fig. 7. Erbud: Income statement forecast
Fig. 8. Erbud: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
1264
1224
1366
1411
1416
Current assets
696
678
753
793
821
COGS
1180
1133
1271
1309
1309
Fixed assets
124
118
115
112
112
Gross profit
84
91
95
102
107
Total assets
820
796
868
904
933
SG&A
50
58
60
63
63
Current liabilities
442
445
496
509
509
-4
0
0
0
0
38
74
74
74
74
EBITDA
37
41
42
47
51
126
83
83
83
83
Operating profit
29
33
34
39
43
65
20
20
20
20
-6
-8
-8
-9
-9
Equity
251
267
288
312
340
Profit before tax
23
25
26
30
34
Total liabilities
820
796
868
904
933
Income tax
-5
-8
-5
-6
-7
49
40
21
Net profit
20
18
21
24
28
Net debt
-98
-30
Gross margin
6.7%
7.4%
6.9%
7.2%
7.5%
EBITDA margin
2.9%
3.3%
3.1%
3.3%
3.6%
Operating margin
2.3%
2.7%
2.5%
2.7%
3.1%
Net profit margin
1.6%
1.5%
1.6%
1.7%
2.0%
bank debt
bank debt
Fig. 9. Erbud: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
89
-55
-57
24
36
CF from investment
-5
0
-4
-4
-6
-43
-23
-18
-10
-11
-80
10
19
CF from financing
Net change in cash
40
-77
75
76
FINANCIALS
Poland
NOVEMBER 12, 2014
RECOMMENDATION
EUCO
BUY (MAINTAINED)
TARGET PRICE: PLN 31.7 (PREV. 30.9)
Momentum remains strong


Triggers/Risks. Apart from the usual risk of forecasting errors, we would
highlight the gap between reported revenues and the claims actually
received in cash in last years, as the company opted to recognise cases it
had won or was very likely to win in revenues before receiving a payment.
Reputation/perception risks are common in this sector. We also note that
the sector is seriously under-regulated. Insurers, while generally cooperative, may become more obstructive as the recent increase in the
share of court-settled claims indicates.
Valuation & recommendation. We set a 12-month target price of PLN
31.70/share using a blend of DCF and comparable company multiples.
The implied 20% upside may seem steep, but, at our target price, EuCO’s
multiples (13.4x 2014E earnings and 11.2x EV/EBITDA) would be only
marginally above the current median for comparable companies. We think
the TP is justified by EuCO’s superior ROE (36% in 2014E) and net profit
margin (25%). At the current price, the company trades at 9.5x 2015E P/E
and an EV/EBITDA of 8.1x. Which we perceive as attractive level.
Hold
Sell
35
TP
30
25
EUC
20
15
WIG Relative
10
5
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
0
Apr-12
Financials. Strong growth looks set to stay. Inflows from insurance
companies to the law firm increased to PLN64mn in 2013 from PLN2mn in
2009 (when it started up). We expect this to increase further to
PLN140mn in 2016E. Revenues at EuCO’s parent should stay stable at
above PLN20mn, while its business in the Czech Republic, Slovakia and
Hungary should stay stable. Romania, its new market, should be
consolidated in 2014E and add around PLN0.2-0.5mn to net profit.
However, we are not yet including this in our forecasts. We conservatively
assume a more modest growth rate ahead, resulting in annual average
revenue growth of 11%. This, coupled with stable margins, should
translate into 17% CAGR in the period. Strong cash generation should
allow EuCO to pay substantial dividends (payout ratio of 60%+, DY 5%+)
and, unless it embarks on major acquisitions or broader geographical
expansion, its dividend yield could be as high as 8.9% in 2016E vs. 3.7%
in 2013. ROE could be over 30% by 2016.
STOCK PERFORMANCE
Buy
Oct-11

Equity Story. A leading provider of personal injury claim services. EuCO
provides a wide range of services related to obtaining compensation for
its clients from insurance companies. Claiming compensation for personal
injuries for victims of road accidents represents most of its business. The
bulk of cases are settled directly with insurers, who typically agree to pay
approximately twice the amount they would pay claimants. Most cases are
settled by EuCO’s law firm through the courts, allowing EuCO to earn
approximately 30% of the settlement value. EuCO’s success to date has
been largely driven by a combination of an efficient claim processing
centre and an extensive, well-motivated and low-cost (fee-based) network
of agents. EuCO currently operates through over 25k agents. It is among
the two largest companies of its kind in Poland and is developing a
subsidiary in Romania.
Jan-12

Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Buy
7-23-2014
21.4
30.9
23.7%
19.7
Hold
7-9-2014
20.3
22.0
5.6%
3.9
Buy
4-28-2014
19.8
22.0
2.4%
4.0
Buy
1-30-2014
13.2
22.0
50.0%
47.7
COMPANY DESCRIPTION
EuCO specialises in servicing personal injury claims,
typically on behalf of victims of motor accidents. It is one of
the leading players in Poland and the Czech Republic. Its inhouse legal practice pursues more complex cases in the
courts.
Main shareholders
% of votes
Spexar Ltd
Corpor Capital Ltd
ING Pension Fund
31.1%
31.1%
12.2%
ANALYST
Andrzej Bieniek
Securities Broker, Investment Advisor
(+48) 22 586 85 21; andrzej.bieniek@bzwbk.pl
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
49.3
12.1
11.3
10.2
14.5
11.7
2014E
55.6
14.5
13.8
12.8
11.2
9.3
2015E
63.5
17.3
16.6
15.4
9.5
8.1
2016E
67.0
19.6
18.8
16.6
8.8
7.2
77
Free float (%)
1M
Price performance
1.8%
EUC.WA / EUC PW
148
5.6
38%
0.1
3M
YTD
3.2%
83.2%
Fig. 23. EuCO: 3Q14 results preview
1Q12 2Q12
Revenues
8.5
9.6
Gross profit
3.7
3.0
EBITDA
2.0
2.0
EBIT
1.8
1.8
Net profit
1.6
5.0
Gross profit margin
44%
31%
EBITDA margin
24%
21%
EBIT margin
22%
19%
Net profit margin
19%
52%
3Q12
10.5
3.6
2.4
2.2
1.8
34%
23%
21%
17%
4Q12
16.9
6.9
3.2
3.0
2.8
41%
19%
18%
16%
1Q13
12.1
4.2
2.4
2.2
1.7
35%
20%
18%
14%
2Q13
11.1
3.4
1.7
1.5
1.6
31%
15%
13%
14%
3Q13
11.3
4.1
2.6
2.4
2.2
37%
23%
21%
20%
4Q13
14.8
7.2
5.5
5.3
4.8
49%
37%
36%
32%
1Q14
12.1
4.3
2.7
2.5
2.3
36%
22%
21%
19%
2Q14 3Q14E
14.1
14.0
4.7
5.3
3.1
3.4
2.9
3.2
2.6
3.0
34%
38%
22%
24%
20%
23%
18%
21%
y/y
24%
28%
32%
34%
35%
q/q
-1%
12%
11%
12%
17%
Fig. 24. EuCO: Forecast changes
2014E
New Previous
Sales
55.6
55.6
EBITDA
14.5
14.5
EBIT
13.8
13.8
Net profit
12.8
12.8
New
63.5
17.3
16.6
15.4
Change
0.0%
0.0%
0.0%
0.0%
2015E
Previous
63.5
17.3
16.6
15.4
New
67.0
19.6
18.8
16.6
Change
0.0%
0.0%
0.0%
0.0%
2016E
Previous
67.0
19.6
18.8
16.6
Change
0.0%
0.0%
0.0%
0.0%
Fig. 25. EuCO: Valuation changes
New
31.6
31.9
31.7
DCF valuation
Previous
30.1
31.7
30.9
Change
+5.0%
+0.6%
+2.5%
Fig. 26. EuCO: Income statement forecast
Fig. 27. EuCO: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
45.6
49.3
55.6
63.5
67.0
-28.3
-30.3
-34.3
-38.0
-38.9
Gross profit
17.2
19.0
21.3
25.5
Sales costs
-0.3
-0.1
-0.1
Management costs
-7.9
-7.7
0.7
Net sales
COGS
EBITDA
EBIT
Financial expenses/income
Profit on ordinary
activities
2012
2013
2014E
2015E
2016E
Current assets
47.2
64.2
66.7
73.2
79.1
L-t assets
13.3
11.5
10.4
11.8
17.2
28.2
Total assets
60.5
75.7
77.1
85.0
96.3
-0.1
-0.1
Current liabilities
27.7
39.1
35.1
36.0
36.9
-6.9
-8.3
-8.6
2.4
6.1
6.1
6.1
6.1
0.2
-0.6
-0.6
-0.7
6.0
4.2
2.7
3.6
8.1
10.5
12.1
14.5
17.3
19.6
1.7
0.2
0.0
0.0
0.0
9.7
11.3
13.8
16.6
18.8
26.8
32.4
39.3
45.4
51.2
-0.3
-0.2
-0.4
-0.4
-0.4
share capital
0.6
0.6
0.6
0.6
0.6
Minority Interest
0.3
0.9
0.0
0.0
0.0
77.1
85.0
96.3
9.5
11.2
13.4
16.2
bank debt
bank debt
Equity
18.4
Total liabilities
60.5
75.7
Pre-tax profit
9.5
11.2
13.4
16.2
Income tax
1.7
-0.9
-0.6
-0.8
18.4
-1.8
Net profit
11.2
10.2
12.8
15.4
16.6
Gross margin
37.8%
38.5%
38.3%
40.2%
42.0%
2012
2013
2014E
2015E
2016E
EBITDA margin
23.0%
24.6%
26.1%
27.2%
29.2%
CF from operations
4.7
10.4
11.6
13.4
14.6
EBIT margin
21.4%
23.0%
24.8%
26.1%
28.1%
CF from investment
-1.9
-6.3
-1.1
-1.2
-1.3
27.5%
CF from financing
-0.6
-0.4
-6.1
-9.2
-10.8
4.5
3.0
2.6
Fig. 28. EuCO: Cash flow forecast
Margins
Pre-tax margin
20.8%
22.6%
24.1%
25.5%
Effective tax rate
17.7%
-8.2%
-4.5%
-5.0% -10.0%
Net profit margin
24.5% 20.8%
23.1%
24.2%
Net change in cash
2.2
3.7
24.8%
78
Pharma / Health Care
Poland
NOVEMBER 12, 2014
RECOMMENDATION
FARMACOL
BUY (MAINTAINED)
TARGET PRICE: PLN 66.0 (M AINTAINDED)
Weaker quarter y/y expected

3Q14 Results Preview. We expect Farmacol to report weaker
results y/y in 3Q14 due to lower gross margins on the refunded
drugs. We had assumed that Farmacol’s top line would rise by
4% y/y to PLN1,329mn. Due to the lower gross margins y/y and
lack of any visible cost savings initiatives, we expect the EBITDA
to come in at PLN21.9mn (-38% y/y, margin down by 110bps y/y
to 1.7%) and the profit on sales to drop by 28% y/y to PLN20mn
(margin down by 65bps to 1.5%). We had also assumed the other
operating losses at PLN3mn in 3Q14 and the net financial income
at PLN8mn. The expected 19% effective tax rate should yield a
net profit of PLN20mn (-35% y/y). Outcome: NEGATIVE.

Farmacol is trading with a 6%/11% premium on PE’14 and a
18% /34% premium on PE’15 to Pelion and Neuca, respectively.
On the other hand, when we take the Cash Adjusted PE into
account (which equals to 10.5x and 9.4x in 2014-15), Farmacol
offers double-digit discounts vs. its competitors and its fair PE
(11.6x). We believe this limits any downside in case of a negative
surprise from the results’ release and makes Farmacol an
attractively priced stock.

Change in valuation & recommendation. DCF-based valuation
points to PLN66/shr. A comparative valuation to its Polish peers
points to PLN52.1/share.
PUBLICATION DATE
NOVEMBER 12, 2014
3Q14E
1,329
21.9
16.5
19.9
Sales
EBITDA
EBIT
Net profit
y/y (%)
4.0%
-38.3%
-43.5%
-35.0%
q/q (%)
13.5%
29.4%
43.1%
52.7%
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
-2.6
Buy
10/21/2014
51.2
66.0
-1.9%
Buy
9/7/2014
50.0
72.0
2.3%
4.5
Buy
4/28/2014
50.4
75.0
-0.9%
-6.4
Buy
1/30/2014
58.2
77.0
-13.4%
-15.7
COMPANY DESCRIPTION
One of the largest pharmaceutical distributors in Poland.
With the acquisition of Cefarm Bialystok, Farmacol has
significantly increased its exposure to the retail segment.
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
5,206
137
113
125
9.2
6.1
2014E
5,424
101
72
84
13.7
8.0
2015E
5,626
112
81
88
13.2
6.6
2016E
5,843
117
84
92
12.5
5.7
79
FCLP.WA / FCL PW
1,175
23.4
Free float (%)
42.3%
0.2
1M
3M
YTD
Price performance
-5.1%
9.1%
-25.9%
Fig. 1. Farmacol: 3Q14 results preview
Sales
EBITDA
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y (%)
q/q (%)
1,234
1,348
1,157
1,139
1,294
1,254
1,335
1,256
1,278
1,337
1,451
1,171
1,329
4.0%
13.5%
21.9 -38.3%
29.4%
15.6
20.0
30.6
23.6
16.9
54.9
35.0
23.9
35.5
43.2
22.4
17.0
1.3%
1.5%
2.6%
2.1%
1.3%
4.4%
2.6%
1.9%
2.8%
3.2%
1.5%
1.4%
11.6
16.4
26.4
20.0
13.2
51.1
28.0
17.8
29.2
37.9
16.5
11.6
0.9%
1.2%
2.3%
1.8%
1.0%
4.1%
2.1%
1.4%
2.3%
2.8%
1.1%
1.0%
8.4
15.2
26.4
18.5
14.8
52.8
30.6
20.3
30.6
43.9
18.3
13.0
Net margin
0.7%
1.1%
2.3%
1.6%
1.1%
4.2%
2.3%
1.6%
2.4%
3.3%
1.3%
1.1%
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 2. Farmacol: Forecast changes
2014E
New Previous
Sales
5,424
5,424
EBITDA
101
101
EBIT
72
72
Net profit
84
84
1.7%
-113
20
16.5 -43.5%
43.1%
1.2%
-104
26
19.9 -35.0%
52.7%
1.5%
-90
38
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
0.0%
5,626
5,626
0.0%
5,843
5,843
0.0%
0.0%
112
112
0.0%
117
117
0.0%
0.0%
81
81
0.0%
84
84
0.0%
0.0%
88
88
0.0%
92
92
0.0%
Fig. 3. Farmacol: Valuation changes
New
66.0
52.1
DCF valuation
Previous
66.1
51.1
Change
n.a.
+2.0%
Fig. 4. Farmacol: Income statement forecast
Fig. 5. Farmacol: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
4,844
5,206
5,424
5,626
5,843
Current assets
2012
2013
2014E
2015E
2016E
1,518
1,729
1,814
1,938
COGS
4,406
4,826
5,044
5,233
5,434
2,069
Fixed assets
416
449
488
492
Gross profit
438
380
380
394
496
409
Total assets
1,934
2,178
2,302
2,430
2,565
SG&A
294
262
293
-33
-5
-15
304
316
Current liabilities
931
1,037
1,080
1,120
1,163
-9
-9
9
9
9
9
EBITDA
117
137
101
9
112
117
79
90
90
90
90
Operating profit
111
113
72
81
84
-32
-31
-33
-28
-30
Profit before tax
bank debt
bank debt
Equity
14
14
14
14
14
918
1,047
1,128
1,216
1,308
23
142
144
104
109
114
share capital
23
23
23
23
Income tax
28
19
20
21
22
Minority Interest
6
5
5
4
4
Net profit
114
125
84
88
92
Total liabilities
1,934
2,178
2,302
2,430
2,565
-348
-419
-493
Gross margin
9.0%
7.3%
7.0%
7.0%
7.0%
EBITDA margin
2.4%
2.6%
1.9%
2.0%
2.0%
Operating margin
2.3%
2.2%
1.3%
1.4%
1.4%
Net profit margin
2.3%
2.4%
1.6%
1.6%
1.6%
Net debt
-286
-321
Fig. 6. Farmacol: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
199
91
99
105
110
CF from investment
7
-58
-68
-35
-36
-15
-2
-3
0
0
28
70
74
CF from financing
Net change in cash
190
32
80
Industrials
Poland
November 12, 2014
RECOMMENDATION
FORTE
BUY (INITIATION)
Strengthening abroad



Financials. We expect Forte’s sales to total PLN827mn in 2014, up by
24% y/y. For 2015-17 we forecast an average sales momentum of 10%
y/y (15% in 2015 vs. 5% in 2017). The EBITDA / EBIT margins should
amount to 14.8% / 12.8%, respectively. Looking ahead, we expect the NP
margin to fluctuate at around 10% (reaching a record of 10.6% in 2015).
In the mid-term, we expect the margins to stabilise with short-lived
positive or negative deviations from the aforementioned levels. Close to
the end of our forecasting period, we make a conservative assumption of
a slight margin deterioration (inflationary costs increase vs. high
production capacities utilisation with no additional growth in the CAPEX
planned in the end of the model’s horizon).
Triggers / Risks. We look at export as a significant catalyst for the stock.
In our model, we estimate that exports to France will develop steadily to
reach PLN200mn in 2017. Other significant European markets (Spain and
UK) are treated as a growth option for the future, with varied potential
stemming from the differences in the market structure, however. The
biggest downside risk we associate with deterioration of demand for
furniture and ability to deliver the declared capacities’ enhancement in line
with the schedule. The EURPLN exchange rate poses a threat to the
financial outcome only to a limited extent thanks to the symmetric, no-cost
option corridors hedging the exposure to the currency exchange rate risk
for two years ahead, in line with the company’s strategy. The high
concentration of demand from the Steinhoff group constitutes an
operational risk as well (at the same time the group remains the chief
sales booster).
Valuation & recommendation. Based on our DCF model, we arrived at a
12M TP of PLN67.60, which implies a 19% upside potential. A
comparative valuation puts Forte’s share price in a range from PLN43.02
to PLN58.28. Assigning equal weights to the P/E and EV/EBITDA ratios,
we arrive at an average valuation of PLN49.27 per share. As a
consequence of the upside potential of 19%, we are initiating coverage
with a Buy recommendation.
STOCK PERFORMANCE
Buy
Hold
Sell
70
60
50
40
30
20
FTE
WIG Relative
10
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Oct-11
Equity Story. The market environment for the Polish furniture industry
remains supportive. The CSO (Central Statistical Office) indicates robust
momentum in sold furniture production, both in terms of volume (16% y/y
increase in 3Q14) and value (14% y/y upswing). The double-digit pace of
growth might be difficult to maintain in the long term (taking into
consideration the long-term average of c. 6.5%), but we see the
production output here in an upward trend. Compared with the Polish
furniture sector, Forte outperforms its competitors in terms of production
efficiency. We even expect the company to be able to improve its financial
figures in tougher market conditions. The recent readings of the sold
furniture output indicate flat export prices and a minuscule decline of the
domestic ones. As a consequence, it could turn out that there is little room
left for margins’ expansion in the medium term. We assume, however,
that prices of raw materials should remain stable, which, combined with
the planned investments in the Polish production plants (instead of
developing a brand new one abroad) with the estimated CAPEX
expenditure at PLN30-40mn scheduled for 2014-16 should allow Forte to
boost its sales with sound margins’ levels.
Jan-12

Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
Forte is one of the Polish leaders in the production of cabinet
furniture for flats and offices. The recipients of the company’s
products are chiefly foreign customers.
Main shareholders
MaForm Holding
MetLife OFE
ING OFE
AVIVA OFE
% of votes
29.53%
14.69%
6.32%
5.58%
ANALYST
Michal Sopiel
(+48) 22 586 82 33
michal.sopiel@bzwbk.pl
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
666
89
72
58
23.4
15.1
2014E
827
122
106
87
15.5
11.2
2015E
950
142
123
101
13.5
9.6
2016E
1,043
155
135
109
12.4
8.7
81
FTEP.WA / FTE PW
1,354
23.8
Free float (%)
70.5%
1.5
1M
3M
YTD
Price performance
+3.6%
+29.8%
+48.1%
Fig. 1. Forte: DCF valuation
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
WACC
PV FCF 2014-2023
Terminal Value (TV)
PV TV
Total EV
Net debt
Equity value
Month
12-month Target Price
2014E
827
109
21
88
16
54
32
70
7.9%
538
1,775
831
1,369
-7
1,376
23.8
1,476
10
62.2
67.6
2015E
950
125
24
101
19
24
38
43
2016E
1,043
135
26
110
20
16
35
31
2017E
1,093
137
26
111
22
18
32
28
2018E
1,118
135
26
109
24
5
29
10
2019E
1,140
135
26
109
27
5
32
10
2020E
1,160
135
26
109
27
6
27
6
2021E
1,180
135
26
109
28
5
28
5
2022E
1,201
133
25
108
30
6
30
6
2023E
1,222
133
25
108
31
6
31
6
Fig. 2. Forte: Comparable valuation
Company
Price
Currency
P/E
2014E
Fabryki Mebli Forte SA
2015E
EV/EBITDA
2016E
2014E
11.2
2015E
9.6
2016E
56.0
PLN
15.3
13.2
12.2
8.7
Grupa Kety SA
288.1
PLN
16.7
15.4
18.0
9.7
9.1
8.5
Inter Cars SA
206.5
PLN
16.4
14.9
13.8
12.6
11.4
10.7
Budimex SA
135.5
PLN
20.2
16.9
14.5
9.8
8.4
7.3
77.5
PLN
15.4
10.2
8.6
n.a.
n.a.
n.a.
Polish Industrials
Elektrobudowa SA
Paged SA
42.0
PLN
10.9
7.6
7.1
n.a.
n.a.
n.a.
210.0
PLN
70.8
35.8
20.0
30.6
12.0
7.4
Pfleiderer Grajewo SA
31.0
PLN
13.8
12.7
11.7
8.5
7.8
7.2
Kopex SA
11.0
PLN
9.7
9.6
8.2
4.8
4.9
4.4
Pozbud T&R SA
5.0
PLN
10.2
9.0
9.7
n.a.
n.a.
n.a.
Famur SA
3.2
PLN
12.7
11.6
11.2
4.3
4.0
3.8
Rovese SA
1.5
PLN
n.a.
45.5
18.3
9.0
7.9
7.2
14.6
12.7
11.7
9.3
8.1
7.2
Integer.pl SA
Median
Foreign furniture sector representatives
Ekornes ASA
73.3
NOK
11.0
9.5
8.8
5.8
5.1
4.9
BoConcept Holding A/S
85.0
DKK
15.5
6.4
4.1
6.0
4.7
3.4
5,511.0
ZAr
11.4
10.0
9.0
10.5
9.4
8.9
Nobia AB
59.5
SEK
17.1
12.2
11.1
9.8
7.4
6.9
Herman Miller Inc
31.8
USD
16.3
13.7
12.0
9.0
8.0
7.2
Ethan Allen Interiors Inc
29.3
USD
17.1
14.5
12.1
8.3
7.3
6.4
Knoll Inc
19.7
USD
18.8
15.0
13.1
11.9
9.8
n.a.
Hooker Furniture Corp
15.2
USD
14.8
11.9
n.a.
6.6
5.6
n.a.
15.9
12.0
11.1
8.6
7.4
6.7
Premium/discount vs. Polish peers median
4.7%
4.1%
4.5%
19.7%
17.8%
19.6%
Premium/discount vs. foreign peers median
-3.9%
10.2%
10.4%
29.5%
29.9%
30.2%
Implied Forte price per share vs. Polish peers
53.49
53.77
53.58
46.80
47.54
46.81
Implied Forte price per share vs. foreign peers
58.28
50.83
50.73
43.25
43.10
43.02
Steinhoff International Holdings Ltd
Median
Source: BZ WBK Brokerage research, Bloomberg
82
Fig. 3. Forte: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
143.3
155.6
147.0
116.3
137.3
159.9
156.5
146.8
166.5
196.5
212.0
190.7
201.0
20.7%
5.4%
15.4
10.8%
14.3
9.2%
15.3
10.4%
8.4
7.2%
15.6
11.3%
18.0
11.3%
22.0
14.1%
17.5
11.9%
22.0
13.2%
27.5
14.0%
32.0
15.1%
25.6
13.4%
30.1
15.0%
36.8%
3.6
17.6%
3.1
11.8
8.2%
10.8
6.9%
11.4
7.8%
4.7
4.0%
11.6
8.5%
14.0
8.8%
18.0
11.5%
13.3
9.1%
17.8
10.7%
23.3
11.9%
27.9
13.1%
21.4
11.2%
26.0
12.9%
46.2%
4.5
21.3%
3.8
6.5
8.1
9.1
4.6%
5.2%
6.2%
Net margin
4.9
4.2%
9.6
7.0%
10.9
6.8%
13.8
8.8%
10.4
7.1%
14.9
9.0%
18.8
9.6%
23.2
11.0%
17.2
9.0%
21.9
10.9%
46.6%
3.9
27.6%
3.8
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Forte: Forecast changes
2014E
New Previous
Sales
827
n.a.
EBITDA
122
n.a.
EBIT
106
n.a.
Net profit
87
n.a.
New
950
142
123
101
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
New
1,043
155
135
109
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Forte: Valuation changes
New
67.60
49.27
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Forte: Income statement forecast
Fig. 7. Forte: Balance Sheet forecast
2012
2013
2014E
2012
2013
2014E
2015E
2016E
Net sales
560.5
666.4
827.3
949.7 1,043.1
Current assets
231.2
300.8
341.7
380.3
417.5
COGS
375.3
424.9
521.9
598.0
656.6
Fixed assets
252.9
254.1
270.1
289.1
304.1
Gross profit
185.2
241.4
305.4
351.7
386.4
Total assets
484.1
554.9
611.7
669.4
721.5
SG&A
137.8
162.1
198.9
228.6
250.9
Current liabilities
87.0
93.7
103.1
117.4
131.0
-2.3
-6.9
-0.6
0.2
-0.2
30.8
10.0
10.0
10.0
10.0
EBITDA
60.7
89.1
122.3
142.1
155.3
48.3
76.6
71.6
66.6
61.6
Operating profit
45.2
72.4
105.9
123.4
135.3
31.8
60.3
55.3
50.3
45.3
0.0
0.7
1.7
0.8
-0.7
345.2
380.9
433.3
481.7
525.3
23.8
Profit before tax
2015E
2016E
bank debt
bank debt
Equity
45.1
73.1
107.6
124.2
134.6
share capital
23.8
23.8
23.8
23.8
Income tax
6.6
15.2
20.4
23.6
25.6
Minority Interest
3.6
3.7
3.7
3.7
3.7
Net profit
37.9
57.8
87.1
100.6
109.0
484.1
554.9
611.7
669.4
721.5
10.9
5.5
-7.2
Gross margin
33.0%
36.2%
36.9%
37.0%
37.0%
EBITDA margin
10.8%
13.4%
14.8%
15.0%
14.9%
8.1%
10.9%
12.8%
13.0%
13.0%
Net profit margin
6.8%
8.7%
10.5%
10.6%
10.5%
Operating margin
Total liabilities
Net debt
31.9
-6.5
Fig. 8. Forte: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
75.3
77.9
49.7
95.3
113.0
CF from investment
-30.8
-17.4
-32.4
-37.7
-35.0
-40.0
-14.3
-39.7
-57.3
-70.4
-17.8
-22.6
-34.7
-52.3
-65.4
-22.4
0.4
7.7
dividends
Net change in cash
4.5
46.1
83
84
FMCG
Poland
NOVEMBER 12, 2014
RECOMMENDATION
GINO ROSSI
BUY (INITIATION)
A succesfull restructuring story



Equity Story. Gino Rossi’s story is similar to Bytom. Following a
successful restructuring process, the once troubled company is
now healing in both its segments: Gino Rossi and Simple. Gino
Rossi is now showing the first positive signs thanks to its
restructuring efforts of the previous years. Taking into account 1)
the increased share of its own production in Gino Rossi, as well
as 2) the deep optimisation in Simple, including a change in
management, that brought about shorter collections and lower
inventories, Gino Rossi will not only notably improve its financial
results in the coming years, but it is also set to regain its growing
profile to some extent, especially in Simple. And while the
company previously failed to see much space for opening new
stores, now that the necessary changes had been implemented,
the number of its Simple stores is likely to grow to 70 in the longterm from the current 50. The number of its own Gino Rossi
stores is likely to grow to 99 in the long-term from the current 85.
Financials. We expect a noteworthy improvement of Gino
Rossi’s financial results in the coming years. We expect the net
profit at a CAGR’14-16 of 85%, the EBITDA at 26.3% and sales
at 12.8%. Our main assumptions are: 1) selling space growth
(incl. franchising) by 2k/2k/1.8k sqm in 2014-16E, respectively, 2)
LfL at 8.5%, 4% and 4% in 2014-16E, respectively, 3) the gross
margin at 49.6% (+430bps), 50.2% (+64bps) and 50.9%
(+69bps), 4) the SG&A/avg. sqm at PLN6,618 (+6.1% y/y),
PLN6,784 (+2.5% y/y) and PLN7,042 (+3.8% y/y) and 5) lower
interest on debt from 2015.
Valuation & recommendation. Gino Rossi is currently trading at
a PE of 20x and 13x in 2014-15E, which seems demanding. But
when we take into account the company’s good corporate
governance as well as its relatively high financial costs, the
premium seems justified. Based on our DCF model, we arrived at
a 12 month TP of PLN4.0 per share, which implies a 30% upside
potential. We are initiating our coverage with a Buy rating.
STOCK PERFORMANCE
COMPANY DESCRIPTION
Gino Rossi is a retail company selling shoes under the
brand Gino Rossi and women’s fashion under the brand
Simple.
Main shareholders
% of votes
Forum mutual fund
Investors mutual fund
Mr. J. Pilch
Mr. K. Bajołek
Pioneer mutual fund
Nova Idea Farm sp. z o.o. SKA
Free Float
14.9%
13.9%
13.0%
9.7%
6.7%
6.3%
35.6%
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
218.5
14.1
8.4
2.0
77.9
14.3
2014E
255.3
23.4
3.0
7.7
20.5
8.4
2015E
286.5
26.4
3.2
11.8
13.4
7.2
2016E
313.8
28.4
3.5
12.8
12.3
6.6
85
Free float (%)
1M
Price performance
-6.0%
GRIP.WA / GRI PW
155.9
50.1
87.0%
0.2
3M
YTD
5.1%
20.5%
Fig. 1. Gino Rossi: DCF valuation
2014E
255
17
2
15
7
7
7
8
7.8%
78
2.5%
290
137
216
44
172
51
3.4
11
3.6
4.0
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
WACC (2014-23)
PV FCF (2014-23)
Terminal growth
Terminal Value (TV)
PV TV
Total EV
Net debt
Equity value
Month
2015E
287
20
4
16
7
6
6
10
2016E
314
21
4
17
7
5
11
8
2017E
318
15
3
12
8
1
9
10
2018E
323
12
2
10
8
1
9
9
2019E
329
16
3
13
9
1
8
13
2020E
337
22
4
18
9
2
8
17
2021E
345
22
4
18
10
2
9
17
2022E
353
21
4
17
10
2
9
17
2023E
360
20
4
16
11
1
12
14
Fig. 2. Gino Rossi: Comparable valuation
P/E
Name
EV/EBITDA
PEG
ROE
DY
2014E
2015E
2016E
2014E
2015E
2016E
1Y
2Y
2014E
2015E
2016E
2014E
2015E
2016E
LPP
33.1
28.7
22.2
20.3
17.7
13.8
1.5
0.7
30.2%
28.9%
30.6%
1.0%
1.2%
1.4%
Monnari
11.0
11.9
13.8
8.4
7.4
6.8
0.8
2.6
26.4%
19.3%
14.9%
0.0%
0.0%
5.0%
Bytom
13.9
10.5
10.9
9.3
7.4
6.4
0.02
0.01
29.3%
32.0%
27.5%
0.0%
4.9%
6.7%
average
19.3
17.1
15.6
12.7
10.8
9.0
0.8
1.1
28.6%
26.8%
24.4%
0.3%
2.0%
4.4%
CCC
26.2
19.9
16.9
18.1
14.1
12.2
0.9
0.4
28.7%
31.2%
1.2%
1.9%
2.5%
0.0%
Wojas
10.1
10.6
10.1
6.1
5.9
5.5
14.5
-2.5
14.8%
12.3%
11.4%
1.3%
1.9%
0.0%
Gino Rossi
20.5
13.4
12.3
8.4
7.2
6.6
0.1
0.0
10.5%
14.2%
13.5%
0.0%
0.0%
0.0%
average
18.9
14.6
13.1
10.9
9.1
8.1
5.1
-0.7
18.0%
19.2%
8.7%
1.1%
1.5%
0.0%
Total - average
19.1
15.9
14.4
11.8
10.0
8.5
3.0
0.2
23.3%
23.0%
16.5%
0.7%
1.7%
2.2%
86
Fig. 3. Gino Rossi: 3Q14 results preview
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
48.2
52.1
48.7
49.8
56.2
54.5
51.2
49.4
58.3
59.6
60.1
65.5
68.8
18.1%
5.1%
-50.7%
0.5
4.4
2.2
2.4
3.7
4.1
1.1
3.6
3.1
6.2
2.8
7.7
3.8
21.7%
0.9%
8.4%
4.4%
4.9%
6.6%
7.6%
2.2%
7.3%
5.3%
10.4%
4.7%
11.7%
5.5%
17
-622
-1.1
2.8
0.6
0.9
2.4
2.4
-0.3
2.1
1.7
4.7
1.4
6.0
2.1
22.1%
-65.7%
-2.2%
5.4%
1.3%
1.8%
4.3%
4.4%
-0.5%
4.2%
2.9%
7.8%
2.3%
9.2%
3.0%
10
-622
-4.6
1.8
0.0
2.3
0.9
1.0
-1.4
1.5
0.3
1.3
0.2
2.2
0.1 -79.7%
-97.2%
Net margin
-9.5%
3.5%
0.0%
4.5%
1.7%
1.8%
-2.7%
3.0%
0.5%
2.3%
0.3%
3.4%
New
2015E
Previous
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Gino Rossi: Forecast changes
2014E
New Previous
Sales
255
n.a.
EBITDA
23
n.a.
EBIT
3
n.a.
Net profit
8
n.a.
Change
New
Change
0.1%
-44
2016E
Previous
-331
Change
n.a.
287
n.a.
n.a.
314
n.a.
n.a.
n.a.
26
n.a.
n.a.
28
n.a.
n.a.
n.a.
3
n.a.
n.a.
3
n.a.
n.a.
n.a.
12
n.a.
n.a.
13
n.a.
n.a.
Fig. 5. Gino Rossi: Valuation changes
New
4.0
3.9
DCF valuation
Previous
n.a.
n.a.
Change
0.0%
0.0%
Fig. 6. Gino Rossi: Income statement forecast
Fig. 7. Gino Rossi: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
209
219
255
287
314
Current assets
88
106
126
145
162
COGS
121
120
129
143
154
Fixed assets
73
80
77
76
79
Gross profit
89
99
127
144
160
Total assets
161
186
202
222
241
SG&A
86
91
110
124
139
Current liabilities
75
73
82
89
96
4
0
0
0
0
28
20
20
20
20
12
14
23
26
28
18
43
43
43
43
Operating profit
6
8
17
20
21
11
36
36
36
36
2
6
8
5
5
68
69
77
89
102
Profit before tax
5
2
9
15
16
share capital
48
48
48
48
48
Income tax
0
0
1
3
3
Minority Interest
0
0
0
0
0
Net profit
4
2
8
12
13
161
186
202
222
241
40
33
29
42.3%
45.3%
49.6%
50.2%
50.9%
EBITDA margin
5.9%
6.5%
9.2%
9.2%
9.1%
Operating margin
3.0%
3.9%
6.6%
6.8%
6.7%
3.0%
4.1%
4.1%
2016E
EBITDA
Gross margin
Net profit margin
2.0%
0.9%
bank debt
bank debt
Equity
Total liabilities
Net debt
35
44
Fig. 8. Gino Rossi: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
81
4
7
13
15
CF from investment
-46
-13
-3
-6
-11
-3
17
0
0
0
4
6
4
CF from financing
Net change in cash
33
9
87
88
Industrials
Poland
November 12, 2014
RECOMMENDATION
GRAJEWO
BUY (INITIATION)
In full swing



Financials. We expect Grajewo to report a nearly c. 8.7% y/y sales
growth in 2014 (PLN1.59bn). Our figures indicate hefty increases of its
margins across all the P&L lines. We forecast the NP to stand at
PLN106mn (6.7% margin). Looking forward, the adoption of measures
aimed at operational performance improvement will lead to a margins’
uptick by 36bps in 2015 (in case of the EBITDA margin by 45bps, while
the EBIT and NP should increase c. 37bps). We see the EBITDA growing
to PLN212mn in 2015 and PLN228mn in 2017.
Triggers / Risks. We identified several risks to our model scenario.
Firstly, there is the possible upswing in the supply of wood-based boards
from the East, which might pose a risk for the total sales volumes in the
short term. High utilisation rates, on the one hand, push the maintenance
cost up and, on the other, makes production less flexible in the event of
an unplanned stoppage. In the long term, the EURPLN exchange rate
could affect the company’s financial results as well. However, the
company hedges its currency position with forward contracts, which
should give it a chance to adjust the price when needed.
STOCK PERFORMANCE
Buy
Hold
Sell
40
35
30
25
20
15
WIG Relative
GRJ
10
5
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Oct-11
Equity Story. The Polish wood-based boards producer benefits from the
recently observed strong growth in furniture output of the domestic
manufacturers. As we see no early signs of significant deterioration of the
furniture market, we expect the company to extrude more value for its
shareholders. The positive readings of the German particleboard price
index (4% q/q uptick) remain supportive of the sales volumes in the
particleboards segment. However, in the forecast horizon we are more
conservative and expect prices to rise on average by 2% y/y. Additionally,
high capacities’ utilisation has led to the development of an investment
plan that aims at boosting efficiency (6% y/y in regards to wood-based
panels this year). Production efficiency is expected to start improving from
3Q14 onward and achieve a target performance in the end of 2015 with
regards to particleboards’ production (investment plan for the HDF
segment regarding conversion of the production profile is scheduled for
2015-16). In the mid-term, Grajewo plans to seek a value increase
through the development of a modern production line of kitchen
countertops, expansion of its product mix and introduction of prefabricated
products production (packed furniture). We also expect Silekol to be an
important driver of the financial results’ improvement due to rising sales
beyond the group (inter alia to the construction industry). According to the
company, a strategic move regarding its engagement in a new production
plant project should materialise no sooner than in 2017. On the cost side,
we assumed inflationary growth of raw material prices (2% y/y till 2016
and 2.5% in the long term). We expect prices of glues and resins to
increase a touch more slowly (c. 2%) due to favourable urea (thus
melamine) prices.
Jan-12

Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
Grajewo is one of Poland’s leading producers of
wood-based boards
Main shareholders
% of votes
Pfleiderer Service GmBH
AVIVA OFE
ING OFE
65.11%
9.93%
5.32%
ANALYST
Michal Sopiel
(+48) 22 586 82 33
Valuation & recommendation. Based on the DCF valuation, we
have set a 12M TP of PLN35.50. A comparison with Grajewo’s peers
indicates a valuation range from PLN22.75 to PLN37.93 per share.
Since our valuation exceeds the current market price by 16%, we are
initiating coverage of Grajewo with a Buy recommendation.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
1,462
157
109
0
10.0
10.6
2014E
1,589.3
194.5
147.7
106.2
14.3
8.5
2015E
1,671.6
212.1
161.6
117.8
12.9
7.8
2016E
1,716.2
221.2
165.6
121.3
12.5
7.5
89
Free float (%)
1M
Price performance
+2.2%
GRJ.WA / GRJ PW
1,521
49.6
34.9%
0.2
3M
YTD
-8.9%
+17.9%
Fig. 1. Grajewo: DCF valuation
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
WACC
PV FCF 2014-2023
Terminal Value (TV)
PV TV
Total EV
Net debt
Minority interest
Equity value
Month
2014E
1,589
148
29
119
47
19
117
89
8.0%
615
2,218
1,025
1,641
138
0
1,503
49.6
1,618
10
32.5
35.5
2015E
1,672
162
32
130
51
0
131
80
2016E
1,716
166
32
133
56
7
111
62
2017E
1,759
169
33
136
60
13
71
25
2018E
1,801
169
33
136
62
6
74
19
2019E
1,847
171
33
138
64
10
76
22
2020E
1,897
172
34
138
66
11
80
24
2021E
1,949
174
34
140
68
10
81
24
2022E
2,002
177
34
142
69
12
83
25
2023E
2,057
176
34
142
73
12
88
27
Fig. 2. Grajewo: Comparable valuation
Company
Price
Currency
P/E
2014E
2015E
EV/EBITDA
2016E
2014E
2015E
2016E
31.01
PLN
14.5
13.1
12.7
8.5
7.8
7.6
288.05
206.50
135.45
77.50
42.00
210.00
56.00
10.99
4.99
3.20
1.46
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
16.7
16.4
20.2
15.4
10.9
70.8
16.1
9.7
10.2
12.7
n.a.
15.7
15.4
14.9
16.9
10.2
7.6
35.8
14.5
9.6
9.0
11.6
45.5
14.5
18.0
13.8
14.5
8.6
7.1
20.0
13.3
8.2
9.7
11.2
18.3
13.3
9.7
12.6
9.8
n.a.
n.a.
30.6
11.1
4.8
n.a.
4.3
9.0
9.7
9.1
11.4
8.4
n.a.
n.a.
12.0
9.9
4.9
n.a.
4.0
7.9
8.7
8.5
10.7
7.3
n.a.
n.a.
7.4
9.0
4.4
n.a.
3.8
7.2
7.3
22.87
15.94
50.18
23.58
37.43
1150.65
26.99
8.22
CAD
USD
USD
EUR
USD
INR
CAD
BRL
61.3
28.9
17.7
16.5
17.5
18.0
17.8
12.2
17.7
-18.2%
-18.2%
33.64
37.93
20.0
18.0
14.7
11.9
14.0
20.0
11.2
10.3
14.3
-8.6%
-8.6%
34.28
33.94
9.9
15.9
21.1
9.0
11.0
17.1
9.6
8.8
10.4
21.9%
21.9%
32.39
25.44
15.2
12.6
8.2
6.7
7.9
10.1
7.4
6.7
8.1
5.5%
5.5%
35.50
29.38
8.5
9.6
7.1
6.2
6.7
8.9
5.8
6.0
6.9
13.7%
13.7%
34.49
27.27
5.5
7.5
9.1
5.4
5.7
7.7
5.1
5.3
5.6
36.3%
36.3%
29.90
22.75
Polish Industrials
Grupa Kety SA
Inter Cars SA
Budimex SA
Elektrobudowa SA
Paged SA
Integer.pl SA
Kopex SA
Pozbud T&R SA
Famur SA
Rovese SA
Median
Foreign wood-based boards sector representatives
Norbord Inc
Interface Inc
Universal Forest Products Inc
Surteco SE
Boise Cascade Co
Greenply Industries Ltd
Canfor Corp
Duratex SA
Median
Implied Grajewo price per share vs. Polish peers
Implied Grajewo price per share vs. foreign peers
90
Fig. 3. Grajewo: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
445.5
480.6
362.4
328.4
448.6
379.9
354.5
341.3
380.1
386.3
396.8
380.8
394.2
3.7%
3.5%
65.2
14.6%
64.2
13.4%
27.1
7.5%
30.5
9.3%
55.4
12.3%
42.8
11.3%
24.9
7.0%
31.4
9.2%
42.9
11.3%
54.9
14.2%
41.9
10.6%
53.0
13.9%
49.2
12.5%
14.7%
0.1
-7.2%
3.3
45.7
10.2%
44.9
9.3%
16.0
4.4%
19.8
6.0%
36.3
8.1%
24.2
6.4%
14.4
4.1%
20.8
6.1%
32.4
8.5%
39.5
10.2%
30.1
7.6%
40.2
10.6%
35.9
9.1%
10.6%
1.0
-10.7%
3.0
6.6
22.9
12.7
1.5%
4.8%
3.5%
Net margin
5.2
1.6%
14.1
3.2%
17.8
4.7%
13.3
3.7%
5.9
1.7%
17.5
4.6%
24.9
6.5%
20.3
5.1%
29.6
7.8%
27.9
7.1%
59.6%
3.9
-5.7%
5.4
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Grajewo: Forecast changes
2014E
New Previous
Sales
1,589
n.a.
EBITDA
194
n.a.
EBIT
148
n.a.
Net profit
106
n.a.
New
1,672
212
162
118
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
New
1,716
221
166
121
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Grajewo: Valuation changes
New
35.50
31.40
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Grajewo: Income statement forecast
2012
2013
Fig. 7. Grajewo: Balance Sheet forecast
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
1,076.8
327.9
353.8
340.1
344.0
Fixed assets
730.2
790.9
860.1
941.4
997.1
1,807.0
1,118.8
1,213.9
1,281.5
1,341.1
995.9
331.9
324.3
335.8
343.0
528.4
67.7
82.7
82.7
82.7
226.0
134.6
131.2
128.0
124.0
Net sales
1,432.3 1,462.1 1,589.3 1,671.6 1,716.2
Current assets
COGS
1,204.9 1,200.1 1,278.1 1,339.1 1,374.9
Gross profit
227.4
262.1
311.2
332.5
341.4
Total assets
SG&A
161.7
158.4
166.9
174.3
179.1
Current liabilities
7.4
5.1
3.3
3.3
3.3
116.1
156.8
194.5
212.1
221.2
EBITDA
Operating profit
Profit before tax
73.1
108.7
147.7
161.6
165.6
-54.8
-28.8
-15.8
-15.2
-14.9
bank debt
bank debt
Equity
182.7
86.8
95.1
90.1
85.1
527.4
652.3
758.4
817.7
874.1
16.4
18.3
80.0
131.9
146.4
150.7
share capital
16.4
16.4
16.4
16.4
Income tax
1.2
10.6
25.7
28.5
29.4
Minority Interest
57.8
0.0
0.0
0.0
0.0
Net profit
49.8
151.8
106.2
117.8
121.3
1,807.0
1,118.8
1,213.9
1,281.5
1,341.1
132.5
143.4
156.7
15.9%
17.9%
19.6%
19.9%
19.9%
EBITDA margin
8.1%
10.7%
12.2%
12.7%
12.9%
Operating margin
5.1%
7.4%
9.3%
9.7%
9.6%
Net profit margin
3.5% 10.4%
6.7%
7.0%
7.1%
2016E
Gross margin
Total liabilities
Net debt
129.0
137.9
Fig. 8. Grajewo: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
241.3
122.5
118.0
171.4
161.9
CF from investment
-25.6
535.8
-112.5
-124.0
-110.4
-217.7
-659.3
23.3
-63.4
-69.7
0.0
0.0
0.0
-58.4
-64.7
28.7
-16.0
-18.2
dividends
Net change in cash
-2.0
-1.0
91
92
TELECOMS
Poland
November 12, 2014
RECOMMENDATION
HAWE
BUY (INITIATION)
Dark Fibre for Sale
 Equity Story. HAWE has built and now operates two parallel
 Financials. Following the uninspiring 3Q14, we expect the
seasonally high sales of dark fibre to boost the 4Q14E results
to reach a flat FY14E EBITDA y/y. The completion of the
heavy margin-eroding construction works will keep the top line
inflated in 2015E, while focus on the dark fibre lease or sale
(own assumption of 4,000km p.a.) should result in the
EBITDA’s stabilising at PLN58mn in 2016E. Assuming no
dividend pay-out, we expect HAWE to become debt-free as of
2018E.
STOCK PERFORMANCE
Buy
Hold
Sell
7
6
5
HWE
4
WIG Relative
3
2
1
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Oct-11
0
Jan-12
4,000km dark fibre backbone rings in Poland, offering a
unique high-speed connection capacity. On the one hand,
these connect Poland’s key cities, on the other, they offer a
direct line between Germany and Belarus. The sale or lease
of the backbone network has been HAWE’s key EBITDA
driver in the past (some 20k km sold) and we expect it to stay
that way in the future - with the average contract profitability at
above 90%. HAWE services all the main Polish telco players,
both the mobile and fixed-liners, and its backbone network
seems to be an ideal platform for the construction of Polandwide FTTH connections. On top of that, HAWE won two
substantial network construction contracts to be completed by
2015. While these support the 2014/15E EBITDA, the scale of
the construction works distorts the mid-term top line trends
and inflates the EBITDA margin by 2015.
Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
HAWE operates most modern Polish backbone ring,
consisting of two 3,800km-long fibre-optic main lines, with
cross-border links with Russia, Belarus, Ukraine and
Germany. It also provides network construction services.
 Triggers / Risks. Annual sales of more than 5,000km of optic
fibre p.a. are a substantial upside (+PLN1.5 per share to TP
for additional 1,000km p.a.). The company is also looking
for a strategic investor, which could change the picture.
HAWE’s key shareholder is facing some legal problems and
we believe there future of Mr. Falenta’s stake is uncertain.
Finally, FTTH involvement could result in HAWE’s increased
investment outlays.
Main shareholders
Trinitybay Investments Ltd.
Marek Falenta
% of votes
26.1%
7.7%
 Valuation & recommendation. Based on our DCF model, we
ANALYST
arrived at a 12M TP of PLN4.40 per share, which implies a
75% upside potential. The price of acquiring the Italian dark
fibre provider back in 2011 yields a HAWE per share price of
PLN5.81, while a comparison with the Polish ATM on 2014E16E EV/EBITDA ratio yields a share price of PLN5.92.
(+48) 22 586 80 95
pawel.puchalski@bzwbk.pl
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
175
77
61
52
5.2
4.8
2014E
232
76
59
48
5.6
5.2
2015E
243
76
58
50
5.4
4.6
2016E
157
58
40
38
7.0
5.7
93
HWE.WA / HWE PW
268.1
107.2
Free float (%)
63.6%
1.0
1M
3M
YTD
Price performance
5.5%
-15.3%
-26.3%
Fig. 1. HAWE: DCF valuation
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
WACC
PV FCF 2014-2023
Terminal Value (TV)*
PV TV
Total EV
Net debt**
Equity value
Month
2014E
232
70
11
59
18
-19
13
82
9.0%
398
657
136
534
132
403
107.2
3.8
10
4.0
4.4
2015E
243
71
12
59
18
16
13
48
2016E
157
54
9
45
18
-5
8
61
2017E
159
55
10
45
18
-2
8
58
2018E
160
57
10
46
18
-2
8
59
2019E
162
58
11
47
19
-2
8
60
2020E
164
59
11
48
19
-2
8
61
2021E
166
60
11
48
19
-2
8
62
2022E
168
61
12
49
19
-2
8
63
2023E
170
61
12
50
19
-2
8
64
Source: Company data, DM BZ WBK estimates. * Terminal Value equals PV FCF 2024-2030E, before value of Fixed Assets reaches nil
in 2030E; ** adjusted for 4.2mn own shares held, priced at market value.
Comparative Valuation: Past transactions
In 2011 an Italian dark fibre provider in the northern Italy was sold for EUR436mn. According to different sources it had
network length in the range from 5,200km to 6,600km, and 2010 EBITDA at EUR42mn. Transaction price implies
transactional EV/EBITDA at 10.3x, and EUR / km ranging from 66k to 84k. While we believe ratio of price per dark fibre
network kilometre should not be applied to Poland due to very different economics of two countries, we see transactional
EV/EBITDA at 10.3x as providing fair comparative approach, especially in light of current very low interest rates.
If we apply this ratio, on basis of our 2014E-16E estimates HAWE should be priced at PLN5.81 per share.
Fig. 29. HAWE: Comparable valuation
Price
Currency
P/E
2014E
HAWE
ATM
2015E
EV/EBITDA
2016E
2014E
2015E
2016E
2.35
PLN
5.2
5.0
6.6
5.0
4.4
5.4
11.05
PLN
29.9
20.5
17.3
12.0
10.2
8.9
13.37
9.54
6.12
7.28
6.45
4.01
Implied HAWE price per share
Source: BZ WBK Brokerage research, Bloomberg. Own estimates for HAWE, market consensus for ATM.
94
Fig. 30. HAWE: 3Q14 results review
3Q11
4Q11
1Q12
Sales
EBITDA
EBITDA margin
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
32.5
12.2
35.7
48.8
33.5
38.6
54.2
49.0
89.2
64.7
67.7%
-27.5%
-54.5%
12.5
1.6
6.3
31.9
20.4
6.6
18.0
12.1
17.9
8.1
22.8%
38.5%
12.8%
17.6%
65.5%
60.9%
17.1%
33.1%
24.7%
20.0%
12.6%
-4.6
-7.5
10.2
-0.7
4.1
29.3
15.2
2.7
13.9
7.9
13.6
3.9
46.4%
-71.2%
31.5%
-5.9%
11.4%
60.1%
45.5%
7.0%
25.7%
16.1%
15.3%
6.1%
-0.9
-9.2
6.5
0.7
1.6
25.2
14.3
2.6
9.8
7.2
10.9
2.6
2.0%
-76.0%
36.3%
36.6%
16.4%
26.3%
32.1%
27.9%
29.6%
19.3%
13.2%
4.1%
-23.9
-9.1
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
n.a.
243
n.a.
n.a.
157
n.a.
n.a.
n.a.
76
n.a.
n.a.
58
n.a.
n.a.
n.a.
58
n.a.
n.a.
40
n.a.
n.a.
n.a.
50
n.a.
n.a.
38
n.a.
n.a.
EBIT
EBIT margin
2Q12
Net profit
Net margin
Fig. 31. HAWE: Forecast changes
2014E
New Previous
Sales
232
n.a.
EBITDA
76
n.a.
EBIT
59
n.a.
Net profit
48
n.a.
Fig. 32. HAWE: Valuation changes
New
4.40
5.92
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 33. HAWE: Income statement forecast
Fig. 34. HAWE: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
108
175
232
243
157
COGS
75
98
133
146
79
Gross profit
33
77
99
97
SG&A
18
18
22
21
-4
-4
0
0
0
EBITDA
33
77
76
76
58
Operating profit
24
61
59
58
40
-2
2
0
4
7
Profit before tax
Net sales
2012
2013
2014E
2015E
70
79
72
61
59
Fixed assets
469
530
552
575
592
78
Total assets
539
609
625
636
651
20
Current liabilities
206
78
126
89
64
160
29
96
49
35
32
179
98
96
98
1
98
49
45
40
300
353
401
451
489
139
139
139
139
139
0
2
0
0
0
539
609
625
636
651
131
84
62
Current assets
bank debt
bank debt
Equity
22
63
59
62
47
share capital
Income tax
5
12
11
12
9
Minority Interest
Net profit
17
52
48
50
38
Gross margin
30.6%
43.9%
42.6%
39.8%
49.6%
EBITDA margin
30.6%
43.9%
33.0%
31.3%
36.9%
Operating margin
22.4%
34.9%
25.3%
23.9%
25.4%
Net profit margin
15.7% 29.6%
20.5%
20.7%
24.4%
Total liabilities
Net debt
147
101
2016E
Fig. 35. HAWE: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
34
45
48
68
36
CF from investment
43
19
13
13
8
1
-7
-47
-59
-25
0
0
0
0
0
-12
-4
3
dividends
Net change in cash
-7
19
95
96
Industrials
Poland
RECOMMENDATION
GRUPA KETY
BUY (MAINTAINED)
New strategy almost there

Equity Story. Our investment story remains intact. We believe that export
STOCK PERFORMANCE
sales, especially in the aluminium systems segment, growth in margins

Buy
and, finally, stabilisation in the extruded products will remain Kety’s main
360
drivers of growth. We also still believe that Kety can monetise the rising
310
aluminium usage in the automotive segment.
260
3Q14 Results Review. Kety’s management had previously announced
Hold
Sell
TP
210
that the company had the highest results in its history. Its sales amounted
160
segments and all of them recorded growth in sales and margins, both in
y/y as well as q/q terms. It also worth noting that both aluminium systems
Date
Jul-14
Oct-14
Apr-14
Jan-14
Oct-13
Jul-13
Price
Price performance
on issue 12 month
date
target
export markets (biggest export growth was
recorded in Germany, Italy, Holland, UK and the Czech Republic). Kety’s
Apr-13
Rec.
growth in sales was caused by a rise in demand on the domestic, as well
as on the majority of its
Oct-12
and the flexible packaging segments generated record-high margins, with
the extruded products returning to margins unseen since 2010. The
Jan-13
10
Jul-12
60
losses due to the UAH devaluation (financial costs were at PLN5.4mn).
Apr-12
PLN62.1mn (+41.1%). The bottom line was, however, burdened by FX
Oct-11
(+32.9% y/y and +43.2% y/y, respectively). The net profit came in at
The results’ growth was driven by improvement in the three main
WIG Relative
KTY
110
Jan-12
to PLN489 (+8% y/y), the EBITDA/EBIT to PLN103mn/PLN81.6mn
absolute
relative
(p.p)
Buy
10-23-2014
266.2
311.0
4.5%
4.1
Buy
8-6-2014
219.0
287.0
24.6%
19.3
net debt stood at PLN192.7mn at the end of the quarter, slightly below the
previously suggested level of PLN200mn. The operating cash flow
COMPANY DESCRIPTION
amounted to PLN63.2mn (61% of the EBITDA due to the seasonal
Kety is a leading Polish aluminium products (extruded
profiles and aluminium systems) and flexible packaging
manufacturer.
working capital spike) and CAPEX was at PLN30mn (PLN74mn after 9M).
Moreover, the management suggested that y/y demand growth for
products in 4 out of 5 segments will continue in 4Q14 (with the y/y
demand growth in extrustion, aluminium systems and accessories seen at
5-10%, in flexible packaging at 5% and in constructional services flat).

New strategy in 1Q15. The management announced that its strategic
targets for 2015, which were set in the company’s previous strategy,
Main shareholders
Aviva pension fund
ING pension fund
PZU pension fund
% of votes
18.0%
17.2%
9.8%
5.3%
would be met or nearly met already in 2014 (we assume that the target of
PLN325mn in EBITDA will be missed just by PLN1mn). Kety is due to
present its new, five-year strategy in 1Q15. The company is set to focus
on organic growth in its present segments but will not rule out
ANALYST
acquisitions. Its CAPEX plans will be balanced with a satisfactory dividend
Tomasz Kucinski
level for its shareholders (according to our model, the company should be
+48 22 534 16 10
able to maintain the 60% pay-out ratio without a debt increase and still be
able to finance its CAPEX of PLN150-160mn in the coming years).

Valuation & Recommendation. We made no changes to our forecasts
and, as a consequence, to our valuation.
Company Data
PLNmn
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
1,594
226
145
154
16.9
12.5
2014E
1,790
324
240
185
14.0
8.7
2015E
1,867
336
253
199
13.1
8.4
2016E
1,942
347
262
205
12.7
8.1
97
Free float (%)
1M
Price performance
5.5%
KTY.WA / KTY PW
2,610.7
9.4
98.8%
1.8
3M
YTD
27.1%
27.1%
Fig. 1. Kety: 3Q14 results review
Sales
3Q11
411.3
4Q11
390.5
1Q12
349.8
2Q12
387.5
3Q12
442.9
4Q12
387.9
1Q13
334.4
2Q13
379.6
3Q13
452.6
4Q13
427.2
1Q14
412.9
2Q14
438.7
3Q14
489.0
y/y
8.0%
q/q
11.5%
26.7%
70.1
50.2
47.2
62.7
74.4
40.3
45.1
53.0
77.5
50.3
67.9
81.3
103.0
32.9%
17.0%
12.9%
13.5%
16.2%
16.8%
10.4%
13.5%
14.0%
17.1%
11.8%
16.4%
18.5%
21.3%
4.1
2.7
52.7
30.7
27.6
41.5
53.9
19.1
25.6
33.1
57.0
29.2
48.4
61.1
81.6
43.2%
33.6%
12.8%
7.9%
7.9%
10.7%
12.2%
4.9%
7.7%
8.7%
12.6%
6.8%
11.7%
13.9%
16.9%
4.3
3.0
34.0
19.7
23.9
31.8
44.0
17.2
17.0
42.9
44.0
49.6
30.8
52.6
62.1
41.1%
18.1%
8.3%
5.0%
6.8%
Net margin
8.2%
9.9%
4.4%
5.1%
11.3%
9.7%
11.6%
7.5%
12.0%
13.1%
34.3%
8.9%
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 2. Kety: Forecasts changes
2014E
New Previous
1,790
1,790
Sales
324
324
EBITDA
240
240
EBIT
185
185
Net profit
New
1,867
336
253
198
Change
0.0%
0.0%
0.0%
0.0%
2015E
Previous
1,867
336
253
198
New
1,942
347
262
205
Change
0.0%
0.0%
0.0%
0.0%
2016E
Previous
1,942
347
262
205
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. Kety: Valuation changes
New
311
308
DCF valuation
Previous
311
308
Change
0%
0%
Fig. 4. Kety: Income statement forecast
Sales revenue:
operating cost, ex.
depreciation
Depreciation
EBITDA
Operating profit
Profit before tax
Fig. 5. Kety: Balance sheet forecast
2012
1,568
2013
1,594
2014E
1,790
2015E
1,867
2016E
1,942
1,365
1,412
1,490
1,554
1,619
Fixed assets
932
1006
1060
1121
1183
Total assets
1,643
1,716
1,826
1,918
2,010
482
467
484
492
499
254
245
252
251
251
138
124
125
122
120
52
39
42
41
41
1,023
1,126
1,217
1,305
1,391
830
887
947
1,021
1,100
0
0
0
0
0
1,643
1,716
1,826
1,918
2,010
231
228
227
83
81
84
84
85
225
226
324
336
347
142
145
240
253
262
-5
-11
-17
-8
-9
137
134
222
245
Current assets
Current liabilities
bank debt
bank debt
253
Income tax
20
-19
37
47
48
Net profit
117
154
185
198
205
Equity
share capital
Minority Interest
14.3%
14.2%
18.1%
18.0%
17.9%
9.1%
9.1%
13.4%
13.5%
13.5%
7.5%
9.6%
Net profit margin
10.3%
10.6%
10.6%
EBITDA margin
Operating margin
Total liabilities
2012
711
2013
710
236
208
Net debt
2014E
766
2015E
797
2016E
827
Fig. 6. Kety: Cash flow forecast
CF from operations
2012
108
2013
239
2014E
210
2015E
259
2016E
267
CF from investment
-87
-158
-138
-145
-147
-15
-72
-85
-112
-120
-46
-56
-93
-111
-119
-12
1
1
dividends paid
6
10
Net change in cash
98
Health Care / IT
Poland
NOVEMBER 12, 2014
RECOMMENDATION
MEDICALGORITHMICS
HOLD (INITIATION)
TARGET PRICE: PLN230
Fair-valued growth story
Equity Story. Medicalgorithmics’ success story is based on its own, state-

250
200
150
100
MDG
WIG Relative
50
Aug-14
May-14
Feb-14
Nov-13
Aug-13
Feb-13
May-13
0
Triggers/Risks. Apart from the core Pocket ECG product, the company’s
R&D department is working on three new projects that may have a
positive impact on the company’s P&L. So far Medicalgorithmics is a
single product company, which we think is a major risk. Regulatory risk in
the US was minimised when its global expansion was kicked off, but the
risk of companies like Apple or Samsung appearing on the market is hard
to estimate. Medicalgorithmics does not have a clear policy about what to
do with the cash surplus. A declaration of a higher dividend and a
buyback program would receive a warmer welcome than investments in
the Polish corporate bonds. The stock’s share price has recently been
under pressure from a share supply from the CEO and seed funds, as
well as its lower-than-expected pace of growth. We believe that the
current price levels balance the company’s growth prospects and its
downside risks.

300
Nov-12
Medicalgorithmics. We believe that after the c80% sales y/y expansion in
2014E, the company will be able to expand its top-line by c50% in 2015E
on orders from the largest US market and new contracts for Pocket ECG.
The company’s relocation to a new bigger factory and its headcount
increase ballooned its opex and slightly lowered the margins. We expect,
however, that the operating margin will return to levels seen last year from
2015, when the higher fixed costs will be diluted by higher revenues.
Medicalgorithmics is trading at a 2015E and 2016E P/E of 31.0x and
24.8x, respectively.
Sell
350
Aug-12
Financials. The growth pace remains the key valuation driver for
Hold
May-12

STOCK PERFORMANCE
Buy
Feb-12
of-the-art software system used in Pocket ECG. This allows the company
to enjoy superb margins, the highest among all the WSE-listed
companies. The SaaS sales model helps to stabilise its results and tie its
customers for a long time. Medicalgorithmics is the first Polish company
that received an FDA certificate and set a foothold on the most attractive
US market. It has also started to enter new markets in Europe, Asia and
Americas. We like the company’s light business model (no expensive own
distribution), its low CAPEX and working capital requirements, resulting in
a strong cash generation ability, strong balance sheet, as well as
excellent and sustainable pace of growth.
Nov-11

COMPANY DESCRIPTION
The Company is focused on the development of solutions
and systems for signal and data processing in cardiac
monitoring.
MAIN SHAREHOLDERS
% of votes
ING pension fund
Mr. Marek Dziubinski
New Europe Ventures
Nordea pension fund
BioInfoBank Seed Capital
Aviva mutual fund
13.1%
11.6%
8.0%
7.5%
6.3%
6.0%
ANALYST
12-month TP of PLN230 per share. The TP implies a 13% upside
potential, which caused us to initiate our coverage of the stock with a Hold
recommendation. The comparative valuation points to PLN131 per share.
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
15.7
10.5
10.0
10.9
64.2
59.4
2014E
28.1
17.1
16.5
16.1
43.3
36.4
2015E
41.7
25.0
24.4
22.5
31.0
24.9
2016E
53.0
32.2
31.6
28.2
24.8
19.0
99
MDG.WA / MDG PW
704.9
3.5
Free float (%)
73.4%
0.5
1M
3M
YTD
Price performance
13.8%
-8.9%
17.9%
Fig. 1. Medicalgorithmics: DCF valuation
2014E
Net sales
28.1
EBIT
16.5
Cash taxes on EBIT
3.1
NOPAT
13.4
Depreciation
0.6
9.7
Capital expenditure
11.6
Free cashflow
-7.4
WACC (2014-23)
8.0%
PV FCF 2014-23
172.9
Terminal growth
2.0%
Terminal Value (TV)
911.3
PV TV
422.1
Total EV
595.0
Net debt
-75.0
Equity value
670.0
3.5
193.9
Month
11
210.4
230.0
2015E
41.7
24.4
4.6
19.7
0.6
8.8
1.9
9.7
2016E
53.0
31.6
6.0
25.6
0.6
6.4
1.7
18.1
2017E
62.6
38.0
7.2
30.8
0.7
5.1
1.6
24.8
2018E
71.9
44.2
8.4
35.8
0.7
5.0
1.6
29.9
2019E
82.1
50.9
9.7
41.2
0.7
5.4
1.7
34.9
2020E
90.3
56.0
10.6
45.4
0.8
4.4
1.6
40.2
2021E
99.3
61.7
11.7
49.9
0.8
4.8
1.7
44.3
2022E
109.2
67.9
12.9
55.0
0.9
5.3
1.8
48.7
2023E
120.1
74.7
14.2
60.5
0.9
5.8
2.0
53.6
Fig. 2. Medicalgorithmics: Comparable valuation
Company
Medicalgorithmics
Peers
LiveChat Software
BioTelemetry
LifeWatch
GN Store Nord
Sonova Holding
Nihon Kohden
SHL TeleMedicine
Medtronic
St Jude Medical
Boston Scientific
SHL TeleMedicine
Lepu Medical Technology
Median
Price
204.00
Currency
PLN
Market
Cap
(EURmn)
208
18.01
8.25
9.67
138.10
150.90
5850.00
8.70
68.70
65.22
13.33
8.70
26.11
PLN
USD
CHF
DKK
CHF
JPY
CHF
USD
USD
USD
CHF
CNY
137
220
134
3,896
10,514
2,335
98
67,527
18,647
17,682
98
3,469
Implied share price vs. LiveChat (PLN)
Implied price (PLN)
2014E
43.3
P/E
2015E
31.0
2016E
24.8
EV/EBITDA
2014E
2015E 2016E
36.4
24.9
19.0
30.0
88.7
71.7
25.6
25.2
21.6
117.2
17.0
16.4
16.1
117.2
47.8
25.6
22.5
33.3
17.9
20.1
21.8
19.9
20.5
15.7
15.5
14.7
20.5
38.4
20.1
18.0
n.a.
12.9
17.3
20.1
18.2
12.7
14.6
14.2
13.3
12.7
30.6
14.4
24.2
11.1
35.5
15.8
17.5
10.5
16.5
11.8
12.2
12.5
16.5
n.a.
14.1
18.1
8.4
9.2
13.4
15.1
9.5
9.9
10.6
11.4
10.7
9.9
n.a.
10.3
14.2
n.a.
6.7
12.1
13.5
8.7
n.a.
9.8
10.4
9.3
n.a.
n.a.
9.8
141.3
120.6
148.1
132.2
148.4
118.7
142.8
92.6
154.7
97.6
158.8
117.2
131.0
100
Fig. 3. Medicalgorithmics: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
1.3
1.9
2.3
3.1
2.7
2.9
3.3
3.7
3.9
4.8
5.9
6.6
7.3
90.0%
11.0%
EBITDA
EBITDA margin
0.7
53.7%
1.2
63.3%
1.8
77.4%
1.8
57.0%
1.9
71.3%
2.1
71.1%
2.2
66.6%
2.4
64.4%
2.9
76.5%
3.1
63.7%
3.9
65.7%
4.1
62.4%
4.3
58.3%
44.9%
-18.2
3.8%
-4.1
EBIT
EBIT margin
0.6
46.5%
1.1
57.8%
1.7
72.7%
1.6
53.6%
1.8
67.5%
1.9
67.0%
2.1
63.1%
2.3
61.3%
2.7
70.5%
3.0
61.1%
3.8
63.4%
4.0
60.1%
4.1
56.3%
51.8%
-14.2
3.9%
-3.8
Net profit
0.6
1.0
1.3
Net margin
48.7% 55.2% 58.3%
1.6
53.5%
2.0
75.2%
2.5
85.8%
2.5
76.7%
2.6
70.5%
2.8
73.3%
3.0
61.1%
3.8
63.5%
3.9
58.6%
4.1
55.6%
44.1%
-17.7
5.2%
-3.0
New
41.7
25.0
24.4
22.5
2015E
Previous
n.a.
n.a.
n.a.
n.a.
Sales
Fig. 4. Medicalgorithmics: Forecast changes
2014E
New Previous
Sales
28.1
n.a.
EBITDA
17.1
n.a.
EBIT
16.5
n.a.
Net profit
16.1
n.a.
Change
n.a.
n.a.
n.a.
n.a.
New
53.0
32.2
31.6
28.2
Change
n.a.
n.a.
n.a.
n.a.
2016E
Previous
n.a.
n.a.
n.a.
n.a.
Change
n.a.
n.a.
n.a.
n.a.
Fig. 5. Medicalgorithmics: Valuation changes
New
230
131
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Medicalgorithmics: Income statement forecast
Fig. 7. Medicalgorithmics: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
11.0
15.7
28.1
41.7
53.0
Current assets
65.2
50.0
54.9
66.5
83.2
Opex
3.9
5.8
11.6
17.3
21.4
Fixed assets
10.4
33.5
44.5
45.8
46.9
0.0
0.1
0.1
0.0
0.0
Total assets
75.5
83.5
99.4
112.3
130.1
EBITDA
7.2
10.2
17.1
25.0
32.2
1.8
2.6
7.0
8.3
10.6
Operating profit
7.1
10.0
16.5
24.4
31.6
0.0
0.0
0.0
0.0
0.0
2.1
3.5
3.4
3.4
3.2
0.0
0.0
0.0
0.0
0.0
Profit before tax
9.2
13.5
19.9
27.8
34.8
0.0
0.0
0.0
0.0
0.0
Income tax
1.8
2.6
3.8
5.3
6.6
73.8
80.9
92.4
104.0
119.5
Net profit
7.4
10.9
16.1
22.5
28.2
share capital
0.3
0.3
0.3
0.3
0.3
Minority Interest
0.0
0.0
0.0
0.0
0.0
75.5
83.5
99.4
112.3
130.1
-75.6
-77.1
-85.2
Net sales
Current liabilities
bank debt
bank debt
Equity
EBITDA margin
65.9%
64.7%
60.8%
59.9%
60.8%
Total liabilities
Operating margin
64.5%
63.7%
58.7%
58.5%
59.6%
Net profit margin
67.6% 69.3%
57.3%
54.0%
53.2%
Net debt
-61.9
-75.0
Fig. 8. Medicalgorithmics: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
6.3
9.2
7.0
14.3
22.4
CF from investment
-6.1
-23.3
-11.6
-1.9
-1.7
CF from financing
54.5
-3.7
-4.6
-11.0
-12.7
9.7
10.1
10.5
Net change in cash
7.0
9.0
101
102
TMT
Poland
NOVEMBER 12, 2014
RECOMMENDATION
MIDAS
BUY (MAINTAINED)
Polkomtel’s promo to boost 3Q volume?
 3Q14 Results Preview. We expect Midas’ 3Q14 data
transfer volume to increase by 29% q/q and 122% y/y to
18GB. We see the 9M data transfer expanding to 44.6GB,
up 112% y/y. In our view the strength of the 3Q14 volumes
may be attributed to Polkomtel’s recent LTE-focused
promotion, likely driving the September volume to some
7GB. We expect little surprises or expansion at the cost
line, but an ‘extra’ 1GB of the September 2014 transfer
volume boosts the EBITDA by an additional PLN5mn. Flat
transfer rates q/q will trim quarterly loss to PLN25mn.
While we see the 3Q14 results broadly flat at the EBITDA /
EBIT / net profit levels y/y, the quarter brings us much
closer to the long-awaited EBITDA breakeven. Outcome:
POSITIVE.
PUBLICATION DATE
NOVEMBER 15, 2014
3Q14E
87.8
-25.4
-55.8
-62.8
Sales
EBITDA
EBIT
Net profit
y/y
56%
n.a.
n.a.
n.a.
q/q
21%
n.a.
n.a.
n.a.
STOCK PERFORMANCE
Buy
Hold
Sell
2
TP
1
1
1
MDS
1
WIG Relative
 Competitive LTE offers. The other Polish mobile players
1
have all announced a launch of their own LTE services for
mid-2014. But so far Midas remains the only fully-blown
provider of LTE services in Poland.
0
 Auction for 800 / 2,600 MHz frequencies. The regulator
0
Rec.
Buy
10-20-2014
0.55
 Change in Forecasts. We keep our forecasts unchanged
Buy
7-9-2014
0.51
Buy
4-28-2014
Buy
1-30-2014
 Change in Valuation & Recommendation. We apply no
changes to our DCF and DDM valuations, leaving these
unchanged, respectively, at PLN1.39 and PLN1.29 per
share. We maintain our BUY recommendation.
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
announced an auction for five 800MHz and fourteen
2,600MHz blocks (5MHz width each), priced at PLN250mn
and PLN25mn, respectively. Bids may be placed by 24
November, 2014 and the regulator will have one month for
verification.
over the entire forecasting period.
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Jan-12
Oct-11
0
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
1.39
9.1%
6.9
1.39
7.8%
4.4
0.63
1.09
-19.0%
-17.4
0.69
1.28
-8.7%
-11.0
COMPANY DESCRIPTION
Midas builds and operates LTE network in Poland, eyes 66%
coverage of the country with the total of 4,700 base stations.
ANALYST
(+48) 22 586 80 95
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
219
-98
-210
-207
n.a.
n.a.
2014E
318
-129
-260
-304
n.a.
n.a.
2015E
468
-21
-176
-248
n.a.
n.a.
103
2016E
669
160
-5
-90
n.a.
12.1
MDSP.WA / MDS PW
Market capitalization (PLNm)
888
1,479.7
Free float (%)
34.0%
0.7
1M
3M
YTD
Price performance
11.1%
15.4%
-9.1%
Fig. 1. Midas: 3Q14 results preview
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
5.5
11.5
18.3
20.7
22.4
28.5
43.0
48.1
56.4
82.5
66.9
72.5
87.8
55.6%
21.2%
EBITDA
EBITDA margin
-7.4
-16.6
-14.9
-21.4
-19.9
-25.5
-21.2
-32.0
-28.1
-17.1
-49.4
-40.7
-25.4
n.a.
n.a.
-134%
-144%
-81%
-104%
-89%
-89%
-49%
-67%
-50%
-21%
-74%
-56%
-29%
21.0
27.3
EBIT
EBIT margin
-12.3
-22.9
-29.9
-47.8
-45.9
-62.5
-47.2
-59.6
-55.8
-47.5
-78.4
-71.1
-55.8
n.a.
n.a.
-223%
-199%
-164%
-231%
-205%
-219%
-110%
-124%
-99%
-58%
-117%
-98%
-63%
35.5
34.6
Net profit
-14.1
-24.4
-28.8
Net margin
-255% -212% -157%
Source: Company data, DM BZ WBK estimates.
-44.6
-42.8
-59.5
-43.9
-56.3
-61.4
-44.9
-82.6
-77.5
-62.8
n.a.
n.a.
-216%
-191%
-209%
-102%
-117%
-109%
-54%
-123%
-107%
-71%
37.4
35.5
Fig. 2. Midas: Forecasts changes
2014E
New Previous
Sales
318
318
EBITDA
-129
-129
EBIT
-260
-260
Net profit
-304
-304
New
468
-21
-176
-248
Change
0%
n.a.
n.a.
n.a.
2015E
Previous
468
-21
-176
-248
New
669
160
-5
-90
Change
0%
n.a.
n.a.
n.a.
2016E
Previous
669
160
-5
-90
Change
0%
0%
n.a.
n.a.
Fig. 3. Midas: Valuation changes
New
1.39
1.29
DCF valuation
DDM valuation
Previous
1.39
1.29
Change
0%
0%
Fig. 4. Midas: Income statement forecast
Net sales
COGS, ex. depreciation
Fig. 5. Midas: Balance sheet forecast
2012
2013
2014E
2015E
2016E
90
219
318
468
669
Current assets
275
429
578
644
674
Depreciation
104
112
132
154
165
Gross profit
-185
-210
-260
-176
-5
0
0
0
0
0
-1
0
0
0
0
SG&A
EBITDA
2012
2013
2014E
2015E
232
198
262
263
368
Fixed assets
1,189
1,285
1,371
1,465
1,382
Total assets
1,420
1,483
1,633
1,728
1,751
282
237
317
408
529
16
0
20
20
20
169
483
858
1,109
1,101
Current liabilities
bank debt
-82
-98
-129
-21
160
-186
-210
-260
-176
-5
2
-15
-52
-81
-93
share capital
-184
-225
-312
-256
-98
Minority Interest
-8
-19
-8
-8
-8
-176
-207
-304
-248
-90
-206%
-96%
-82%
-37%
-1%
-91%
-45%
-41%
-5%
24%
-207%
-96%
-82%
-37%
-1%
Net profit margin adjusted
-196%
-94%
-96%
-53%
-13%
Operating profit
Profit before tax
Income tax
Net profit
EBITDA margin
EBITDA margin adjusted
Operating margin
bank debt
Equity
Total liabilities
2016E
33
357
740
1,000
1,000
970
763
459
210
120
148
148
148
148
148
0
0
0
0
0
1,420
1,483
1,633
1,728
1,751
716
1,046
1,065
2016E
Net debt
-116
317
Fig. 6. Midas: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
-109
-109
-181
-82
65
CF from investment
-390
-325
-218
-248
-83
627
307
403
260
0
0
0
0
0
0
5
-70
-18
dividends paid
Net change in cash
128
-127
104
Retail
Poland
NOVEMBER 12, 2014
RECOMMENDATION
MONNARI
BUY (INITIATION)
What doesn't kill you makes you stronger

Equity Story. Monnari offers investors another successful
restructuring story. Some past bad decision-making pushed
Monnari on the verge of bankruptcy in 2008-09. But thanks to
aggressive restructuring and loyal clients , Monnari did not go the
way of the dodo. Monnari is now a company that has shown
PLN22mn in net cash (including PLN16mn loan) in 3Q14, has
attractive office real estate for sale (worth c.PLN25mn) and plans
further development of the proven Monnari concept – a concept
that survived the worst. And we believe that this scenario will
materialise in the coming years. We expect Monnari to increase
its floor space at least by c5k sqm by 2016E, which accounts for
27% of its current floor space. This should yield in sales and an
EBITDA at a 11% and 14% CAGR in 2014-2016.

Financials. We expect that Monnari will remain on the growth
path in 2015. Our main assumptions are: 1) selling space growth
by 2.2k/1.9k/0.9k sqm in 2014-16E, respectively, 2) LfL at 5.0%,
3.0% and 3.0% in 2014-16E, respectively, 3) the gross margin at
57.5% (+135bps), 56.5% (-95bps) and 57.1% (+52bps), 4) the
SG&A/avg. sqm at PLN3,808 (+9.0% y/y), PLN3,757 (-1.3% y/y)
and PLN3,873 (+3.1% y/y) and 5) starting of tax payments since
2016. We have also assumed that Monnari will sell real estate for
PLN25mn, which will boost company costs by cPLN2mn
(additional rents and lack of rent incomes from external tenants).

Valuation & recommendation. Monnari is currently trading at a
PE of 12.1x (on adj. basis) and 11.9x in 2014-15E, which seems
cheap taking into account its growth potential, the high ROE
(26%) and the clean balance sheet. We believe that PE at c.1516x would be fairer. Assuming that we are correct with our FY’1415 forecasts, there is still plenty of upside to catch. On the other
hand, such corporate actions like loans to external companies
that are connected to Monnari’s owners casts some shadow on
the company and might hinder its price appreciation toward more
attractive multiples. In our view, it would be better to finance
private projects by dividend rather than loans from Monnari.
Based on our DCF model, we arrived at a 12 month TP of
PLN13.5 per share, which implies a 42% upside potential. We
initiate coverage with a Buy rating.
STOCK PERFORMANCE
COMPANY DESCRIPTION
Monnari is a retail company selling women’s fashion mainly
under the brand Monnari.
Main shareholders
% of votes
Mr. Miroslaw Misztal
Fair Ltd.
Mr. Jakub Banasiak
Union Investment
Free float
26.1%
8.3%
6.5%
7.3%
51.8%
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
145.6
25.4
22.6
23.6
12.5
9.5
2014E
166.9
25.8
22.7
26.9
11.0
8.4
2015E
182.6
26.4
23.1
24.7
11.9
7.4
2016E
197.4
28.3
24.7
21.4
13.8
6.8
105
MONP.WA /MON PW
298.6
30.6
Free float (%)
47.8%
0.4
1M
3M
YTD
Price performance
-4.0%
+15.6%
+46.9%
Fig. 1. Monnari: DCF valuation
2014E
167
23
0
23
3
3
5
18
8.0%
110
2.5%
374
173
284
-77
361
31
12
11
12.5
13.5
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
WACC (2014-2023, %)
PV FCF 2013-2023
Terminal growth (%)
Terminal Value (TV)
PV TV
Total EV
Net debt
Equity value
Month
2015E
183
23
0
23
3
2
4
20
2016E
197
25
5
20
4
2
4
17
2017E
191
16
3
13
4
-1
4
13
2018E
201
17
3
14
4
1
5
12
2019E
209
18
3
15
4
1
5
13
2020E
218
20
4
16
5
1
5
15
2021E
227
23
4
18
5
1
5
17
2022E
236
26
5
21
5
1
6
19
2023E
246
26
5
21
6
1
7
19
Fig. 2. Monnari: Comparable valuation
P/E
Name
EV/EBITDA
PEG
ROE
DY
2014E
2015E
2016E
2014E
2015E
2016E
1Y
2Y
2014E
2015E
2016E
2014E
2015E
2016E
LPP
33.1
28.7
22.2
20.3
17.7
13.8
1.5
0.7
30.2%
28.9%
30.6%
1.0%
1.2%
1.4%
Monnari
11.0
11.9
13.8
8.4
7.4
6.8
0.8
2.6
26.4%
19.3%
14.9%
0.0%
0.0%
5.0%
Bytom
13.9
10.5
10.9
9.3
7.4
6.4
0.02
0.01
29.3%
32.0%
27.5%
0.0%
4.9%
6.7%
average
19.3
17.1
15.6
12.7
10.8
9.0
0.8
1.1
28.6%
26.8%
24.4%
0.3%
2.0%
4.4%
CCC
26.2
19.9
16.9
18.1
14.1
12.2
0.9
0.4
28.7%
31.2%
1.2%
1.9%
2.5%
0.0%
Wojas
10.1
10.6
10.1
6.1
5.9
5.5
14.5
-2.5
14.8%
12.3%
11.4%
1.3%
1.9%
0.0%
Gino Rossi
20.5
13.4
12.3
8.4
7.2
6.6
0.1
0.0
10.5%
14.2%
13.5%
0.0%
0.0%
0.0%
average
18.9
14.6
13.1
10.9
9.1
8.1
5.1
-0.7
18.0%
19.2%
8.7%
1.1%
1.5%
0.0%
Total - average
19.1
15.9
14.4
11.8
10.0
8.5
3.0
0.2
23.3%
23.0%
16.5%
0.7%
1.7%
2.2%
106
Fig. 3. Monnari: 3Q14 results review
Sales
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13E
1Q14
2Q14
3Q14
y/y
q/q
27.3
30.7
30.9
42.9
30.6
32.2
33.6
49.1
35.1
41.6
37.0
9.9%
-11.1%
-32.5%
-0.5
2.8
0.3
8.4
0.0
4.7
2.3
11.4
4.1
7.2
4.9
108.1%
-1.9%
9.3%
1.1%
19.6%
-0.1%
14.7%
6.9%
23.2%
11.6%
17.3%
13.1%
619
-417
-1.3
2.2
-0.3
7.8
-0.6
4.0
1.8
10.8
3.4
6.3
4.0
127.2%
-36.1%
-4.6%
7.0%
-0.9%
18.1%
-1.9%
12.4%
5.3%
22.0%
9.6%
15.2%
10.9%
565
-429
-1.4
2.3
-0.7
8.0
1.1
4.4
0.9
10.6
6.1
6.4
4.0
322.4%
-38.4%
Net margin
-5.1%
7.6%
-2.4%
18.7%
3.6%
13.7%
2.8%
21.5%
17.4%
15.4%
10.7%
791
-473
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Monnari: Forecast changes
New
2014E
Previous
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
167
n.a.
n.a.
183
n.a.
n.a.
197
n.a.
n.a.
26
n.a.
n.a.
26
n.a.
n.a.
28
n.a.
n.a.
23
n.a.
n.a.
23
n.a.
n.a.
25
n.a.
n.a.
27
n.a.
n.a.
25
n.a.
n.a.
21
n.a.
n.a.
Sales
EBITDA
EBIT
Net profit
Fig. 5. Monnari: Valuation changes
New
13.5
12.4
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Monnari: Income statement forecast
Fig. 7. Monnari: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
132
146
167
183
197
COGS
63
64
71
79
Gross profit
69
82
96
SG&A
60
60
-1
1
EBITDA
11
Operating profit
Net sales
Profit before tax
2012
2013
2014E
2015E
2016E
Current assets
88
84
97
139
146
85
Fixed assets
20
18
33
18
19
103
113
Total assets
108
102
131
157
165
74
80
88
35
13
15
17
18
0
0
0
25
0
0
0
0
25
26
26
28
1
0
0
0
0
8
23
23
23
25
0
0
0
0
0
1
0
-1
-2
-2
71
88
115
140
147
102
Current liabilities
bank debt
bank debt
Equity
8
22
24
25
26
share capital
68
69
77
89
Income tax
-1
-1
-3
0
5
Minority Interest
0
0
0
0
0
Net profit
8
24
27
25
21
108
102
131
157
165
-36
-74
-78
52.5%
56.1%
57.5%
56.5%
57.1%
EBITDA margin
8.5%
17.4%
15.5%
14.5%
14.4%
Operating margin
6.4%
15.5%
13.6%
12.6%
12.5%
Net profit margin
6.2% 16.2% 16.1%
13.5%
10.9%
Gross margin
Total liabilities
Net debt
-2
-28
Fig. 8. Monnari: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
2
33
27
26
23
CF from investment
3
-1
-19
12
-4
-1
-31
0
0
-15
9
38
4
CF from financing
Net change in cash
3
1
107
108
FINANCIALS
Poland
NOVEMBER 12, 2014
RECOMMENDATION
MW TRADE
BUY (INITIATION)
Healthy momentum



Financials. The company’s strong revenues and EPS growth
should continue despite our conservative assumptions for its
product portfolio growth (10% CAGR in 2014-2016E vs. 22% in
2010-2013) and negative margin development (10.7% in 2016E
vs. 13.3% in 2013). We expect a 15% revenue CAGR in 201416E, following 56% in 2009-2013 and an EPS CAGR 11% vs. a
historical rate of 49%. We expect the dividend pay-out ratio to
stay at 50% in 2014E-2016E, which implies a DY of 5.1%-6.1% in
upcoming years.
Triggers/Risks. The risks include frequent changes to
regulations on hospital liabilities and the general structural
challenges that the Polish health care system is facing. The
funding risks are significant, though we believe they are properly
addressed in our model since we use a COE of 14%. Lastly, MW
Trade is in the Getin Holding group, which is both an opportunity
and a threat. Idea Bank is now granting safe and flexible loans,
but there is the threat that Idea Bank might acquire MW Trade’s
know-how and become its competitor.
Valuation & recommendation. We have set a 12-month target
price for MW Trade at PLN21.6/share using a blend of residual
income (50%) and a warranted equity method (50%), which
implies a 16% upside potential. The company currently trades at
P/E 8.9x 2015E, P/BV of 1.9x, a headline EV/EBITDA of 39x and
a dividend yield of 5.6%
STOCK PERFORMANCE
Buy
25
Hold
Sell
20
15
MWT
WIG
Relative
10
5
Oct-14
Jul-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Jan-12
Equity Story. MW Trade is Poland’s second-largest, non-bank
provider of funding and financial services for the health care
sector (hospitals as well as their suppliers). The company is also
increasingly engaged with local governments and municipalities.
Its close cooperation with the Getin Holding group (Idea Bank
funding) offers the company more flexibility and opportunity to
grow in the new business line of guarantees and fees. Following
the 56% revenues CAGR in 2010-2013 and 49% of earnings,
2014-2016E should bring 15% and 11% growth rates,
respectively, despite our assumption of margin contraction. Based
on our estimates, the company trades at a 8.9x 2015E P/E and a
P/Book of 1.9x, while continues to generate a ROE of 23%. Our
TP of PLN 21/ share implies a 16% upside potential. We are
initiating our coverage with a BUY rating.
Oct-11

Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
absolute
n.a.
n.a.
relative
(p.p)
n.a.
COMPANY DESCRIPTION
MW Trade provides funding and financial services to health
care sector, its suppliers as well as local governments and
municipalities. The company is a second player on the Polish
market of hospital liabilities.
Main shareholders
% of votes
Getin Holding
Mr. Rafał Wasilewski
TFI Quercus
AVIVA OFE
51.3%
20.0%
10.2%
5.2%
ANALYSTS
Andrzej Bieniek
Dariusz Górski
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
61.3
17.5
17.2
14.0
9.5
37.5
2014E
68.6
20.2
19.8
16.0
8.6
38.5
2015E
79.7
21.9
21.5
17.5
7.9
37.2
109
2016E
93.3
23.9
23.5
19.3
9.5
37.5
MWT.WA / MWT PW
140
8.4
Free float (%)
28.7%
0.05
1M
3M
YTD
Price performance
-7.6%
0.7%
-21.6%
Fig. 1. MW Trade: Residual income valuation
2014E
16
71
23.7%
14.0%
9.7%
7
17.4
Growth (CAGR)
-0.9%
3.0%
84.9
8
10.1
7.6
17.7
10
19.8
22.5
25%
Net profit
Equity (YE)
ROE
COE
Excess return
Residual income
Perpetuity
# of shares (m)
Value per share
Last reported BVPS
Fair value (Jan'14)
Month
12 month TP
Upside potential
2015E
17
80
23.1%
14.0%
9.0%
7
2016E
19
90
22.7%
14.0%
8.7%
7
ROE (avg.)
20.9%
19.7%
Pay-out (avg.)
60%
60%
Total value
58
84
PV
32.2
35
Fig. 2. MW Trade: Comparable valuation
2016E ROE (%)
COE (%)
g (%)
YE16E BVPS
Fair value (YE16)
PV (Jan'14)
DPS14E
DPS15E
DPS16E
PV of 2014-16E DPS
Month
PV (current)
Upside potential
22.7
14.0
3.0
1.8
10.7
19.1
12.9
0.9
1.0
1.1
2.4
15.3
10
17.1
19.5
8%
Fig. 3. MW Trade: Valuation changes
MWT/MAG price ratio
1.00
STD +/-1
MWT/MAG P/E ratio
Average
STD +/-2
STD +/- 1
0.95
STD +/-2
0.32
0.90
0.85
0.27
0.80
0.75
0.22
0.70
0.65
0.17
0.60
0.55
0.12
Source: Bloomberg data, DM BZ WBK estimates
Source: Bloomberg data, DM BZ WBK estimates
110
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Nov-14
Jul-14
Sep-14
May-14
Jan-14
Mar-14
Nov-13
Jul-13
Sep-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
May-12
Jan-12
Mar-12
0.50
Fig. 5. MW Trade: 3Q14 results review
Revenues
Funding cost
Gross profit
Opex
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
13.3
17.0
15.0
15.9
14.9
16.7
17.6
17%
5%
-8.7%
-8.4%
-7.9%
-8.1%
-7.7%
-7.9%
-7.9%
0%
0%
3.5
5.6
4.0
4.0
4.0
5.0
5.0
26%
1%
-1.4
-1.7
-1.5
-2.4
-1.7
-1.8
-1.7
13%
-6%
EBITDA
3.6
5.7
4.1
4.2
4.2
5.0
5.1
25%
2%
EBIT
3.5
5.6
4.0
4.1
4.1
4.9
5.0
26%
2%
Net profit
Income yield
2.9
4.6
3.3
3.2
3.3
3.9
4.0
20%
2%
13.0%
14.9%
12.4%
12.7%
11.6%
12.4%
12.0%
n.a.
n.a.
Funding cost
-8.7%
-8.4%
-7.9%
-8.1%
-7.7%
-7.9%
-7.9%
n.a.
n.a.
Gross profit margin
26.0%
33.1%
26.4%
25.3%
26.7%
29.6%
28.3%
n.a.
n.a.
EBITDA margin
26.9%
33.7%
27.2%
26.1%
28.2%
30.0%
29.0%
n.a.
n.a.
EBIT margin
26.2%
33.1%
26.5%
25.4%
27.5%
29.4%
28.5%
n.a.
n.a.
Net profit margin
21.6%
27.0%
22.2%
20.3%
22.2%
23.6%
22.8%
n.a.
n.a.
Fig. 6. MW Trade: Forecast changes
2014E
New Previous
Sales
68.6
n.a.
EBITDA
20.2
n.a.
EBIT
19.8
n.a.
Net profit
16.0
n.a.
2015E
Previous
n.a.
n.a.
n.a.
n.a.
New
79.7
21.8
21.5
17.5
Change
0%
0%
0%
0%
2016E
Previous
n.a.
n.a.
n.a.
n.a.
New
93.3
24.1
23.7
19.3
Change
0%
0%
0%
0%
Change
0%
0%
0%
0%
New
19.8
17.1
21.6
Residual income
Warranted Equity
Previous
n.a.
n.a.
n.a.
Change
0%
0%
0%
Fig. 8. MW Trade: Income statement forecast
Net sales
Portfolio funding cost
Gross profit
Fig. 9. MW Trade: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
44.6
61.3
68.6
79.7
93.3
-27.2
-35.8
-40.2
-49.2
-59.6
17.4
25.5
28.5
30.5
33.7
Current assets
Cash and equivalents
Financial assets
L-t
Opex
-6.6
-8.4
-8.8
-9.2
-10.1
EBITDA
11.1
17.5
20.2
21.8
24.1
PP&E
EBIT
10.8
17.2
19.8
21.5
23.7
Financial assets
2012
2013 2014E 2015E 2016E
214.3
162.9
228.3
267.4
2.3
1.7
4.1
5.4
4.5
211.7
158.3
221.3
258.0
281.0
184.2
361.6
502.5
584.5
635.9
2.2
2.3
2.4
2.5
2.6
178.3
353.3
494.1
576.0
627.2
290.4
0.4
0.2
0.0
0.2
0.2
Total assets
398.5
524.5
730.8
851.9
926.3
Pre-tax profit
11.2
17.4
19.8
21.7
23.9
Current liabilities
188.6
160.7
190.1
205.9
210.8
Income tax
-2.2
-3.3
-3.8
-4.2
-4.6
156.5
300.5
419.6
491.6
533.5
Net profit
9.0
14.0
16.0
17.5
19.3
Equity
53.4
63.2
71.3
80.1
89.8
Total liabilities and equity
398.5 524.5
730.8
851.9
926.3
Other
Gross margin
39.1%
41.6%
41.5%
38.3%
36.1%
EBITDA margin
24.8%
28.6%
29.5%
27.4%
25.8%
EBIT margin
24.2%
28.0%
28.9%
26.9%
25.4%
25.1%
28.3%
28.9%
27.2%
25.6%
Pre-tax margin
Effective tax rate
-19.3% -19.1% -19.4% -19.4% -19.4%
Net profit margin
20.2% 22.9%
23.3%
21.9%
20.7%
Fig.10. MW Trade: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
-96.7
-112.0
-128.2
-75.4
-25.0
CF from investment
-0.5
-0.6
-0.6
-0.6
-0.6
CF from financing
96.4
112.0
131.2
77.3
24.7
2.4
1.3
-0.9
Net change in cash
-0.7
-0.7
111
Dom Maklerski BZ WBK S.A. with its registered office in Poznan, Pl. Wolności 15, 60 - 967 Poznan, registered by the District Court in Poznan – Nowe Miasto i Wilda, Division VIII Commercial of the National Court Register under the number KRS
0000006408, Taxpayer Identification No. 778-13-59-968, with share capital amounting to PLN 45 073 400 fully paid up. DM BZ WBK S.A. is subject to the supervision of the Financial Supervision Commission.
The disclaimers concerning the nature of the published document are found on the last page of the document and constitute its integral part.
TMT
Poland
NOVEMBER 12, 2014
RECOMMENDATION
NETIA
HOLD (PREV. SELL)
TARGET PRICE: PLN5.71 (PREV. PLN4.95)
Concerning customer trends
PUBLICATION DATE
3Q14 Results Review. The results came in below our estimates and
the market consensus: there was a 10% top line erosion, the reported
NOVEMBER 6, 2014
EBITDA was down 23% y/y and there was a net loss, something not
3Q14 RESULTS REVIEW
3Q14E
413.4
109.4
3.1
-4.4
seen in a very long time. Most importantly, the total RGUs (down 62k
to 2.36m) erosion accelerated to 7.7% y/y and 2.6% q/q; the reported
long-unseen RGU erosion in its own network, the highest-ever
volume erosion in the B2C segment, a sudden slowdown in the B2B
Sales
EBITDA
EBIT
Net profit
segment. The management believes that the erosion in the own
8
promising’; due to (1) the intensified market competition and (2)
7
Netia’s focus on high-margin clients. The company will strive to
6
maintain revenues and margin.
5
Changes in shareholder structure. SISU Capital increased its stake
4
to 10.18% from 8.7%. On the other hand, insider(s) sold 305k Netia
3
shares in Sept. and Oct. 2014. An insider bought 15k shares very
2
Hold
WIG Relative
it will strive to optimise costs in both. The company will effectively
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Apr-13
Jan-13
Jul-12
divide its B2B and B2C segments into separate business lines.
PLN145mn payment from Orange. Netia and Orange agreed to
Rec.
Date
with Netia giving up all its future claims. If the EU fine put on Orange
Price
Price performance
on issue 12 month
date
target
settle all their past lawsuits and Orange will pay Netia PLN145mn,
absolute
relative
(p.p)
Sell
7-20-2014
5.5
5.0
1.5%
-3.0
Sell
7-9-2014
5.5
4.5
0.4%
-0.8
future.
Sell
4-28-2014
5.4
4.6
1.1%
2.8
Change in Forecasts. We adjust our forecasts for the PLN145mn
Sell
1-30-2014
4.8
4.5
11.8%
9.5
settles below EUR120mn, Netia might receive up to EUR50mn in the
(pre-tax) inflow from Orange, to be reported in 4Q14.

Oct-12
Apr-12
0
Oct-11
also set to quit proactive acquisition of the B2C segment’s clients and

1
Strategy update. The company will focus on the B2B segment,
trimming any operating or investing outlays in the B2C segment. It is

Sell
TP
NET
Jan-12

Buy
4Q14. The management finds sales to the old Aster clients ‘very
recently.
q/q
-2%
-9%
-78%
n.a.
STOCK PERFORMANCE
network RGUs is a one-off and that growth will emerge already in

y/y
-10%
-23%
-91%
n.a.
Oct-13

Change in Valuation & Recommendation. The PLN145mn comes
out of the blue and boosts Netia’s valuations (DCF and comparative)
COMPANY DESCRIPTION
Netia is the largest alternative fixed line telecommunication
service provider in Poland.
by some 8-9% each. We expect Netia to become very inexpensive on
the EV/EBITDA ratios following the PLN145mn 4Q14 payment. We
ANALYST
changed our method of TP-setting from pure DCF to 50% DCF-50%
(+48) 22 586 80 95
comparable. The new TP at PLN5.71 offers little upside, so we
change our recommendation to Hold from Sell.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
1,876
533
93
50
40.0
4.4
2014E
1,739
637
207
157
12.6
3.8
2015E
1,667
455
65
45
43.9
4.5
113
2016E
1,616
429
79
52
38.0
4.6
Free float (%)
1M
Price performance
-3.0%
NET.WA / NET PW
1,934
347.9
74.3%
2.4
3M
YTD
-0.5%
5.5%
Fig. 1. Netia: 3Q14 results review
2Q14 3Q14E
y/y
q/q
BZWBK
est.
mkt
cons
Sales
394.6 426.7 544.3 536.5 521.1 519.5 490.7 477.5 457.1 450.8 434.4 422.2 413.4
-10%
-2%
416
415
EBITDA
103.4
54.1 138.6 136.4 142.5 115.2 126.0 119.8 109.4
-23%
-9%
115
117
EBITDA margin 26.2% 23.0% 22.8% 25.1% 28.5% 10.4% 28.3% 28.6% 31.2% 25.6% 29.0% 28.4% 26.5%
-4.7
-1.9
3Q11
EBIT
EBIT margin
Net profit
4Q11
98.0
1Q12
2Q12
3Q12
124.1 134.9 148.4
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
27.7% 28.2%
27.6
16.2
4.1
12.8
27.3
-65.2
27.3
26.4
32.8
6.2
20.7
14.2
3.1
-91%
-78%
9
12
7.0%
3.8%
0.8%
2.4%
5.2%
-13%
5.6%
5.5%
7.2%
1.4%
4.8%
3.4%
0.7%
-6.4
-2.6
2.3%
2.8%
24.7
14.3
-9.8
21.0
8.3
-4.4
n.a.
n.a.
3
5
2.0% -1.1%
-4.1
-3.0
0.8%
1.3%
10.0 -108.9
Net margin
6.2% 3.3% -1.8% 3.9%
1.9%
Fig. 2. Netia: Forecasts changes
2014E
New Previous
Sales
1,739
1,739
EBITDA
637
492
EBIT
207
62
Net profit
157
39
-21%
13.1
8.6
14.1
10.5
11.0
2.7%
1.8%
3.1%
2.3%
2.5%
New
1,667
455
65
45
Change
0%
29%
234%
304%
2015E
Previous
1,667
455
65
43
New
1,616
429
79
52
Change
0%
0%
0%
5%
2016E
Previous
1,616
429
79
50
Change
0%
0%
0%
4%
Fig. 3. Netia: Valuation changes
New
5.37
6.05
5.71
DCF valuation
Weighted valuation*
Previous
4.95
5.55
n.a.
Change
8%
9%
n.a.
Source: Company data, DM BZ WBK estimates. * 50% DCF, 50% comparable valuation.
Fig. 4. Netia: Income statement forecast
Fig. 5. Netia: Balance sheet forecast
2012
2013
2014E
2015E
2016E
Net sales, incl.:
2,121
1,876
1,739
1,667
1,616
Voice Revenues
986
830
712
623
548
Data Revenues
791
747
736
732
Other Revenues
344
299
291
312
-2,142
-1,783
-1,532
-1,602
-1,537
COGS, incl.:
Sales & mgm (ex. wages /
restruct. / deprec. )
Depreciation
One-offs (provisions &
restructuring)
-283
-482
-257
-440
-211
-430
-192
-390
2012
2013
2014E
2015E
455
316
544
580
586
Fixed assets
2,777
2,621
2,381
2,232
2,123
729
Total assets
3,232
2,937
2,925
2,812
2,708
338
Current liabilities
486
416
395
384
376
166
127
127
127
127
451
317
312
310
308
384
257
257
257
257
2,296
2,205
2,219
2,119
2,025
386
348
351
352
352
0
0
0
0
0
3,232
2,937
2,925
2,812
2,708
50
6
-5
2016E
-179
Current assets
bank debt
bank debt
-350
Equity
2016E
-102
-4
143
0
0
EBITDA
462
533
637
455
429
Operating profit
-21
93
207
65
79
-40
-25
-18
-15
-14
Profit before tax
-61
68
189
50
64
Income tax
27
18
32
5
12
Net profit
-88
50
157
45
52
EBITDA margin
21.8%
28.4%
36.6%
27.3%
26.5%
2012
2013
2014E
2015E
EBITDA margin, ex. one-offs
26.6%
28.6%
28.4%
27.3%
26.5%
CF from operations
453
515
588
439
407
Operating margin
-1.0%
4.9%
11.9%
3.9%
4.9%
CF from investment
-262
-298
-200
-250
-250
Net profit margin
-4.1%
2.6%
9.1%
2.7%
3.2%
-182
-295
-146
-146
-146
125
128
146
146
146
242
43
11
share capital
Minority Interest
Total liabilities
Net debt
380
292
Fig. 6. Netia: Cash flow forecast
dividends paid
Net change in cash
10
-78
114
Poland
NOVEMBER 12, 2014
RECOMMENDATION
NEUCA
BUY (MAINTAINED)
CURRENT PRICE: PLN 231
TARGET PRICE: PLN 376 (MAINTAINED)
Under influence of the ACP takeover

Equity story: We left our investment case unchanged. We believe that
Neuca is an attractive company because: (1) it is a leader on the
continuously growing pharma wholesale/retail market (c4-5%pa), (2) the
STOCK PERFORMANCE
recent takeover of ACP Pharma’s wholesale business will provide easy
and notable synergies, (3) further development of Synoptis Pharma’s
business, together with the potential gains from the emerging business of
its own chain of private clinics. These are all arguments that stand behind
our belief that Neuca will be continuously improving its results in the
coming years.

The company is currently trading with 4%/10% discount vs. Pelion and
Farmacol on FY’14 PE. In regards to FY’15, Neuca is trading at an 12%
and 27% discount vs. Pelion and Farmacol, respectively. In this light,
Neuca is cheap as it has the highest fair PE level thanks to the highest
ROE and growth, which we calculate at 12.5x vs. Farmacol (11.6x) and
Pelion (9.0x). In this light, we remain buyers on the stock seizing the
opportunity of the possible correction after disappointing 3Q14
resutls.

Rec.
Date
unchanged. A comparative valuation against Polish peers points to
PLN250/share.
Price
on issue 12 month
date
target
Change in valuation & recommendation. DCF-based valuation stayed
Price performance
absolute
relative
(p.p)
6.2
Buy
10/21/2014
216.0
376.0
6.9%
Buy
9/7/2014
217.9
383.0
-0.8%
1.4
Buy
4/28/2014
232.9
346.0
-6.5%
-12.0
Buy
1/30/2014
276.5
365.0
-15.8%
-18.1
COMPANY DESCRIPTION
Neuca is the largest Polish pharmaceutical distributor, with
rising exposure in drug production.
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
5,795
127
102
85
12.9
10.0
2014E
6,537
120
91
87
13.5
11.2
2015E
7,402
167
132
110
10.7
7.4
2016E
7,786
178
141
121
9.7
6.5
115
NEUP.WA / NEU PW
1,052
4.6
Free float (%)
42.1%
0.7
1M
3M
YTD
Price performance
4.0%
8.5%
-18.4%
Fig. 1. Neuca: 3Q14 results review
Sales
EBITDA
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y (%)
q/q (%)
1,482
1,617
1,459
1,412
1,361
1,456
1,532
1,418
1,435
1,410
1,497
1,555
1,737
21.0%
11.7%
21.1 -26.1%
1.2%
21.2
26.3
35.0
27.7
27.0
27.9
43.5
31.6
28.5
23.1
34.0
20.8
1.4%
1.6%
2.4%
2.0%
2.0%
1.9%
2.8%
2.2%
2.0%
1.6%
2.3%
1.3%
15.8
20.6
29.1
21.9
21.3
21.9
37.7
25.1
22.6
17.1
28.1
13.8
1.1%
1.3%
2.0%
1.6%
1.6%
1.5%
2.5%
1.8%
1.6%
1.2%
1.9%
0.9%
9.9
20.2
20.1
15.0
15.7
15.2
32.3
20.3
19.7
13.1
36.3
10.8
Net margin
0.7%
1.3%
1.4%
1.1%
1.2%
1.0%
2.1%
1.4%
1.4%
0.9%
2.4%
0.7%
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 2. Neuca: Forecast changes
2014E
New Previous
Sales
6,537
6,537
EBITDA
120
120
EBIT
91
91
Net profit
87
87
1.2%
-77
-13
15.3 -32.4%
10.6%
0.9%
-69
-1
11.8 -39.8%
9.3%
0.7%
-69
-1
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
0.0%
7,402
7,402
0.0%
7,786
7,786
0.0%
0.0%
167
167
0.0%
178
178
0.0%
0.0%
132
132
0.0%
141
141
0.0%
0.0%
110
110
0.0%
121
121
0.0%
Fig. 3. Neuca: Valuation changes
New
376
250
DCF valuation
Previous
376
246
Change
n.a.
+1.6%
Fig. 4. Neuca: Income statement forecast
Fig. 5. Neuca: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
5,687
5,795
6,537
7,402
7,786
Current assets
2012
2013
2014E
2015E
2016E
1,461
1,504
2,041
2,217
COGS
5,121
5,243
5,949
6,728
7,060
2,393
Fixed assets
411
413
461
479
Gross profit
566
552
588
674
492
726
Total assets
1,872
1,918
2,519
2,715
2,904
SG&A
452
429
480
-19
-21
-16
525
568
Current liabilities
1,437
1,429
1,764
1,869
1,960
-17
-17
109
100
109
109
EBITDA
118
127
109
120
167
178
92
78
248
248
Operating profit
94
248
102
91
132
141
84
71
244
244
244
13
-2
-4
-3
2
336
406
475
564
662
Profit before tax
81
105
87
129
143
share capital
4
5
5
5
5
Income tax
16
19
0
19
21
Minority Interest
6
5
6
6
6
Net profit
66
85
87
110
121
1,872
1,918
2,519
2,715
2,904
165
64
-11
10.0%
9.5%
9.0%
9.1%
9.3%
EBITDA margin
2.1%
2.2%
1.8%
2.3%
2.3%
Operating margin
1.7%
1.8%
1.4%
1.8%
1.8%
Net profit margin
1.2%
1.5%
1.3%
1.5%
1.6%
Gross margin
bank debt
bank debt
Equity
Total liabilities
Net debt
176
166
Fig. 6. Neuca: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
161
59
225
176
149
CF from investment
-18
-32
-29
-54
-50
-137
-40
-18
-21
-24
179
101
76
CF from financing
Net change in cash
6
-13
116
FINANCIALS
Poland
NOVEMBER 12, 2014
RECOMMENDATION
OPEN FINANCE
BUY (MAINTAINED)
Purification



Dividend prospects. We expect OF to start paying dividends
again in 2016E (DPS of PLN0.11 or DY of 2%). We expect some
of the 2013-15E retained earnings to be used to de-leverage and
that OF will pay off half of its debt and roll over the balance, which
matures in 2015 and 2016
Triggers/Risks. OF enjoys strong operating leverage with
variable costs constituting c. 69% of all costs. On our estimates, a
1% change in revenues translates into cPLN4mn swing in net
profit, ceteris paribus. Furthermore, there is a share supply risk
from GNB and Idea Bank, which hold 42% and 6.6% stakes
respectively. We estimate that the minimum share price levels at
which Idea Bank would recognise a capital gain on the
transaction is PLN12.69/share, while for GNB the level is at
PLN15.60. Both these thresholds are significantly above the
current level and hence minimise the risk of an imminent supply.
Valuation & recommendation. We leave our TP PLN7.00, but
given the 23% upside potential we are re-iterating our Buy rating.
Our TP is derived from an equal-weighted blend of three
methodologies – DCF, comparable multiples and residual income.
We use a risk-free rate of 3.0% (3-month average 10-year bond
yield), Beta of 1.2, risk premium of 5% and g of 1.0%.
STOCK PERFORMANCE
Buy
Hold
Sell
20
18
16
WIG Relative
14
TP
OPF
12
10
8
6
4
2
Jun-14
Sep-14
Mar-14
Dec-13
Jun-13
Sep-13
Mar-13
Dec-12
Jun-12
Sep-12
Mar-12
0
Dec-11
Equity Story & Financials. EPS growth to return from 2015 on.
After the downward revision we are now expecting 2014E
revenues to drop 18% y/y to PLN361mn and to start recovering
from 2015 (up 4% y/y) on. In 2015E the recovery should be driven
by an increase in volumes (loans up 4% y/y, investment products
up 6% and real estate intermediation up 9%). 2014 should be a
‘down year’ again with EPS forecast to drop 54%. Positive
earnings momentum should return from 2015 on (EPS up 19%
y/y) with 2015-2016E CAGR at 18%. Restructuring actions (the
merger of HB/OF branches, outsourcing of advisers, a new CRM
program), new products (low risk regular savings schemes,
insurance products) combined with a supportive environment (an
economic rebound, low market interest rates and a new
government housing subsidy scheme be the drivers. Top line
growth should be moderate initially (+ 4% y/y in 2015) as the
expected continued margin contraction will, we expect, largely
offset the forecast growth in product volumes. C/I should however
fall markedly (down to 90% in 2015E), allowing the bottom line
recovery.
Sep-11

Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Buy
10-29-2014
6.0
7.0
0.0%
0.2
Buy
7-9-2014
8.4
12.2
-29.2%
-34.9
Buy
6-17-2014
9.5
12.2
-11.6%
-7.4
COMPANY DESCRIPTION
Open Finance is the largest and most widely-recognized
financial intermediary in Poland with a 33% market share in
mortgage intermediation and 95% in investment products
The group also includes Open TFI, a mutual fund, Open Life,
a life insurance company and Open Broker.
Main shareholders
% of votes
GNB
Idea Bank
Amplico pension fund
ING pension fund
Aviva pension fund
42.15%
6.60%
7.17%
5.50%
5.20%
ANALYSTS
Andrzej Bieniek
Securities Broker, Investment Adviser
+48 22 586 85 21; andrzej.bieniek@bzwbk.pl
Dariusz Górski
+48 22 586 81 00; dariusz.gorski@bzwbk.pl
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
440
100
71
56
5.8
4.3
2014E
361
60
28
26
12.5
6.8
2015E
376
69
34
31
10.5
5.7
117
2016E
375
75
36
35
9.2
4.3
Free float (%)
1M
Price performance
-9.1%
OPF.WA / OPF PW
309
54.4
45.7%
0.06
3M
YTD
-18.0%
-66.6%
Fig. 1. Open Finance: 3Q14 results review
1Q12 2Q12 3Q12
Revenues
133
117
117
Opex
(98)
(91)
(97)
EBITDA
39
33
24
EBIT
36
29
20
Net profit
30
26
20
EBIT margin
27%
25%
17%
Net profit margin
23%
22%
17%
4Q12
84
(79)
21
5
47
5%
57%
1Q13
105
(90)
22
15
12
14%
12%
2Q13
116
(95)
29
20
16
18%
14%
3Q13
113
(92)
26
21
16
19%
14%
4Q13
107
(96)
23
14
12
14%
11%
1Q14
96
(86)
16
8
6
8%
6%
2Q14
98
(89)
17
8
7
8%
8%
3Q14
85
(84)
16
7.2
7.9
8%
9%
y/y
-25%
-8%
-38%
-66%
-52%
-55%
-35%
q/q
-14%
-5%
-4%
-13%
6%
1%
22%
Fig. 2. Open Finance: Forecast changes
2014E
New Previous
Sales
361
361
EBITDA
60
60
EBIT
28
28
Net profit
26
26
New
376
69
34
31
Change
0.0%
0.0%
0.0%
0.0%
2015E
Previous
376
69
34
31
2016E
Previous
375
75
36
35
New
375
75
36
35
Change
0.0%
0.0%
0.0%
0.0%
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. Open Finance: Valuation changes
New
6.6
6.0
6.8
7.0
Comparable multiples
DCF
Residual Income
Previous
6.6
6.0
6.8
7.0
Change
0.0%
0.0%
0.0%
0.0%
Fig. 4. Open Finance: Income statement forecast
Revenues
Operating costs
Gross profit on sales
Gross margin
EBIT
EBIT margin
EBITDA
EBITDA margin
Fig. 5. Open Finance: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
451
440
361
376
375
(365)
(374)
(329)
(341)
(341)
86
66
32
35
34
19%
15%
9%
9%
9%
90
71
28
34
36
20%
16%
8%
9%
10%
117
100
60
69
75
2012
2013
2014E
2015E
2016E
Fixed assets
414.3
459.9
463.3
473.3
473.3
Current assets
186.7
179.8
190.6
191.2
233.3
62.5
144.1
135.2
111.2
81.2
Equity
362.1
417.6
445.9
476.6
505.6
Current liabilities
176.1
75.5
Total assets
601.0
639.7
72.7
76.6
119.8
653.8
664.4
706.5
2016E
26%
23%
17%
18%
20%
Net financials
Share of the associate's
profit
107
-8
-8
-7
-4
22
5
14
14
14
2012
2013
2014E
2015E
Gross profit
117
68
34
41
47
CF from operations
29
48
77
72
110
Income tax
6
-12
-5
-8
-9
CF from investment
(87)
(83)
(51)
(50)
(37)
5%
-17%
-16%
-19%
-19%
24
35
(12)
(31)
(40)
Net profit
123
56
26
31
35
14
-9
33
Tax rate
Fig. 6. Open Finance: Cash flow forecast
CF from financing
Net change in cash
-34
0
118
Others
Poland
November 12, 2014
RECOMMENDATION
OVOSTAR UNION
HOLD (MAINTAINED)
TARGET PRICE: PLN75 (M AINTAINED)
UAH devaluation takes its toll





3Q14 Results Preview. Ovostar sold 195mn shell eggs in 3Q,
+27% q/q and y/y, especially thanks to high export sales’ volume.
The company sold 407t of dry egg products (-3% y/y, +12% q/q)
and 1,558t of liquid egg products (-13% y/y, 6% q/q). We expect
the selling price of eggs to seasonally increase to UAH0.84/egg
(+15% y/y, +33% q/q), which, in USD terms, would imply a -28%
y/y decline and a +22% q/q growth. We expect the price of dry
egg products at UAH65/kg (+11% q/q, +48% y/y), which implies,
in USD terms, an 8% y/y decline and a 3% q/q growth, and the
price of liquid egg products at UAH18/kg (-1% q/q, +16% y/y),
which implies a 22% y/y decline and a 3% q/q decrease. We do
not expect any BA revaluation gains/losses. Overall, we expect
much lower y/y BA revaluation adjusted results, but higher q/q.
Outcome: NEUTRAL.
STOCK PERFORMANCE
UAH devaluation constitutes the key risk to OVO. The YTD
USD/UAH appreciated 50%+ to UAH12.9. Devaluation generally
reduces our EBITDA forecast, in the short term. Note
thatcompany has EUR-denominated loans and, in case of further
UAH devaluation, extra financial costs may appear.
Change in forecasts. We maintain our financial forecast for
Ovostar intact.
Pressure on fodder costs. The CBOT prices of wheat and corn
(main components of fodder) are under pressure. Price of wheat
decreased by 21% YTD (-15% over 3Q14) and is 30% below
2013 average. The price of corn, is 24% down YTD (-24% over
3Q), and 45% below 2013 avg. Such developments are
favourable for Ovostar, in general.
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Hold
7-10-2014
67.0
75.0
4.6%
-1.5
Hold
7-9-2014
69.9
80.0
-4.2%
-3.7
Hold
4-28-2014
69.0
80.0
1.4%
3.0
Hold
1-30-2014
80.0
105.0
-13.8%
-16.0
Buy
10-23-2013
98.2
122.0
-18.5%
-12.9
COMPANY DESCRIPTION
OVO is egg and egg products manufacturer in Ukraine.
Main shareholders
Prime One Capital
Generali pension fund
Target Price for OVO at PLN75. We maintain our Hold
recommendation for the company.
% of votes
71.2%
9.94%
5.8%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
Company Data
USDm
Sales
EBITDA
EBIT
Net income
Adj EBITDA
Adj EBIT
Adj Net income
Ad P/E (x)
Adj EV/EBITDA (x)
2013
81.6
35.5
31.6
30.9
28.5
19.4
23.8
4.1
3.7
2014E
88.6
30.0
22.9
20.7
26.5
18.5
17.2
6.2
4.7
2015E
100.3
26.8
18.5
15.1
26.8
22.2
15.1
8.4
5.1
119
2016E
113.9
31.2
22.2
18.1
31.2
21.6
18.1
7.0
3.7
Free float (%)
Price performance
1M
1.6%
OVO.WA / OVO PW
421
6.0
28.8%
0.1
3M
3.1%
YTD
-29.9%
Fig. 1. Ovostar: 3Q14 results preview
USD in millions, unless otherwise stated
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y (%)
q/q (%)
13.5
20.6
17.5
13.9
12.5
27.2
19.6
15.1
20.9
27.6
19.5
16.1
17.9
13.5
20.6
EBITDA
EBITDA margin
5.2
38.7%
7.7
37.4%
9.4
53.7%
3.8
27.0%
2.8
22.6%
11.2
41.2%
6.5
33.1%
3.0
19.8%
8.3
39.5%
17.8
64.5%
9.2
47.1%
4.3
26.4%
4.2
23.7%
5.2
38.7%
7.7
37.4%
EBIT
EBIT margin
4.8
35.7%
7.4
35.9%
8.8
50.2%
3.0
21.2%
2.0
16.2%
9.9
36.5%
5.2
26.4%
1.7
11.1%
8.2
39.3%
16.6
60.1%
8.1
41.5%
3.3
20.5%
3.3
18.4%
4.8
35.7%
7.4
35.9%
Net profit
2.9
8.6
8.6
Net margin
21.2% 41.9% 49.4%
3.1
22.2%
2.1
16.6%
9.5
35.0%
5.0
25.6%
1.6
10.7%
8.0
38.4%
16.2
58.7%
7.7
39.5%
3.3
20.6%
3.3
18.4%
2.9
21.2%
8.6
41.9%
Sales
Fig. 2. Ovostar: Forecasts changes
2014E
New Previous
88.6
Sales
88.6
30.0
EBITDA
30.0
22.9
EBIT
22.9
26.5
Adj EBITDA
26.5
19.4
Adj EBIT
19.4
20.7
Net profit
20.7
New
100.3
26.8
18.5
26.8
18.5
15.1
Change
0%
0%
0%
0%
0%
0%
2015E
Previous
100
27
18
27
18
15
New
113.9
31.2
22.2
31.2
22.2
18.1
Change
0%
0%
0%
0%
0%
0%
2016E
Previous
113.9
31.2
22.2
31.2
22.2
18.1
Change
0%
0%
0%
0%
0%
0%
Fig. 3. Ovostar: Valuation changes
New
75
89
DCF valuation
Previous
75
89
Change
0%
0%
Fig. 4. Ovostar: Income statement forecast
Fig. 5. Ovostar: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
60.3
81.6
88.6
100.3
113.9
2012
2013
2014E
2015E
2016E
Current assets
34
48
63
92
BA revaluation
11.0
7.0
3.5
0.0
116
0.0
Fixed assets
86
110
118
126
COGS
42.2
0.0
65.3
121
77.6
87.6
Total assets
120
159
183
219
Gross profit
29.1
35.7
239
26.8
22.7
26.3
Current liabilities
10
9
8
9
SG&A
5.6
11
6.8
5.7
6.2
6.3
3
0
0
0
0
0.2
2.7
1.8
2.0
2.3
2
12
22
42
42
EBITDA
27.3
35.5
30.0
26.8
31.2
2
12
22
42
42
Operating profit
23.8
31.6
22.9
18.5
22.2
Equity
105
138
153
168
186
120
159
183
219
239
13
9
-12
bank debt
bank debt
-0.5
0.6
-1.7
-2.8
-3.5
Total liabilities
Profit before tax
24.3
31.0
21.2
15.6
18.7
Income tax
0.3
-0.1
0.4
0.5
0.6
Net debt
3
3
Net profit
23.5
30.9
20.7
15.1
18.1
Gross margin
48.2%
43.7%
30.3%
22.6%
23.1%
EBITDA margin
45.2%
43.6%
33.9%
26.7%
27.4%
2012
2013
2014E
2015E
2016E
Operating margin
39.4%
38.8%
25.8%
18.4%
19.5%
CF from operations
17
23
12
20
25
Net profit margin
38.9% 37.8%
23.4%
15.1%
15.9%
CF from investment
-38
-11
-16
-16
-4
4
8
4
20
0
0
24
21
Fig. 6. Ovostar: Cash flow forecast
CF from financing
Net change in cash
-16
19
120
Industrials
Poland
November 12, 2014
RECOMMENDATION
PAGED
BUY (INITIATION)
The die is cast



Financials. We forecast the NP margin to come in close to 9% in 2014 and to
total 9.6% in 2015. Starting from 2017 (with the full effect visible from 2018
onward), the NP margin is expected to decrease to c. 8.8% due to an increase
in the effective tax rate. Focusing on the nominal figures, our calculations
indicate that Paged will report its 2014 sales only 1% higher than in the
previous year (implication of low margin activity suppression in DTP). 2017
should bring about a significant improvement as we model a 30% sales
change vs. 2014. We expect the EBITDA to reach almost PLN160mn in 2016
(PLN120mn this year).
Triggers / Risks. In our model we adopted a rather conservative approach to
the output volumes and price trends. With regards to the plywood segment, our
forecast assumes that the final capacities at 212cm will be achieved in 2018
(one year later than the company said in its guidelines). In the forecasted
horizon, we get flat prices and stable margins at levels similar to those in 1H14.
The furniture segment’s and Europa Systems’ operational figures can prove to
be higher than expected. Undoubtedly, major risks are related to the raw
material prices (especially of broadleaved wood) and to the launch of the
MIRROR plywood production.
12M month TP of PLN67.00 per share, which implies a 62% upside potential. A
comparable valuation points to PLN56.77 per share. Said that we, initiate our
coverage of Paged with a Buy recommendation.
STOCK PERFORMANCE
Buy
Hold
Sell
50
45
40
35
30
25
20
PGD
15
WIG Relative
10
5
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Oct-11
Equity Story. Paged is well-positioned to boost its sales in the coming years,
which should translate into a strong financial performance. In our view, worth
noting is the company's investment strategy based on solidifying its activity on
solid fundamentals with a simultaneous diversification of markets, however,
admittedly not always directly related to the core business. The plywood
segment is the key growth driver thanks to the surging capacities from the
already implemented and current investment programme (development of the
MIRROR plywood production capabilities is currently being executed). All the
investment works are scheduled to be completed in 1H2015 and should allow
for an 10% production capacities’ increase in the end of 2015 vs. the currently
observed volumes. It is crucial to keep in mind that at one go Paged will be
able to base its plywood production in 25% (starting from 2017 according to
the company’s guidance) on coniferous wood (so far only broadleaved), which
will mitigate the risk of output contraction in case of broadleaved wood
shortage or a margins’ squeeze caused by excessive prices increase (stability
of financial results should improve in the long term). The furniture segment is
being restructured which should finally lead to an upswing in sales, though we
expect that in 2014 the bottom lines of the P&L will be burdened with the cost
of new managerial staff acquisition. However, we calculate that starting from
2015, sales will enter a steady upward trend with the EBITDA margin surging
from 2.8% in 2013 to 5.5% in 2018. We assumed a stable contribution from the
DTP subsidiary (provider of receivables’ management services, in which
Paged controls a 47.5% stake) at the yearly EBITDA hovering around
PLN25mn. Finally, according to our calculations, Europa Systems (purchased
by Paged in August 2014) will push sales and, to some extent, the margins (c.
1p.p.) higher. However, we have a cautious view on the additional business
that the company will be able to generate as we forecast PLN90mn in
revenues in 2016 (PLN75mn in 2014). In the short term we expect both the
entities to be affected by transaction-related costs (Paged c. PLN3mn).
Jan-12

Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
Paged is the leading plywood producer in Poland. It also
manufactures wooden furniture.
Main shareholders
% of votes
CI Consulting S.K.A.
Fresita Limited Alfa S.K.A.
Ksati Investments S.K.A.
Polski Instytut Inwestycyjny S.K.A.
Yellema Holdings Limited S.K.A.
Generalna Dyrekcja Lasów Państwowych
Daniel Mzyk
Edmund Mzyk
CC14 FIZ
Yawal S.A.
Paged S.A.
9.78%
9.43%
9.43%
9.43%
9.43%
8.33%
8.23%
7.09%
6.72%
5.92%
5.1%
ANALYST
Michal Sopiel
(+48) 22 586 82 33
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
687
105
87
58
10.9
7.4
2014E
702.8
120.3
99.8
61.8
10.3
8.4
2015E
793.2
145.2
117.8
76.5
8.3
6.9
121
2016E
854.5
158.3
128.1
84.8
7.5
6.1
PGDP.WA / PGD PW
627
15.2
Free float (%)
17.2%
0.2
1M
3M
YTD
Price performance
+0.7%
+12.2%
+29.0%
Fig.1. Paged: DCF valuation
Net sales***
EBITDA***
EBIT***
Cash taxes on EBIT***
NOPAT
Depreciation***
Capital expenditure
Net investment
Free cashflow
WACC
PV FCF 2014-2023
Terminal Value (TV)
PV TV
Total EV
Net debt
Minorities
DTP*
Real estate**
Equity value
Month
Current value per share (PLN)*
2014E
655
95
75
12
63
20
50
97
128
-65
7.9%
342
1,546
721
1,063
271
155
197
62
896
15.2
59.0
10
61.7
67.0
2015E
744
119
92
14
79
27
12
77
62
17
2016E
805
132
102
16
87
30
7
51
28
58
2017E
860
143
112
20
92
31
6
42
16
76
2018E
888
149
116
26
89
33
2
41
10
79
2019E
903
150
116
27
90
34
2
40
8
82
2020E
912
152
117
27
90
35
1
39
6
84
2021E
924
153
118
27
91
36
2
39
5
85
2022E
937
155
118
27
91
37
2
39
5
87
2023E
950
157
119
27
92
38
2
39
4
88
Source: Company data, DM BZ WBK estimates, *DTP market capitalisation as of Nov 5, 2014, **assumed fair value of real estate
assets,*** DTP excluded
Fig.2. Paged: Comparable valuation
Company
Price
Paged
42.00
Polish Industrials
Grupa Kety SA
288.05
Inter Cars SA
206.50
Budimex SA
135.45
Elektrobudowa SA
77.50
31.01
Integer.pl SA
210.00
56.00
Kopex SA
10.99
Pozbud T&R SA
4.99
Famur SA
3.20
Rovese SA
1.46
Median
Foreign plywood sector representatives
Norbord Inc
22.87
Ehlebracht AG
3.83
Universal Forest Products Inc
50.18
Greenply Industries Ltd
1150.65
Boise Cascade Co
37.43
Canfor Corp
26.99
Duratex SA
8.22
Steinhoff International Holdings Ltd
5511.00
Median
Implied Paged price per share vs. Polish peers
Implied Paged price per share vs. foreign peers
Currency
P/E
EV/EBITDA
2014E
10.5
2015E
8.3
2016E
7.5
2014E
8.5
2015E
6.9
2016E
6.2
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
16.7
16.4
20.2
15.4
13.8
70.8
16.1
9.7
10.2
12.7
n.a.
15.7
15.4
14.9
16.9
10.2
12.7
35.8
14.5
9.6
9.0
11.6
45.5
14.5
18.0
13.8
14.5
8.6
11.7
20.0
13.3
8.2
9.7
11.2
18.3
13.3
9.7
12.6
9.8
n.a.
8.5
30.6
11.1
4.8
n.a.
4.3
9.0
9.7
9.1
11.4
8.4
n.a.
7.8
12.0
9.9
4.9
n.a.
4.0
7.9
8.4
8.5
10.7
7.3
n.a.
7.2
7.4
9.0
4.4
n.a.
3.8
7.2
7.3
CAD
EUR
USD
INR
USD
CAD
BRL
ZAr
61.5
18.9
17.7
18.0
17.5
17.8
12.3
11.4
17.7
-33.0%
-40.6%
62.72
70.72
20.0
17.2
14.7
20.0
14.0
11.2
10.4
10.0
14.3
-42.8%
-42.2%
73.37
72.70
9.9
16.5
21.1
17.1
11.0
9.6
8.9
9.0
10.4
-43.1%
-27.7%
73.82
58.10
15.2
6.4
8.2
10.1
7.9
7.4
6.7
10.5
8.1
-12.3%
5.1%
47.88
39.95
8.5
6.1
7.1
8.9
6.7
5.8
6.0
9.4
6.9
-17.7%
-0.4%
51.06
42.16
5.5
5.9
9.1
7.7
5.7
5.1
5.3
8.9
5.8
-15.1%
6.8%
49.46
39.33
PLN
122
Fig. 3. Paged: 3Q14 results review
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
141.5
136.4
151.0
141.4
150.2
137.6
181.7
167.3
187.0
150.6
158.2
171.9
194.2
3.8%
13.0%
18.1
12.8%
15.7
11.5%
17.9
11.8%
15.4
10.9%
16.4
10.9%
9.5
6.9%
35.3
19.4%
26.0
15.5%
27.6
14.7%
16.7
11.1%
23.6
14.9%
29.7
17.3%
37.4
19.2%
35.5%
8.3
25.9%
3.7
13.8
9.7%
11.1
8.1%
13.5
8.9%
10.9
7.7%
11.7
7.8%
4.6
3.4%
30.8
16.9%
21.5
12.8%
23.0
12.3%
12.1
8.0%
18.8
11.9%
24.7
14.4%
31.3
16.1%
35.7%
8.3
26.4%
3.3
3.2
6.4
11.4
2.3%
4.7%
7.5%
Net margin
3.2
2.2%
7.9
5.2%
5.2
3.8%
14.0
7.7%
14.1
8.4%
21.5
11.5%
8.9
5.9%
15.4
9.7%
14.7
8.6%
21.3
11.0%
-0.5%
5.8
45.0%
2.6
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Paged: Forecast changes
2014E
New Previous
Sales
703
n.a.
EBITDA
120
n.a.
EBIT
100
n.a.
Net profit
62
n.a.
New
793
145
118
76
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
New
855
158
128
85
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Paged: Valuation changes
New
67.00
56.77
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Paged: Income statement forecast
Fig. 7. Paged: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
587.3
686.7
702.8
793.2
854.5
Current assets
250.8
264.3
384.4
403.8
411.1
COGS
448.7
511.6
496.1
555.7
597.0
Fixed assets
405.6
432.2
620.0
669.6
689.8
Gross profit
138.6
175.1
206.7
237.5
257.5
Total assets
656.4
696.6
1,004.3
1,073.3
1,100.9
SG&A
87.7
89.5
106.6
119.2
128.6
Current liabilities
165.9
149.6
214.4
217.1
218.0
10.2
1.8
-0.2
-0.6
-0.9
66.7
51.6
81.6
77.7
74.0
EBITDA
79.5
105.5
120.3
145.2
158.3
148.7
133.9
260.0
249.9
222.3
Operating profit
61.0
87.4
99.8
117.8
128.1
11.8
10.3
13.5
9.9
9.6
Profit before tax
49.2
77.1
86.4
107.8
118.5
Income tax
14.8
7.0
11.1
13.0
Net profit
28.9
58.4
61.8
76.5
bank debt
74.4
56.2
221.2
211.0
183.5
305.5
365.5
427.3
503.8
558.0
share capital
36.3
36.5
36.5
36.5
36.5
15.0
Minority Interest
36.3
47.6
102.6
102.6
102.6
84.8
Total liabilities
656.4
696.6
1,004.3
1,073.3
1,100.9
271.5
255.3
227.9
Gross margin
23.6%
25.5%
29.4%
29.9%
30.1%
EBITDA margin
13.5%
15.4%
17.1%
18.3%
18.5%
Operating margin
10.4%
12.7%
14.2%
14.8%
15.0%
Net profit margin
4.9%
8.5%
8.8%
9.6%
9.9%
bank debt
Equity
Net debt
117.5
93.5
Fig. 8. Paged: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
-41.7
52.5
62.0
93.2
108.4
CF from investment
-140.1
-41.3
-247.0
-77.0
-50.4
188.2
-20.5
250.0
-14.0
-61.8
0.0
0.0
0.0
0.0
-30.6
65.0
2.1
-3.8
dividends
Net change in cash
6.3
-9.3
123
124
FINANCIALS
Poland
NOVEMBER 12, 2014
RECOMMENDATION
PRIME CAR MANAGMENT
BUY (INITIATION)
Stable dividend payer



Financials. We expect a net profit of PLN68mn in 2014E (exone-off PLN53mn). We also expect the net profit to fall to
PLN55mn in 2015E (down 19% y/y) and improve to PLN58 in
2016, implying a ROE of 15%, 11% and 12% respectively. We
assume that the margin on leasing will decrease in the following
years and expect the margins on additional services (insurance,
service, remarketing) to stay flat. This, with higher volumes,
should increase the profits. We expect the current mix of fleet to
shift towards a higher share of semi-FSL and FSL.
Triggers/Risks. We assume that the company will pay PLN4.3 of
DPS, which implies an 8.3% (7.2% at TP) of DY. This should be
between 6.7-7% (5.8-6.1% at TP) next year. However, the
company has been actively participating in the consolidation
process of the Polish CFM market and is looking for further
acquisitions. Although we did not factor in any future acquisitions
into our model, we think that the company’s good balance sheet
structure and track record (the company completed two
acquisitions in 2013) provide a good basis for further deals.
Valuation & recommendation. We have set a 12-month TP of
PLN59.7/share using a blend of the residual income model,
warranted equity valuation and DDM, which imply a 18% upside
potential. The company currently trades at P/E 9x 2014, P/BV of
1.3 and DY of 8.4%.
STOCK PERFORMANCE
Buy
55
Hold
Sell
50
WIG
Relative
45
PCM
40
35
Oct-14
Oct-14
Sep-14
Sep-14
Aug-14
Aug-14
Jul-14
Jul-14
Jun-14
Jun-14
May-14
Apr-14
30
May-14
Equity Story. Prime Car Management was focused in recent
years on high-margin car fleet management (CFM) services and
we expect it to stay on track and keep its margins on additional
services and increased volumes. We expect that supportive
environment (an economic rebound, low interest rates) with help
to increase higher margin CFM services instead of pure leasing
services. PCM plans to focus more on SME clients, while in
corporate segment should their market share stay stable. We
also expect the company to gain in the environment of lower
interest rates thanks to the leverage ratio level (debt/equity 1.11).
We are initiating our coverage of Prime Car Management with a
BUY rating and a TP of PLN59.70, offering a 18% upside
potential.
Apr-14

Rec.
Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
Prime Car Management Group is one of the leaders in the
car fleet management market in Poland by number of
vehicles. The group operates under the Masterlease brand
and had almost 8k clients with 23.180 vehicles leased and
under management.
Main shareholders
% of votes
Fleet Holdings
OFE ING
60.00%
8.00%
ANALYSTS
Andrzej Bieniek
Dariusz Górski
Company Data
PLNm
Revenues
Costs
Pre-tax profit
Net profit
P/Ex
P/BV
2013
557
-498
59
44
14.1
1.3
2014E
589
-500
89
68
9.1
1.3
2015E
600
-530
70
55
11.2
1.3
125
2016E
641
-569
72
58
10.6
1.2
PCM.WA / PCM PW
605
11.9
Free float (%)
40.0%
0.42
1M
3M
YTD
Price performance
2.7%
21.0%
15.4%
Fig. 1.PCM: Residual Income model
Net profit
Equity (YE)
ROE
COE
Excess return
Residual income
Perpetuity
# of shares (m)
Value per share
Last reported BVPS
Fair value (Jan'14)
Month
2014E
68
479
14.5%
9.3%
5.3%
25
41
Growth (CAGR)
2015E
55
493
11.4%
9.3%
2.1%
10
2016E
58
508
11.6%
9.3%
2.4%
12
ROE (avg.)
Pay-out (avg.)
Total value
PV
3.5%
2.0%
11.8%
11.8%
75%
79%
126
226
56
86
182
12
15.3
40.2
55.4
10.0
59.7
65.2
Upside potential
28%
Fig. 2. PCM: DDM valuation
DPS*
Discount factor
NPV of 2014-16E (PLN/share)
Transition period (2017-23E):
- div. pay-out ratio (min, max)
- CAGR
- NPV (PLN/share)
Terminal value (NPV per share)
Total NPV per share
2014E
2015E
2016E
0.0
0.92
6.3
4.3
0.84
3.5
0.77
72%
3.4%
16.4
28.0
50.6
75%
55.3
Upside potential
8%
Fig. 3. PCM: Warranted Equity Valuation
2016E ROE (%)
COE (%)
g (%)
YE16E BVPS
Fair value (YE16E)
PV of fair value
DPS14E
DPS15E
DPS16E
PV of 2014-16E DPS
Month
PV (current)
11.6
9.3
2.0
1.3
42.6
57
43
0.0
4.3
3.5
6.3
50
10
54
58
Upside potential
15%
126
Fig. 4. PCM: 3Q14 results review
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y
q/q
135
148
139
135
139
151
128
-8%
-15%
o/w operating leasing
43
43
42
42
40
40
38
-10%
-6%
o/w fees
49
49
49
50
53
51
48
-1%
-6%
o/w interest income
10
11
8
11
9
9
9
15%
-1%
o/w sale-lease items
30
45
39
30
35
34
33
-16%
-4%
-117
-135
-128
-119
-120
-121
-114
-11%
-6%
o/w service
-39
-45
-42
-40
-40
-42
-40
-4%
-5%
o/w depreciation
-29
-29
-34
-31
-29
-28
-29
-15%
2%
-9
-9
-8
-10
-9
-10
-9
13%
-10%
-28
-42
-36
-29
-33
-33
-29
-19%
-11%
19
13
11
16
19
30
14
25%
-54%
Net profit
15
10
6
12
15
27
10.9
70%
-60%
Revenues
Costs
o/w G&A
Gross profit
Fig. 5. PCM: Forecast changes
2014E
New Previous
Revenues
589
n.a.
Costs
-500
n.a.
Gross profit
89
n.a.
Net profit
68
n.a.
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
0%
600
n.a.
0%
641
n.a.
0%
0%
-530
n.a.
0%
-569
n.a.
0%
0%
70
n.a.
0%
72
n.a.
0%
0%
55
n.a.
0%
58
n.a.
0%
Fig. 6. PCM: Valuation changes
New
64.0
60.6
55.6
59.7
Residual income
WEV
DDM
Previous
n.a.
n.a.
n.a.
n.a.
Change
0%
0%
0%
0%
Fig. 7. PCM: Income statement forecast
Fig. 8. PCM: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
539
557
589
600
641
Cash and acash equivalents
o/w operating leasing
177
170
171
191
220
Finance lease receivables
o/w fees
202
196
206
210
215
Inventories
38
40
41
39
37
Revenues
o/w interest income
2012
Leased vehicles
7
46
23
8
362
380
384
388
392
17
35
36
44
50
543
526
544
653
751
118
144
148
152
161
1,090
1,082
1,171
1,261
1,349
(496)
(498)
(500)
(530)
(569)
Bonds, loans and borrowings
534
522
544
653
751
o/w service
(184)
(166)
(169)
(173)
(177)
Other liabilities
133
98
148
115
91
o/w depreciation
(112)
(123)
(123)
(144)
(161)
Equity
423
462
479
493
508
92%
89%
85%
88%
89%
Costs
o/w G&A
(32)
(35)
(36)
(37)
(38)
(115)
(135)
(139)
(144)
(152)
Gross profit
43
59
89
70
o/w service
20
34
40
41
o/w insurance
4
8
9
9
9
3
8
9
8
10
-23%
-26%
-23%
-21%
-19%
Net profit
33
44
68
55
58
Tax rate
Total assets
2013 2014E 2015E 2016E
16
C/I
Service margin
0.136% 0.218% 0.250% 0.250% 0.250%
72
Insurance margin
0.024% 0.052% 0.055% 0.055% 0.056%
42
Remarketing margin
0.58% 1.55% 1.65% 1.40% 1.40%
Fig. 9. PCM: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
92
39
107
72
82
CF from investment
(4)
(1)
(1)
(1)
(1)
(92)
(48)
(66)
(94)
(96)
39
-23
-14
CF from financing
Net change in cash
-4
-10
127
2016E
128
Industrials
Poland
November 12, 2014
RECOMMENDATION
PEKAES
BUY (INITIATION)
Something to prove



STOCK PERFORMANCE
Buy
Triggers / Risks. We assume that Pekaes will continue to build its position in
the groupage shipment and the intermodal transport segment, reducing its
exposure to the full-truck load services. According to the management’s
guidance, the company is considering an acquisition that would allow it to
double its parent entities’ sales with the engagement of own cash and external
debt. Adverse trends in the economy pose a significant downside risk for the
TSL company. Nevertheless, markets (planned expansion in southern Europe)
and services should translate into lower business cyclicality in the long run.
Valuation & recommendation. We used a mixed approach to get our
valuation, which is a combination of DCF (50% weight) at PLN12.8 per share
and comparative valuation (50% weight) at PLN8.34 (assigned equal weights
for Polish peers multiples of PLN8.67 and those for foreign peers of PLN8.01).
Implementation of the described formula provides a 12M TP of PLN10.57,
which offers an upside potential of 16.4%. We, therefore, initiate our coverage
of Pekaes with a Buy recommendation.
Sell
12
10
PEK
8
WIG Relative
6
4
2
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Rec.
Financials. Looking forward, the company expects to grow above the historical
long term TSL market average of 3%-4%. We assume that the pace of the
sales increase on a y/y basis will be close to 4% in the long-term horizon (4.5%
in the medium term, till 2019). In our opinion, the company’s sales will amount
to PLN717mn in 2014 (a 30.7% y/y surge) due to the consolidation of
Chemikals and Spedcont. The NP is forecasted to come in at PLN15.7mn
(2.2% margin). We estimate the EBITDA margin to near 5% in the current year
and hover in a range of 4.5% to 5% in the long term, which is still well beneath
the MB’s goal at the sector average of 6.5%. From 2015 onward, the effective
tax rate is expected to increase due to the full settlement of the losses from the
previous years.
Hold
14
Oct-11
Equity Story. Pekaes operates on a challenging market with a strong
exposure to the current economic activity (a highly cyclical business that could
be described as the litmus paper of the economy). The long-term strategic
plans are scheduled for 2014-18 and are aimed at expansion in full warehouse
logistics (domestic and abroad) together with sector and market diversification
both through acquisitions and organic growth. The logistics services provider is
taking measures to deliver more value to its shareholders thanks to
implementation of higher margin services and cross-line activities intended to
extract synergies. The full truck road transport (delivering the lowest margin)
represents c. 40% of the sales (figure used to amount to 80%), while the more
profitable groupage transport is attributable for another 40%. Chemikals and
Spedcont, the fully consolidated subsidiaries purchased at the end of 2013 that
operate in the intermodal segment, bring in on average of 10% of the P&L top
line. Sticking more to market figures, the recent statistics describing the
transport and logistics sector indicate a stable financial and operational
standing of the companies in 3Q14. Taking into account the less favorable
industrial output data for the Polish economy in y/y terms (the seasonally
adjusted gauge dropped c. 2pp in comparison to 2Q14) and pressure on prices
of services (accompanied by limited possibilities of price cuts by the suppliers),
the market remains tough. Statistics indicate an approx. 5.6% uptick in sales in
transport and warehouses services in 1H2014.
Jan-12

Date
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
Pekaes is one of Poland’s leading firms in full-warehouse
logistics and multi-channel freight forwarder.
Main shareholders
% of votes
KH Logistyka Sp. z o.o.
ING OFE
PEK Holdings
56.71%
12.60%
6.30%
ANALYST
Michal Sopiel
(+48) 22 586 82 33
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
549
18
10
13
21.3
13.5
2014E
717
35
16
16
17.7
6.7
2015E
750
36
17
15
18.5
6.5
129
2016E
784
36
18
14
19.6
6.3
PEKA.WA / PEK PW
275.9
30.5
Free float (%)
37.0%
0.1
1M
3M
YTD
Price performance
-1.4%
+7.1%
-9.9%
Fig. 1. Pekaes: DCF valuation
Net sales
EBITDA
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Net investment
Free cashflow
WACC
PV FCF 2014-2023
Terminal Value (TV)
PV TV
Total EV
Net debt
Real estate*
Equity value
Month
2014E
717
35
16
0
16
19
31
15
27
-11
7.9%
94
373
174
268
-22
57
347
30.5
11.4
10
12.0
12.8
2015E
750
36
17
2
15
19
3
16
1
15
2016E
784
36
18
3
15
18
4
16
1
14
2017E
819
37
19
4
15
18
4
15
1
14
2018E
857
39
21
4
17
18
3
15
0
17
2019E
896
41
23
4
19
18
3
15
0
18
2020E
923
42
25
5
20
17
2
15
-1
21
2021E
950
43
26
5
21
17
2
14
-1
22
2022E
979
44
28
5
22
17
2
14
0
23
2023E
1,009
46
29
6
24
16
2
14
0
24
Source: Company data, DM BZ WBK estimates, *assumed fair value of real estate assets
Fig. 2. Pekaes: Comparable valuation
Company
Price
Currency
P/E
2014E
Pekaes
9.00
Polish Industrials
Grupa Kety SA
288.05
Inter Cars SA
206.50
Budimex SA
135.45
Elektrobudowa SA
77.50
Paged SA
42.00
Integer.pl SA
210.00
56.00
Kopex SA
10.99
Pozbud T&R SA
4.99
Famur SA
3.20
PKP Cargo SA
79.99
Median
Foreign logistics sector representatives
ACM Shipping PLC
n.a.
Agility Public Warehousing Co KSC
860.00
Asciano Ltd
6.29
ALL - America Latina Logistica SA
6.46
Bollore SA
400.95
Delticom AG
16.36
Egyptian Transport and Commercial Services Co SAE
18.21
Eurokai GmbH & Co KGaA
29.10
Hamburger Hafen und Logistik AG
17.31
LDLC.com
20.40
Mueller - die Lila Logistik AG
4.40
Reysas Tasimacilik ve Lojistik Ticaret AS
0.81
Super Group Ltd/South Africa
3125.00
Stobart Group Ltd
97.75
TAL International Group Inc
43.49
Median
Implied Pekaes price per share vs. Polish peers
Implied Pekaes price per share vs. foreign peers
Source: BZ WBK Brokerage research, Bloomberg.
130
2015E
EV/EBITDA
2016E
2014E
2015E
2016E
PLN
17.5
18.3
19.4
7.2
7.0
6.8
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
PLN
16.7
16.4
20.2
15.4
10.9
70.8
16.1
9.7
10.2
12.7
11.7
15.4
15.4
14.9
16.9
10.2
7.6
35.8
14.5
9.6
9.0
11.6
11.2
11.6
18.0
13.8
14.5
8.6
7.1
20.0
13.3
8.2
9.7
11.2
9.8
11.2
9.7
12.6
9.8
n.a.
n.a.
30.6
11.1
4.8
n.a.
4.3
5.2
9.7
9.1
11.4
8.4
n.a.
n.a.
12.0
9.9
4.9
n.a.
4.0
5.0
8.7
8.5
10.7
7.3
n.a.
n.a.
7.4
9.0
4.4
n.a.
3.8
4.6
7.3
GBp
KWd
AUD
BRL
EUR
EUR
EGP
EUR
EUR
EUR
EUR
TRY
ZAr
GBp
USD
n.a.
17.6
15.1
28.0
34.8
33.5
10.7
13.6
24.3
15.3
10.5
9.0
12.0
32.5
11.5
15.2
13.8%
15.4%
7.91
7.80
n.a.
14.6
13.2
16.2
31.1
16.9
7.4
11.7
19.9
12.2
9.6
9.0
10.7
20.3
11.5
12.7
57.8%
43.9%
5.70
6.25
n.a.
9.6
12.2
10.6
26.7
11.7
6.1
10.6
17.1
9.4
n.a.
n.a.
9.6
12.3
11.2
10.9
73.5%
78.5%
5.19
5.04
n.a.
10.0
8.2
4.8
14.1
12.3
8.0
4.9
5.6
9.9
n.a.
n.a.
5.2
27.5
8.3
8.3
-26.3%
-13.1%
12.21
10.36
n.a.
8.7
7.5
4.2
12.7
9.5
5.0
4.6
5.3
8.2
n.a.
n.a.
4.8
20.1
8.0
7.7
-20.2%
-10.0%
11.27
10.00
n.a.
6.6
7.2
3.6
11.6
7.6
4.2
4.3
5.0
6.3
n.a.
n.a.
4.1
12.4
7.5
6.5
-7.4%
4.8%
9.72
8.59
Fig. 3. Pekaes: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y (%)
q/q (%)
Sales
143.5
123.2
129.8
134.4
130.6
107.5
118.4
132.3
146.5
151.4
180.1
178.4
178.1
21.5%
-0.2%
EBITDA
0.7
0.5%
-3.8
-3.1%
0.3
0.2%
-3.0
-2.2%
3.2
2.4%
9.5
8.9%
0.6
0.5%
4.0
3.0%
6.8
4.6%
6.4
4.2%
8.6
4.8%
9.1
5.1%
8.8
5.0%
29.6%
2.5
-3.1%
1.9
0.7
0.5%
-6.4
-5.2%
-2.3
-1.8%
-5.5
-4.1%
0.8
0.6%
7.3
6.8%
-1.1
-1.0%
2.5
1.9%
5.0
3.4%
3.9
2.5%
4.3
2.4%
3.9
2.2%
4.1 -17.4%
2.3%
1.7
5.4%
0.4
3.4
-5.7
-2.5
2.4% -4.6% -1.9%
Net margin
-4.3
-3.2%
2.1
1.6%
8.5
7.9%
0.4
0.3%
3.9
2.9%
5.6
3.8%
3.2
2.1%
4.2
2.3%
3.6
2.0%
3.6 -35.5%
2.0%
0.4
-0.5%
-0.9
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Pekaes: Forecast changes
2014E
New Previous
Sales
717
n.a.
EBITDA
35
n.a.
EBIT
16
n.a.
Net profit
16
n.a.
New
750
36
17
15
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
New
784
36
18
14
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Pekaes: Valuation changes
New
12.80
8.34
10.57
DCF valuation
Weighted TP
Previous
n.a.
n.a.
n.a.
Change
n.a.
n.a.
n.a.
Fig. 6. Pekaes: Income statement forecast
Fig. 7. Pekaes: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
523.3
548.6
717.0
749.6
783.7
Current assets
204.8
163.3
217.5
227.8
237.9
COGS
491.0
508.7
663.3
692.5
723.2
Fixed assets
161.1
271.4
253.8
250.9
248.1
Gross profit
32.3
39.9
53.7
57.1
60.4
Total assets
365.9
434.7
471.3
478.8
486.0
SG&A
38.5
31.6
38.4
39.8
41.2
Current liabilities
77.6
95.3
100.2
103.7
107.3
5.6
2.6
2.0
2.1
2.2
0.0
2.8
8.8
8.8
8.8
10.0
17.8
35.3
35.8
36.3
12.5
52.4
68.4
68.4
68.4
EBITDA
Operating profit
0.1
10.2
16.3
17.2
18.0
-4.4
-3.0
0.4
0.5
0.6
Profit before tax
4.6
13.2
15.9
16.7
17.4
Income tax
0.7
0.2
0.2
1.7
3.3
Net profit
3.8
13.0
15.7
15.0
14.1
Gross margin
6.2%
7.3%
7.5%
7.6%
7.7%
EBITDA margin
1.9%
3.2%
4.9%
4.8%
4.6%
Operating margin
0.0%
1.9%
2.3%
2.3%
2.3%
Net profit margin
0.7%
2.4%
2.2%
2.0%
1.8%
bank debt
bank debt
0.0
16.3
32.3
32.3
32.3
275.8
287.0
302.7
306.7
310.4
share capital
98.2
98.2
98.2
98.2
98.2
Minority Interest
0.0
0.0
0.0
0.0
0.0
365.9
434.7
471.3
478.8
486.0
-40.8
-44.5
-47.6
2016E
Equity
Total liabilities
Net debt
-88.8
-36.5
Fig. 8. Pekaes: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
32.6
43.9
5.7
30.2
28.9
CF from investment
0.8
-94.3
-1.4
-15.8
-15.5
-37.7
17.3
22.0
0.0
-10.3
0.0
0.0
0.0
0.0
-10.3
26.3
14.5
3.1
dividends
Net change in cash
-4.3
-33.2
131
132
Poland
NOVEMBER 12, 2014
RECOMMENDATION
PELION
HOLD (MAINTAINED)
TARGET PRICE: PLN79 (M AINTAINED)
Under pressure from falling margin



3Q14 Results Preview. We expect Pelion to report another weak
quarter y/y in 3Q14 on all the P&L levels. The results will be hit by
lower margins on Rx-drugs as well as by the lack of any visible
cost-cutting or growth in sales. We expect the top line to grow
5.0% y/y on the back of pharma growth, which we estimate at 45% y/y. We also assume that the gross margin will probably fall
47bps to 10.4% y/y. Despite some costs savings, putting SG&A at
PLN175mn, or 9.3% of sales in 3Q14, and compared with
PLN170mn (9.6% of sales) in 3Q13, it is not enough to push the
EBITDA higher y/y. All in all, we expect the EBITDA to fall 11%
y/y (the EBITDA margin by 27bp to 1.4%) in 3Q14. Assuming
PLN4mn in net financials, we expect a net profit of PLN10mn
(-10% y/y) in 3Q14. Outcome: NEGATIVE.
We see no reason to change our recommendation on Pelion. In
line with the scenario that we had outlined following the positive
surprise in 1H13, 2H13 brought massive disappointment to
investors because the effects of the massive cost cutting in its
retail business and the impact of the loyalty programmes on sales
growth evaporated. Moreover, (1) another margin cut on the
refunded drugs; (2) slow market growth in 2014; and (3) the
continuous advertising ban in retail all add to this bleak picture.
We, therefore, expect Pelion to report notably weaker results y/y
with the EBITDA and the net profit falling 17% and 31% y/y in
2014. This means that Pelion is trading on a PE’ for 2014E of
13.4x and EV/EBITDA of 10.8x, which implies a 7% discount to
Farmacol and a 17% premium over Neuca. In our view, Pelion
should be traded at a discount to both.
Change in valuation & recommendation. We maintained our 12
month TP at PLN79/share. A comparative valuation against
Polish peers points to PLN62/share.
PUBLICATION DATE
NOVEMBER 14, 2014
3Q14E
1,869
27.0
17.0
10.0
Sales
EBITDA
EBIT
Net profit
y/y (%)
5.0%
-12.0%
-21.6%
-13.8%
q/q (%)
0.9%
35.3%
52.3%
393.7%
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
2.9
Hold
10/21/2014
72.6
79.0
3.6%
Hold
9/7/2014
72.0
80.0
0.8%
3.0
Hold
4/28/2014
76.5
86.0
-5.9%
-11.4
Hold
1/30/2014
89.1
96.0
-14.2%
-16.4
COMPANY DESCRIPTION
Pelion is one of the largest Polish pharmaceutical distributors
controlling a ca. 20% market share and with exposure in the
retail segment.
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x), adj.
EV/EBITDA (x), adj.
2013
7,302
164
128
100
9.9
8.4
2014E
7,589
137
96
69
12.3
10.9
2015E
7,889
154
111
81
11.1
9.5
2016E
8,219
165
119
83
10.8
9.0
133
PELIO.WA / PEL PW
793
11.2
Free float (%)
68.1%
0.6
1M
3M
YTD
Price performance
-0.4%
3.0%
-27.1%
Fig. 1. Pelion: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y (%)
1,628
1,697
1,663
1,659
1,610
1,754
1,922
1,770
1,780
1,831
1,947
1,852
1,869
5.0%
0.9%
35.1
31.3
28.2
29.4
29.7
52.3
63.2
42.8
30.7
28.0
46.6
20.0
27.0 -12.0%
35.3%
2.2%
1.8%
1.7%
1.8%
1.8%
3.0%
3.3%
2.4%
1.7%
1.5%
2.4%
1.1%
27.2
22.5
18.6
19.6
20.0
42.6
54.4
33.5
21.7
18.7
36.6
11.2
1.7%
1.3%
1.1%
1.2%
1.2%
2.4%
2.8%
1.9%
1.2%
1.0%
1.9%
0.6%
14.5
43.3
5.1
5.8
6.5
38.5
35.7
20.5
11.6
32.4
24.5
2.0
Net margin
0.9%
2.6%
0.3%
0.3%
0.4%
2.2%
1.9%
1.2%
0.7%
1.8%
1.3%
0.1%
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 2. Pelion: Forecast changes
2014E
New Previous
Sales
7,589
7,589
EBITDA
137
137
EBIT
96
96
Net profit
69
69
1.4%
q/q (%)
-28
37
17.0 -21.6%
52.3%
0.9%
-31
31
10.0 -13.8% 393.7%
0.5%
-12
43
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
0.0%
7,889
7,889
0.0%
8,219
8,219
0.0%
0.0%
154
154
0.0%
165
165
0.0%
0.0%
111
111
0.0%
119
119
0.0%
0.0%
81
81
0.0%
83
83
0.0%
Fig. 3. Pelion: Valuation changes
New
78.8
62.0
DCF valuation
Previous
78.8
61.0
Change
n.a.
+1.6%
Fig. 4. Pelion: Income statement forecast
Fig. 5. Pelion: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
6,686
7,302
7,589
7,889
8,219
Current assets
2012
2013
2014E
2015E
2016E
1,562
1,741
1,929
2,054
COGS
5,858
6,466
6,738
7,008
7,305
2,178
Fixed assets
915
992
968
972
Gross profit
827
836
851
881
983
913
Total assets
2,477
2,733
2,897
3,026
3,161
SG&A
707
699
747
-20
-9
-8
765
789
Current liabilities
1,623
1,745
1,775
1,839
1,910
-5
-5
67
38
144
144
EBITDA
140
164
144
137
154
165
313
394
449
449
EBITDA, adj.
159
450
173
145
159
170
290
372
424
424
Operating profit
424
101
128
96
111
119
539
591
670
734
798
24
18
21
23
23
share capital
24
23
23
23
23
Profit before tax
77
110
75
88
96
Minority Interest
2
3
3
3
3
Income tax
19
9
6
7
14
Total liabilities
2,477
2,733
2,897
3,026
3,161
Net profit
57
100
69
81
83
Net profit, adj.
78
96
69
81
83
Net debt*
418
437
542
510
541
Source: Company data, DM BZ WBK estimates, *with reverse factoring
12.4%
11.5%
11.2%
11.2%
11.1%
EBITDA margin
2.1%
2.3%
1.8%
2.0%
2.0%
Operating margin
1.5%
1.8%
1.3%
1.4%
1.5%
Net profit margin
0.9%
1.4%
0.9%
1.0%
1.0%
Gross margin
bank debt
bank debt
Equity
Fig. 6. Pelion: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
168
149
-86
95
45
CF from investment
-21
-118
-16
-47
-57
-194
17
155
-16
-19
53
32
-31
CF from financing
Net change in cash
-46
48
134
2016E
Poland
November 12, 2014
RECOMMENDATION
PHN
BUY (MAINTAINED)
Strong 3Q results on tax gain

3Q14 Results Preview. We expect PHN to post strong results in
3Q14. The company had announced an intra-Group transfer of
properties worth PLN243mn to SPV. Such a transaction should
result in the release of a tax provision (tax gain), as in the past.
And though the transaction was concluded already in 4Q, we
think that the company may decide to recognise the gain already
in 3Q. The core business should perform much better than in
2Q14 thanks to 1) higher q/q notary sale volumes (residential
business line), 2) higher q/q rental profits on q/q margin growth.
The continuing restructuring should also lead to slightly lower q/q
(PLN0.6mn) administrative costs. We expect, however, some
PLN4mn in one-off restructuring costs. Overall, we project PHN’s
EBIT to grow to PLN5.6mn from PLN0.6mn in 2Q but to fall vs.
3Q13 by >30%, especially with respect to the gradual NOI
contraction (pressure on rent levels, rising vacancy rates etc.). At
the bottom line level, we expect as much as PLN45.5mn (c.
PLN10mn in 2Q14 and 79mn in 3Q13), helped by the PLN40mn
tax gain. Outcome: POSITIVE.
STOCK PERFORMANCE
Rec.

Change in forecasts. We maintain our financial forecast intact.

Change in Valuation & Recommendation. We maintain our TP
for PHN at PLN29.1. With a fundamental upside, we maintain our
recommendation at Buy. Material tax gains in 3Q14E and 4Q14E
might offer a positive surprise, boosting the FY14 net profit close
to PLN90mn. Assuming there is a 100% dividend pay-out (likely
scenario), the dividend yield would exceed 7%, which is solid
level, the way we see it (PHN’s peers do not pay dividends given
their high leverage, whereas PHN is net cash). The company is
trading 0.63x to its 2Q14 NAV, which offers a huge discount to
the WSE peers, such as Echo or GTC (approx. 0.8x). That said,
we think that the current share valuation is justified only when a
flat NAV is assumed in the coming 6 years (assuming 8.2%
WACC). We find this to be an unlikely scenario in light of the
recently announced strategy to target NAV growth of 75% by
2023 (development of pipeline projects and acquisition of yielding
properties). With respect to the ST risk factors, the introduction of
approx. 0.2mn employee shares into trading by year-end may
produce an additional supply of shares. Furthermore, the
Treasury failed to sell its 73% stake in PHN to a strategic
investor. We think that a sale of the stake in a public placement
could be a possible scenario.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
-1.6
Buy
10-22-2014
25.7
29.1
-1.0%
Hold
7-9-2014
24.7
27.5
4.1%
-1.0
Hold
4-28-2014
29.9
29.7
-17.4%
-15.8
Hold
2-11-2014
28.1
29.5
6.4%
8.3
COMPANY DESCRIPTION
PHN is a real estate developer.
Main shareholders
Trasury
Aviva pension fund
ING pension fund
% of votes
70.5%
9.2%
5.1%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
P/BV (x)
2013
131.2
-5.0
-7.0
100.4
11.2
0.60
2014E
158.6
16.4
14.4
88.7
12.7
0.61
2015E
160.0
39.2
37.2
26.4
36.3
0.60
135
2016E
136.0
45.4
43.4
31.6
33.9
0.59
Free float (%)
1M
Price performance
4.1%
PHN.WA / PHN PW
1 170.5
46.4
29.8%
0.4
3M
YTD
12.3%
-5.9%
Fig. 1. PHN: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y (%)
q/q (%)
Sales
n.a.
52.9
48.8
52.1
40.2
46.6
50.7
41.5
37.9
41.2
39.8
38.7
40.1
5.8%
3.6%
EBITDA
EBITDA margin
n.a.
n.a.
-82.9
n.a.
-63.1
n.a.
-63.1
n.a.
-56.7
n.a.
-47.0
n.a.
10.5
-32.2
20.7% -77.6%
9.0
23.7%
7.7
18.7%
3.0
7.5%
1.0
2.6%
6.0 -33.3%
15.0%
-0.4
n.m.
EBIT
n.a.
-32.8
8.6
7.3
2.6
0.6
5.6 -34.9%
n.m.
19.5% -79.0%
22.7%
17.7%
6.5%
1.6%
78.8
37.5
2.5
10.2
13.4% -55.7% 207.9%
91.0%
6.3%
26.4%
EBIT margin
Net profit
-83.9
-63.9
-63.7
-57.2
-47.7
n.a.
158.6% 130.9% 122.3% 142.3% 102.4%
-66.7
-46.0
-41.2
-43.8
-39.8
Net margin
n.a.
-94.3% -79.1%
-85.4%
126.1%
109.0%
9.9
n.a.
Fig. 2. PHN: Forecasts changes
2014E
New Previous
159
159
Sales
16
16
EBITDA
14
14
EBIT
89
89
Net profit
6.8
New
160
39
37
27
Change
0%
0%
0%
0%
-23.1
2015E
Previous
160
39
37
27
Change
0%
0%
0%
0%
New
136
45
43
32
14.0%
4.8
-0.4
8.0
45.5 -42.3%
n.m.
n.m.
-0.5
2016E
Previous
136
45
43
32
3.3
Change
0%
0%
0%
0%
Fig. 3. PHN: Valuation changes
New
29.1
27.9
SOTP valuation
Comparable valuation (based on P/BV)
Previous
29.1
27.9
Change
0%
0%
Fig. 4. PHN: Income statement forecast
Fig. 5. PHN: Balance Sheet forecast
2013
2014E
2015E
2016E
Net sales
131.2
158.6
160.0
136.0
Current assets
COGS
-59.1
-89.6
-90.1
-60.6
Gross profit
72.1
69.0
69.9
SG&A
46.2
35.1
39.0
-19.5
-7.7
-7.0
0.0
EBITDA
-5.0
16.4
39.2
45.4
Operating profit
-7.0
14.4
37.2
43.4
6.8
0.6
-4.6
-4.5
Profit before tax
2013
2014E
2015E
483.0
291.2
235.8
254.7
Fixed assets
1974.2
2074.2
2166.4
2180.0
75.4
Total assets
2457.2
2365.4
2402.2
2434.7
39.0
Current liabilities
251.7
251.7
251.7
251.7
1.1
1.1
100.0
100.0
212.8
138.3
237.2
237.2
0.4
0.4
0.4
0.4
Equity
1992.7
1975.4
1913.3
1945.8
2457.2
2365.4
2402.2
2434.7
-49.9
64.4
45.5
2016E
bank debt
bank debt
-0.2
15.0
32.6
39.0
Total liabilities
Income tax
107.4
74.5
-6.2
-7.4
Net profit
100.4
88.7
26.4
31.6
Net debt
-216.3
Gross margin
55.0%
43.5%
43.7%
55.5%
EBITDA margin
-3.8%
10.3%
24.5%
33.4%
Operating margin
-5.3%
9.1%
23.3%
31.9%
Net profit margin
76.5%
55.9%
16.5%
23.2%
2016E
Fig. 6. PHN: Cash flow forecast
2013
2014E
2015E
CF from operations
34.4
48.5
73.5
37.8
CF from investment
10.2
-115.0
-95.0
-15.0
CF from financing
-0.5
-99.9
6.1
-4.0
Net change in cash
44.1
-166.4
-15.4
18.9
136
Poland
NOVEMBER 12, 2014
RECOMMENDATION
POZBUD
BUY (MAINTAINED)
Another good quarter

Our investment story remains intact. Pozbud still benefits from
a recovery in the domestic market, while its good quality products
and competitive prices are helping it increase its sales in Western
Europe markets. In our view, it should last for another year.
Additionally, in next year Pozbud will finalize investments into
additional capacities and is likely to sign production contract with
foreign partner. In our view, it will be a notable upside for Pozbud,
which we has not included in our model so far.

3Q14 results preview. 3Q14 was another positive quarter for
Pozbud. We expect top line to stay flat y/y at PLN68mn in 3Q14.
Please note the strong comparison base from previous year for
Pozbud. We estimate the gross margin should fall y/y in 3Q14 to
10.4% vs. 12.8% last year. We expect SG&A at PLN2.1mn (3.1%
in sales vs. 3.2% last year). We expect EBITDA of PLN6.2mn
(9.1% margin compared to 9.9% last year). We expect Pozbud to
report a net profit of PLN3.8mn vs. PLN4.8mn last year.
Outcome: NEUTRAL.

We materially cut our forecasts due to elimination of Baumal’s
takeover impact. On the other hand, we excluded from our
calculations notable dilution of Pozbud’s capital, which totally
eliminated negative impact of forecast decrease on our valuation.
12-m Target Price increase to PLN7.7 from PLN7.2 mainly comes
from lower RfR and time-passage.

Change in valuation & recommendation. Our DCF-based 12month target price points to PLN7.70/share. The comparative
valuation points to PLN4.0/share.
PUBLICATION DATE
NOVEMBER 14, 2014
3Q14E
67.6
6.1
5.1
3.8
Sales
EBITDA
EBIT
Net profit
y/y (%)
0.4%
-18.3%
-22.6%
-21.0%
q/q (%)
62.3%
34.5%
35.1%
27.7%
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Buy
10/22/2014
4.6
7.7
9.0%
8.4
Buy
4/28/2014
5.2
7.2
-11.8%
-15.2
Buy
1/30/2014
5.3
6.7
-3.2%
-5.5
Buy
10/23/2013
4.5
6.1
20.0%
25.6
COMPANY DESCRIPTION
Pozbud T&R is a producer of high-quality wooden windows
and doors that has recently expanded into solid wooden floor
production.
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
148.9
17.8
14.7
11.4
10.2
7.0
2014E
188.8
19.5
16.3
13.3
8.7
7.0
2015E
187.8
21.0
17.9
14.0
8.3
7.2
2016E
155.0
19.0
15.7
11.8
9.8
8.5
137
POZP.WA / POZ PW
133
26.8
Free float (%)
70.1%
0.1
1M
3M
YTD
Price performance
1.2%
11.2%
0.2%
Fig. 1. Pozbud: 3Q14 results preview
Sales
EBITDA
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y (%)
q/q (%)
21.6
35.8
19.6
25.8
24.0
23.7
17.5
24.6
67.3
35.0
33.2
41.6
67.6
0.4%
62.3%
6.1 -18.3%
34.5%
4.1
2.6
2.7
3.6
2.5
4.5
2.3
3.1
7.5
3.9
4.8
4.6
18.9%
7.1%
13.8%
14.0%
10.3%
18.8%
13.4%
12.7%
11.1%
11.1%
14.5%
10.9%
3.3
1.8
1.9
2.9
1.8
3.7
1.7
2.4
6.6
3.1
3.8
3.8
15.4%
5.0%
9.9%
11.4%
7.4%
15.5%
9.7%
9.9%
9.7%
8.9%
11.5%
9.0%
2.3
2.0
1.5
2.4
1.8
2.1
1.7
2.1
4.8
2.0
2.9
3.0
Net margin
10.7%
5.5%
7.7%
9.2%
7.7%
8.9%
9.8%
8.6%
7.1%
5.8%
8.7%
7.1%
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 2. Pozbud: Forecast changes
2014E
New Previous
Sales
188.8
188.8
EBITDA
19.5
19.5
EBIT
16.3
16.3
Net profit
13.3
13.3
9.1%
-208
-188
5.1 -22.6%
35.1%
7.5%
-223
-152
3.8 -21.0%
27.7%
5.6%
-152
-152
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
0.0%
187.8
187.8
0.0%
155.0
155.0
0.0%
0.0%
21.0
21.0
0.0%
19.0
19.0
0.0%
0.0%
17.9
17.9
0.0%
15.7
15.7
0.0%
0.0%
14.0
14.0
0.0%
11.8
11.8
0.0%
Fig. 3. Pozbud: Valuation changes
New
7.7
4.0
DCF valuation
Previous
7.7
3.9
Change
n.a.
+2.6%
Fig. 4. Pozbud: Income statement forecast
Fig. 5. Pozbud: Balance Sheet forecast
2012
2013E
2014E
2015E
2016E
Net sales
93.2
148.9
188.8
187.8
155.0
Current assets
2012
2013E
2014E
2015E
77.3
102.3
77.9
73.7
COGS
79.0
126.7
164.2
161.2
130.5
Gross profit
2016E
71.3
Fixed assets
113.7
133.9
155.9
166.3
167.6
Total assets
191.0
236.2
233.8
240.0
238.9
55.6
74.9
60.7
60.9
56.7
31.6
38.0
22.4
22.4
22.4
15.9
13.2
21.9
21.9
21.6
14.9
12.4
20.0
20.0
20.0
119.5
143.7
146.8
152.8
156.2
23.4
14.3
22.3
24.6
26.5
24.5
SG&A
4.6
8.3
8.0
8.3
8.5
0.2
0.7
-0.3
-0.3
-0.3
12.6
17.8
19.5
21.0
19.0
9.8
14.7
16.3
17.9
15.7
-1.1
-1.5
-0.9
-1.6
-2.1
Profit before tax
8.7
13.1
15.4
16.3
13.6
share capital
23.4
26.8
23.4
23.4
Income tax
1.0
1.7
2.1
2.3
1.8
Minority Interest
0.0
4.4
4.4
4.4
4.4
Net profit
7.7
11.4
13.3
14.0
11.8
191.0
236.2
233.8
240.0
238.9
19.9
35.6
45.5
Gross margin
15.3%
15.0%
13.0%
14.1%
15.8%
EBITDA margin
13.6%
12.0%
10.3%
11.2%
12.2%
Operating margin
10.5%
9.8%
8.6%
9.5%
10.1%
Net profit margin
8.3%
7.7%
7.0%
7.5%
7.6%
2016E
EBITDA
Operating profit
Current liabilities
bank debt
bank debt
Equity
Total liabilities
Net debt
17.2
9.0
Fig. 6. Pozbud: Cash flow forecast
2012
2013E
2014E
2015E
CF from operations
-4.9
9.7
22.9
5.9
4.5
CF from investment
5.6
-18.8
-23.5
-13.6
-5.9
-1.2
21.1
-18.2
-8.0
-8.4
-18.8
-15.8
-9.8
CF from financing
Net change in cash
-0.5
11.9
138
FINANCIALS
Poland
NOVEMBER 12, 2014
RECOMMENDATION
PRESCO
SELL (INITIATION)
No story to buy

STOCK PERFORMANCE
Equity Story. PRESCO is one of the leading entities operating on the
market of purchase and sale of mass-scale consumer receivables in
Poland. It conducts the process of receivables recovery for its own
Buy
12
Hold
Sell
10
account, using amicable methods and, if necessary, at court. The
basic market on which the company builds its position and
8
development plans is Poland. In 2013, P.R.E.S.C.O. launched a pilot
6
WIG
Relative
PRE
project aimed at expansion abroad by way making the first investment
of 13.9x. It generates a ROE of 2%. Our TP of PLN3.1/ share implies
a 19% downside potential. We are initiating our coverage with a SELL
Oct-14
Jul-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
rating.

Jul-12
estimates, the company trades at 28.5x 2014 P/E and an EV/EBITDA
0
Oct-12
resigned. All this doesn’t exactly help the company. Based on our
2
Apr-12
any major debt portfolio in the period. What is more, its CFO
Jan-12
with PLN1.8mn in net profit (vs. PLN9.1mn in 2013) and it didn`t buy
4
Oct-11
in a receivables portfolio in Russia. PRESCO had a quite weak 1H14
Financials. We expect the company’s revenues to rise by 3% to
Rec.
Date
PLN53mn in 2015 and to PLN57mn in 2016E. Due to changes in the
business model (50/50 settlement and court cases), we expect its
n.a.
n.a.
cost-to- income to fall in the following years to 70%. We do not expect
the Russian portfolio to add any extras to revenues in 2014-2016.
Purchases of debt portfolios should stabilise at around PLN40mn per
year. We expect the company to hit bottom in 2014E , when its net
profit should amount to PLN2.6mn. It should, however, rise to
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
COMPANY DESCRIPTION
PRESCO group is one of the entities operating on the market
of purchase and sale of mass-scale consumer receivables in
Poland. The Company was established in 1998 and it
specialises in the purchasing of portfolios receivables, which
have been recognised to be difficult to recover by the primary
owners.
PLN7.7mn in 2016E.

Triggers/Risks. We believe that the golden age for the company has
already passed. We do not see any triggers that could help either.
Since court collectability is lower each year, the company tries to shift
the business model towards settlement. But it won’t work, in our
Main shareholders
Andrzejewski Investments Limited
Piwonski Investments Limited
TFI Legg Maison
opinion, not I the near future anyway. We also believe it Russian
portfolio to be quite risky, even though its losses aren’t as big.

% of votes
40.7%
40.6%
5.3%
ANALYSTS
Andrzej Bieniek
Valuation & recommendation. We have set a 12-month target price
for PRESCO at PLN3.1/share using a blend of residual income (50%)
and a DCF method (50%), which implies a 19% downside potential.
Dariusz Górski
The company currently trades at P/E 11x 2015E, an EV/EBITDA of
11.1x and a dividend yield of 0.1%. We used a RFR of 3%, risk
premium 5%, Beta levered 1.54.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
65.8
17.4
16.6
9.1
8.2
7.4
2014E
51.4
10.4
9.6
2.6
28.5
13.9
2015E
53.1
14.3
13.5
6.8
11.1
10.1
139
2016E
57.1
15.4
14.6
7.7
9.7
9.4
Free float (%)
1M
Price performance
-7.4%
PRE.WA / PRE PW
76
19.7
18.7%
0.004
3M
YTD
8.4%
-39.6%
Fig. 1.PRESCO: Residual Income valuation
2014E
2015E
2016E
3
7
8
Net profit
Equity (YE)
116
122
130
ROE
2.3%
5.7%
6.1%
COE
10.7%
10.7%
10.7%
Excess return
-8.4%
-5.0%
-4.6%
-10
-6
-6
Growth (CAGR)
ROE (avg.)
Pay-out (avg.)
Total value
PV
1.6%
7.2%
30%
-38
-18.8
Perpetuity
3.0%
7.4%
30%
-80
-29
-65.7
Residual income
-17.8
# of shares (m)
20
Value per share
-3.3
Last reported BVPS
5.9
Fair value (Jan'14)
2.5
Month
10
2.8
3.1
12 month TP
Upside potential
-19%
Fig. 2. PRESCO: DCF valuation
Revenues
y/y
EBIT
y/y
EBIT margin
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
51
53
57
61
64
67
70
72
73
74
TV
75
-22%
3%
8%
7%
6%
5%
4%
3%
2%
1%
1%
13.5
9.6
13.5
14.6
15.2
14.8
14.8
14.7
14.4
14.0
13.4
-42%
42%
8%
4%
-3%
0%
-1%
-2%
-3%
-4%
-4%
19%
25%
26%
25%
23%
22%
21%
20%
19%
18%
18%
Taxes on EBIT
1.8
2.6
2.8
2.9
2.8
2.8
2.8
2.7
2.7
2.5
2.6
NOPAT
7.7
11.0
11.8
12.3
12.0
12.0
11.8
11.7
11.3
10.8
10.9
Depreciation
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
14.1
17.1
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
-17.1
-40.0
-40.0
-40.0
-40.0
-40.0
-40.0
-40.0
-40.0
-40.0
-40.0
-0.8
-0.8
-0.8
-0.8
-0.8
-0.8
-0.8
-0.8
-0.8
-0.8
-0.8
WC change
0.3
0.3
0.3
-1.3
0.1
0.3
0.3
0.3
0.3
0.3
0.3
Free cash flow
5.0
-11.7
12.1
11.0
12.1
12.3
12.1
11.9
11.6
11.1
11.2
Discount
0.9
0.8
0.8
0.7
0.7
0.6
0.5
0.5
0.5
0.4
0.4
WACC (2014-23E)
9%
Portfolio amortisation
Portfolio purchase
Capex
PV FCF (2014-23E)
Terminal growth
PV Terminal value
Total EV
Net debt (cash) (YE13)
Equity value
Equity value per share-current (PLN)
Target price (12-month)
Upside/downside
50
1.0%
55
104
54
51
19.7
2.6
2.8
-26%
140
Fig. 3. PRESCO: 3Q14 results preview
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14E
y/y
q/q
Revenues
20.2 14.2 18.1 12.2 14.9 19.2 17.1 14.6 14.4 12.7
10.0 -42% -21%
o/w revaluation of debt portfolios
-0.8
-6.8
-2.9
-8.8
-6.2
-1.9
-3.9
-6.5
-4.9
-8.1
-8.0 104%
-2%
COGS
-11.0 -11.1 -11.2
-6.2 -12.9 -16.5
-8.0
-8.7 -11.8
-9.0
-8.0
0% -11%
EBITDA
8.8
2.9
6.6
5.2
1.6
2.4
7.7
5.7
2.2
3.4
2.1 -73% -38%
EBIT
8.6
2.5
6.0
5.2
1.4
2.2
7.5
5.5
2.0
3.2
1.9 -75% -41%
Net profit
7.2
0.9
4.1
3.3
-0.6
0.7
5.5
3.5
0.1
1.6
0.1 -97% -91%
Purchases of debt portfolio
11
21
29
16
0
-1
-5
20
-1
-2
18 -435% -862%
EBIT margin
42% 17% 33% 42% 10% 11% 44% 38% 14% 25%
19%
Net profit margin
36%
7% 22% 27% -4%
4% 32% 24%
1% 13%
1%
Fig. 4. PRESCO: Forecast changes
2014E
New Previous
Sales
51.4
n.a.
EBITDA
10.4
n.a.
EBIT
9.6
n.a.
Net profit
2.6
n.a.
New
53.1
14.3
13.5
6.8
Change
0%
0%
0%
0%
2015E
Previous
n.a.
n.a.
n.a.
n.a.
New
57.1
15.4
14.6
7.7
Change
0%
0%
0%
0%
2016E
Previous
n.a.
n.a.
n.a.
n.a.
Change
0%
0%
0%
0%
Fig. 5. PRESCO: Valuation changes
New
2.80
2.77
3.10
DCF valuation
Residual Income valuation
Previous
n.a.
n.a.
n.a.
Change
0%
0%
0%
Fig.6. PRESCO: Income statement forecast
Fig.7. PRESCO: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
64.8
65.8
51.4
53.1
57.1
-39.4
-46.1
-40.2
-37.2
-40.0
Gross profit
25.4
19.7
11.2
15.9
Management costs
-2.7
-3.1
-2.4
-2.5
other operating income, net
-6.7
-7.5
-6.9
-6.8
-6.9
EBITDA
23.0
17.4
10.4
14.3
EBIT
22.3
16.6
9.6
Financial expenses/income
-6.7
-7.5
Pre-tax profit
Net sales
CoGS
2012
2013
2014E
2015E
20.7
22.1
8.4
8.4
8.4
L-t assets
172.3
170.1
160.9
160.9
160.9
17.1
Total assets
193.0
192.2
169.3
169.3
169.3
-2.6
Current liabilities
32.9
32.8
32.8
32.8
32.8
o/w debt
29.6
30.4
32.4
32.4
32.4
15.4
L-t liabilities
50.4
44.7
45.0
45.0
45.0
13.5
14.6
o/w debt
50.4
44.6
44.9
44.9
44.9
-6.9
-6.8
-6.9
115.7
122.5
130.2
2016E
Current assets
Equity
107.6
112.8
2016E
15.5
9.1
2.6
6.8
7.7
Income tax
0.0
0.0
0.0
0.0
0.0
Net profit
15.5
9.1
2.6
6.8
7.7
2012
2013
2014E
2015E
Gross margin
39.2%
29.9%
21.8%
30.0%
30.0%
CF from operations
43.5
37.2
36.7
37.3
35.3
EBITDA margin
35.4%
26.5%
20.2%
27.0%
27.0%
CF from investment
-86.6
-11.7
-14.0
-37.0
-37.0
EBIT margin
34.3%
25.2%
18.6%
25.5%
25.6%
CF from financing
27.3
-13.0
-7.5
-6.9
-6.9
Pre-tax margin
24.0%
13.8%
5.1%
12.7%
13.5%
15.2
-6.5
-8.5
Effective tax rate
-0.2%
0.0%
0.0%
0.0%
0.0%
Net profit margin
24.0% 13.8%
5.1%
12.7%
13.5%
Fig.8. PRESCO: Cash flow forecast
Margins
Net change in cash
-15.9
12.5
141
142
Poland
November 12, 2014
RECOMMENDATION
RONSON
SELL (INITIATION)
Simply too expensive




Equity Story. Ronson offers exposure to the quickly developing
Polish residential construction market. We expect a favourable
2015E outlook for the company, incl. probable growth in sales
volumes and strong profits on rising notary sales. In the short
term, however, we expect net losses in 4Q14/1Q14 on low notary
sales, accompanied by a negative operating cash flow boosting
leverage. Also, having followed the stock’s outperformance in the
last 3M period (compared to its closest peers), we believe the
company became quite expensive. It is trading in line with its NAV
and above the estimated fair P/NAV ratio, which we estimate at
0.96x, taking into account the 2015E ROE and 0.73x based on
our 2016E ROE estimates. We also cannot exclude some share
supply overhang, which theoretically could put some pressure on
the share price. Note for example that U.Dori, Ronson’s major
shareholder, recognised a deep net loss and negative equity in
1H14 and, hypothetically, we think it could decide to divest to
deleverage.
Financials. Following the disappointing 2014E results (net loss),
we expect a strong profit momentum in 2015. We expect the
handing-overs to rise to 950 units next year (from 500 in 2014E)
from the accumulation of completed dwellings (with respect to the
construction schedule) and strong pre-sales in 2014E (c. 700).
We forecast the sales volume at c. 850-900 units annually beyond
2015 (above the 2014E level) and the handing-overs at the same
level.
Triggers/Risks. We see a possible risk in the form of share
supply from U.Dori, which faces a strained balance sheet. The
growing sales volumes could be a major trigger, drawing support
from 1) a low WIBOR3M (past reverse-correlation between
interest rates and apartment sales volumes), 2) a recovery of
mortgage originations on some GDP growth acceleration next
year (past correlation between the GDP rate and mortgage
originations), and 3) a likely further increase in price limits under
the MdM scheme. We think that these factors should more than
offset the negative implication from the maximum LTV fall to 90%
from 2015 on from the current 95%. Another trigger could be
dividend payment next year (from retained profits)
arrived at 12 month TP at PLN1.53 per share, and we issue Sell
recommendation for Ronson.
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
-
-
-
-
absolute
relative
(p.p)
-
-
COMPANY DESCRIPTION
Ronson is a residential developer focusing on Warsaw and
Poznan markets.
Main shareholders
U.Dori Group
ITR Dori
ING pension fund
% of votes
39.8%
39.8%
7.3%
4.97%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
Company Data
PLNm
Sales
EBITDA
EBIT
Net profit
P/E (x)
EV/EBITDA (x)
2013
207.0
19.4
18.7
19.0
24.3
29.7
2014E
160.4
0.3
-0.3
-4.4
n.m.
n.m.
2015E
370.9
51.1
50.5
38.3
12.1
9.8
143
2016E
314.5
43.5
42.8
33.1
14.0
10.8
RONO.WA / RON PW
463
272.4
Free float (%)
20.4%
0.2
1M
3M
YTD
Price performance
-4.0%
18.9%
-9.1%
Fig. 1. Ronson: DCF valuation
2014E
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cash flow
Sum of FCFFs PVs
Risk free rate
WACC
Residual value
Ronson’s EV
Dividends
Equity value
No. of shares (m)
Equity value of Ronson per share (PLN)
Month
Current equity value of Ronson per
share (PLN)
12M Target Price (PLN)
160
0
0
0
1
16
-1
16
239.5
3.0%
8.0%
1.0%
493.7
228.6
468.1
52.2
164.0
0.0
356.2
272.4
1.31
11
2015E
371
50
10
41
1
22
-1
63
2016E
315
43
8
35
1
1
-1
35
2017E
310
42
8
34
1
-4
-1
29
2018E
338
45
9
37
1
0
-1
37
2019E
336
44
8
36
1
0
-1
36
2020E
334
44
8
35
1
0
-1
36
2021E
334
43
8
35
1
2
-1
37
2022E
325
41
8
33
1
1
-1
34
2023E
320
42
8
34
1
1
-1
34
1.41
1.53
Fig. 2. Ronson: Comparable valuation to housing developers
P/NAV
Name
2Q14
Dom Development
Robyg
Polnord
JWC
Inpro
Vantage
Median:
NAV of Ronson as of 2Q14 (PLNmn)
Implied equity value of Ronson (PLNmn)
Implied equity value of Ronson per share (PLN)
1.33
1.37
0.17
0.44
0.90
0.55
0.79
465
369
1.36
Source: Bloomberg, BZ WBK research
144
Fig. 3. Ronson: 3Q14 results review
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
21
35
7
35
31
126
54
57
57
39
66
47
-1.0
-4.8%
4.4
-2.7
12.5% -37.5%
2.3
6.6%
-2.2
-6.9%
29.6
23.5%
9.0
16.7%
5.2
9.2%
4.2
7.4%
0.1
0.3%
5.8
8.7%
-4.8 -212.2% -416.3%
1.5
3.2% -16.1%
-3.2
-6.0
-1.3
-6.2%
4.4
-2.9
12.4% -40.2%
2.1
6.0%
-2.3
-7.5%
29.4
23.4%
8.9
16.4%
5.0
8.8%
4.1
7.2%
0.0
0.0%
5.6
8.5%
-4.9 -219.6% -462.2%
1.4
2.9% -16.6%
-3.3
-6.8
0.4
5.9
-1.1
1.7% 16.7% -14.9%
Net margin
3.0
8.6%
-1.6
-5.2%
31.4
24.9%
9.1
16.8%
4.0
7.1%
4.6
8.1%
0.4
1.1%
4.2
6.3%
-4.9 -206.0%
0.0
0.1% -16.6%
-3.1
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Ronson: Forecast changes
2014E
New Previous
Sales
160
n.a
EBITDA
0
n.a
EBIT
0
n.a
Net profit
-4
n.a
New
371
51
50
38
Change
n.a
n.a
n.a
n.a
2015E
Previous
n.a
n.a
n.a
n.a
New
315
43
43
33
Change
n.a
n.a
n.a
n.a
3Q14
y/y
q/q
29.5 -48.5%
-37.3%
2016E
Previous
n.a
n.a
n.a
n.a
n.m.
-167.4
Change
n.a
n.a
n.a
n.a
Fig. 5. Ronson: Valuation changes
New
1.53
1.36
DCF valuation
Previous
-
Change
-
Fig. 6. Ronson: Income statement forecast
Fig. 7. Ronson: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
199
207
160
371
315
Current assets
2012
2013
2014E
2015E
2016E
749
698
710
791
COGS
148
164
135
296
247
824
Fixed assets
37
47
47
47
Gross profit
50
43
25
75
47
68
Total assets
787
745
757
838
871
SG&A
22
23
24
-2
-1
-1
25
25
Current liabilities
174
124
139
183
182
0
0
67
20
20
20
EBITDA
27
19
20
0
51
43
153
155
155
155
155
Operating profit
26
2
19
0
50
43
141
144
144
144
144
-1
-4
-3
-2
Equity
460
467
462
501
534
28
17
-4
47
41
Total liabilities
787
745
757
838
871
Income tax
3
1
0
-9
-8
100
40
6
Net profit
32
19
-4
38
33
Net debt
163
112
Gross margin
25.4%
20.6%
15.8%
20.3%
21.6%
EBITDA margin
13.6%
9.4%
0.2%
13.8%
13.8%
Operating margin
13.2%
9.1%
-0.2%
13.6%
13.6%
Net profit margin
15.9%
9.2%
-2.7%
10.3%
10.5%
Profit before tax
bank debt
bank debt
Fig. 8. Ronson: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
-36
54
20
68
40
CF from investment
-8
1
1
2
4
CF from financing
-6
-48
-9
-10
-11
12
60
34
Net change in cash
-50
7
145
146
Health Care
Poland
NOVEMBER 12, 2014
RECOMMENDATION
SYNEKTIK
BUY (MAINTAINED)
New cyclotron weigh on results
 Deal with Iason GmbH. Synektik purchased rights to four
radiopharmaceuticals - EFDEGE, IASOflu, IASOdopa and
IASOcholine - for EUR2.77mn in Poland, Lithuania, Latvia,
Estonia, Ukraine and Belarus. It also bought the right to
produce and sell those radiopharmaceuticals in then Czech
Republic and Slovakia. According to our calculations,
Synektik paid 4-5x this year’s license fee, which we have
estimated is at 12% of sales, and gained access to several
new markets. We expect 2-3k doses to be sold on the new
markets.
12-month Target Price for Synektik at PLN32.5 and

STOCK PERFORMANCE
Buy
Hold
Sell
40
35
30
TP
25
20
SNT
WIG Relative
15
10
5
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
0
Oct-11
mediocre results, lower y/y across all lines, but visibly
higher than in 1-2Q14. Such dynamics is also an effect of
high base from 3Q13. In radiopharmacy segment earnings
were depressed by opex and depreciation costs of Warsaw
cyclotron, which is still in registration process. ‘Old
business’ should perform quite well mostly due to
settlement of contract for MRI scanner shipment to
Oncology Hospital in Gliwice. We expect distribution and IT
segment to report PLN16.5mn sales, -5% y/y. Overall, we
see company to report sales of PLN22.4mn, with an
EBITDA of PLN3.4mn and a net profit of PLN1.6mn.
Outcome: NEUTRAL.
Jan-12
 3Q14 Results Preview. We expect Synektik to report
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
2.9
Buy
10-21-2014
22.7
32.5
3.6%
Buy
7-9-2014
21.0
35.9
8.1%
3.2
Buy
4-28-2014
25.1
32.9
-16.4%
-14.8
Buy
1-30-2014
22.5
31.3
11.7%
9.5
MAIN SHAREHOLDERS
% of votes
Melhus Company Limited
Templeton Asset Management
ING pension fund
PZU mutual fund
Altus mutual fund
Trigon mutual fund
Norges Bank
Noble mutual fund
25.0%
10.8%
10.0%
8.7%
7.5%
5.4%
5.2%
5.1%
COMPANY DESCRIPTION
Synektik is a healthcare company focused on radiology
segment.
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
77.4
14.2
10.3
7.7
28.3
13.7
2014E
85.2
12.4
6.8
5.8
37.7
16.4
2015E
101.3
19.0
14.5
12.1
18.0
9.9
147
2016E
105.6
21.5
17.0
14.1
15.4
7.9
SNTP.WA / SNT PW
201
8.5
Free float (%)
75.0%
0.3
1M
3M
YTD
Price performance
9.4%
12.7%
14.8%
Fig. 1. Synektik: 3Q14 results preview
Sales
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
9.0
19.2
6.9
9.2
16.4
28.9
11.9
10.5
24.3
32.2
9.3
18.7
22.4
-7.9%
19.4%
3.4 -18.6%
15.2%
-2.0
71.9%
4.6
EBITDA
EBITDA margin
0.5
5.3%
1.6
-1.3
8.4% -18.8%
0.1
0.7%
0.5
2.9%
3.9
13.4%
1.3
11.2%
1.7
16.3%
4.2
17.2%
7.0
21.8%
1.0
11.2%
2.0
10.6%
EBIT
EBIT margin
0.2
2.7%
1.3
-2.0
6.5% -29.3%
-0.7
-7.3%
-0.3
-1.6%
3.2
10.9%
0.6
5.0%
0.9
8.9%
3.4
13.9%
6.2
19.4%
0.3
2.9%
0.5
2.8%
1.7 -49.8% 219.7%
7.6%
-6.3
4.8
Net profit
0.2
1.0
-1.9
Net margin
1.8%
5.0% -28.0%
-0.9
-9.4%
-0.6
-3.9%
2.8
9.8%
0.3
2.4%
0.6
5.8%
2.9
11.8%
4.7
14.7%
0.3
2.9%
0.4
2.3%
1.6 -44.2% 264.2%
7.1%
-4.7
4.8
Fig. 2. Synektik: Forecasts changes
2014E
New Previous
Sales
85.2
85.2
EBITDA
12.4
12.4
EBIT
6.8
6.8
Net profit
5.8
5.8
New
101.3
19.0
14.5
12.1
Change
0.0%
0.0%
0.0%
0.0%
2015E
Previous
101.3
19.0
14.5
12.1
New
105.6
21.5
17.0
14.1
Change
0.0%
0.0%
0.0%
0.0%
2016E
Previous
105.6
21.5
17.0
14.1
Change
0.0%
0.0%
0.0%
0.0%
Fig. 3. Synektik: Valuation changes
New
32.50
27.60
DCF valuation
Previous
32.50
27.60
Change
0.0%
0.0%
Fig. 4. Synektik: Income statement forecast
Fig. 5. Synektik: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
61.5
77.4
85.2
101.3
105.6
2012
2013
2014E
2015E
2016E
Current assets
37.5
59.0
51.3
70.2
COGS
42.5
45.0
55.5
59.6
88.4
59.8
Fixed assets
22.5
43.8
48.7
45.5
Gross profit
19.0
32.3
29.7
42.0
41.7
45.8
Total assets
60.1
102.9
100.0
115.7
130.4
SG&A
18.9
22.1
-0.3
0.2
22.9
27.1
28.8
Current liabilities
34.5
39.0
31.2
36.7
38.1
0.0
0.0
0.0
3.2
3.4
2.5
2.5
2.8
2.5
14.2
12.4
19.0
21.5
8.0
8.9
7.2
5.4
Operating profit
4.6
-0.1
10.3
6.8
14.5
17.0
7.0
7.9
6.1
4.3
3.5
-0.8
-1.1
0.1
0.3
0.4
17.5
54.9
61.6
73.6
87.7
Profit before tax
4.3
EBITDA
bank debt
bank debt
Equity
-1.0
9.2
6.9
14.9
17.4
share capital
3.3
3.4
4.3
4.3
Income tax
0.0
1.5
1.1
2.8
3.3
Minority Interest
0.0
0.0
0.0
0.0
0.0
Net profit
-0.9
7.7
5.8
12.1
14.1
60.1
102.8
100.0
115.7
130.4
-14.1
-29.5
-47.0
30.9%
41.8%
34.8%
41.1%
43.3%
4.6%
18.4%
14.5%
18.8%
20.4%
-0.2%
13.4%
7.9%
14.4%
16.1%
Net profit margin
-1.5%
9.9%
6.8%
11.9%
13.3%
Gross margin
EBITDA margin
Operating margin
Total liabilities
Net debt
-3.7
-21.7
Fig. 6. Synektik: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
1.4
13.3
2.0
16.6
18.6
CF from investment
-3.5
-24.4
-10.5
-1.2
-1.1
CF from financing
-1.6
31.0
-1.8
-1.8
-0.8
-10.4
13.6
16.8
Net change in cash
-3.7
19.9
148
Poland
NOVEMBER 12, 2014
RECOMMENDATION
TESGAS
BUY (MAINTAINED)
Nothing new


PUBLICATION DATE
Equity Story: Our investment view on Tesgas has not changed.
Similar to Atrem’s case, the long-awaited margin rebound in the
construction niches where Tesgas operates is not materialising
and it is unlikely to emerge any time soon. In our view, we will
have to wait a little longer to see better times arrive in terms of the
generated margins on contracts. On the other hand, we do not
change our view on Tesgas. For us, it is operating in an attractive
natural gas niche of the construction market, which also offers
exposure to the new round of EU funds’ flow, and it is wellbalanced with an estimated FY’14 net cash of PLN20mn (c. 50%
of the market capitalisation). In this light, we believe Tesgas, like
Atrem, is well-prepared for a rebound in margins, which, in our
view, will finally materialise sometime ahead.
Change in valuation & recommendation. Our DCF-based
valuation remains nearly unchanged at PLN7.40/share. The
comparative valuation points to PLN4.30/share.
NOVEMBER 14, 2014
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
Buy
10/22/2014
4.2
7.4
6.9%
6.4
Buy
4/28/2014
5.0
7.8
-16.5%
-19.9
Buy
3/31/2014
5.1
7.8
-1.2%
0.4
Buy
1/30/2014
4.8
7.4
5.2%
1.3
COMPANY DESCRIPTION
Tesgas is an engineering company specializing in the
construction of a great variety of natural gas facilities as well
as providing maintenance services for the largest natural gas
network operators, namely PGNiG and Gaz System.
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
60.7
3.7
1.3
3.5
14.7
7.8
2014E
78.9
4.2
2.1
0.0
n.a.
7.3
2015E
93.7
5.0
2.8
3.7
13.9
5.8
2016E
103.4
7.4
5.1
5.8
8.7
3.5
149
TSGP.WA / TSG PW
51
11.4
Free float (%)
17.9%
0.1
1M
3M
YTD
Price performance
10.6%
2.1%
29.9%
Fig. 1. Tesgas: 3Q14 results review
Sales
EBITDA
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
y/y (%)
q/q (%)
31.9
47.9
23.1
18.4
21.3
28.8
11.6
11.7
18.1
19.4
16.9
18.3
24.6
36.3%
34.3%
4.2
0.4
0.3
1.0
1.8
0.3
-0.3
0.9
14.6% 3.2%
2.7%
5.6%
9.5%
1.7%
-1.4%
3.8%
-0.3
-0.4
0.4
1.6
-0.4
-1.0
11.8% -2.8%
2.1
8.9
3.5
-21.7
1.6
6.7%
18.5%
15.0%
-117.9%
7.4%
1.4
8.1
2.7
-22.5
1.0
4.3%
16.9%
11.6%
-122.1%
4.5%
1.9
5.9
2.1
-48.7
1.1
Net margin
6.0%
12.3%
8.9%
-264.5%
5.0%
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 2. Tesgas: Forecast changes
2014E
New Previous
Sales
78.9
78.9
EBITDA
4.2
4.2
EBIT
2.1
2.1
Net profit
0.0
3.0
3.4
-3.4%
2.4%
8.1%
-2.4%
-5.5%
-0.1
-0.2
0.2
3.6
-0.1
-0.7
11.9% -0.9%
-1.7%
0.8%
18.6%
-0.6%
-4.0%
3.4
-6.5% -462.9%
-175
523
0.2 -60.1% -117.4%
0.7%
-171
616
0.3 111.1% -144.3%
1.3%
47
529
Change
New
2015E
Previous
Change
New
2016E
Previous
0.0%
93.7
93.7
0.0%
103.4
103.4
0.0%
0.2%
5.0
7.0
-27.9%
7.4
7.8
-4.8%
-1.2%
2.8
4.7
-40.1%
5.1
5.4
-6.1%
n.a.
3.7
5.8
-37.0%
5.8
6.4
-8.8%
Change
Fig. 3. Tesgas: Valuation changes
New
7.4
4.3
DCF valuation
Previous
7.4
4.4
Change
n.a.
-2.3%
Fig. 4. Tesgas: Income statement forecast
Fig. 5. Tesgas: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
91.6
60.7
78.9
93.7
103.4
COGS
74.8
50.1
66.3
79.6
Gross profit
16.8
10.6
12.6
SG&A
2012
2013
2014E
2015E
2016E
Current assets
69.7
70.1
77.5
86.2
94.7
86.6
Fixed assets
51.4
49.2
50.1
51.5
53.2
14.0
16.8
Total assets
122.6
121.4
129.9
139.9
150.1
Current liabilities
20.6
21.4
27.2
31.8
34.9
2.9
2.3
2.3
2.3
2.3
14.5
12.4
12.5
12.5
12.5
14.4
12.3
12.3
12.3
12.3
76.1
79.5
79.5
83.2
89.0
11.4
10.9
9.7
10.5
11.2
11.8
-21.3
0.3
0.0
0.0
0.0
EBITDA
-13.1
3.7
4.2
5.0
7.4
Operating profit
-15.4
1.3
2.1
2.8
5.1
-0.1
-1.7
-1.0
-1.0
-0.9
-15.3
2.9
3.0
3.8
6.0
share capital
11.4
11.4
11.4
11.4
0.8
-0.5
0.0
0.0
0.0
Minority Interest
1.3
1.2
1.3
1.4
1.5
-14.6
3.5
0.0
3.7
5.8
Total liabilities
122.6
121.4
129.9
139.9
150.1
-20.3
-21.6
-25.2
18.3%
17.5%
16.0%
15.0%
16.3%
EBITDA margin
-14.3%
6.1%
5.3%
5.4%
7.2%
Operating margin
-16.9%
2.1%
2.6%
3.0%
4.9%
Net profit margin
-15.9%
5.7%
0.0%
3.9%
5.6%
2016E
Profit before tax
Income tax
Net profit
Gross margin
bank debt
bank debt
Equity
Net debt
-16.8
-22.2
Fig. 6. Tesgas: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
9.7
6.3
0.6
4.8
7.5
CF from investment
24.4
-0.9
-3.0
-3.6
-4.0
-31.2
-2.8
0.6
0.1
0.1
-1.8
1.3
3.6
CF from financing
Net change in cash
2.9
2.6
150
Poland
November 12, 2014
RECOMMENDATION
TRAKCJA
BUY (MAINTAINED)
Relatively cheap

Equity story. We maintain our positive view on Trakcja and see
an upside risk to our 2014E financial forecast following the strong
and slightly better-than-expected 3Q14 results (net profit +63%
y/y, positive operating CF, leverage q/q reduction). Even keeping
our original FY forecasts intact, the company is relatively cheap,
trading at a 2014E P/E of 11.3x, which offers 20% and 27%
discounts to its Polish and Western peers, respectively. The
healthy gross margin at 9.5% in 9M14 also suggests a significant
upside risk to our FY15 forecast (6% expected by us), we
maintain, however, our profit projection to stay on the safe side.
We are also optimistic on the LT outlook for Trakcja since
investments in the sector should accelerate in the coming years
underpinned by EU funds (see the note below for details). Having
said that, we believe in Trakcja’s backlog development in 2015,
although some delay cannot be excluded given the poor track
record of PKP PLK when it comes to smooth contracts’
distribution). We also like the company’s plans for entering new
foreign markets, such as in Scandinavia and the Belarus, which
would constitute an upside to our projections.
 Change in forecasts. We maintain our financial forecast for
Trakcja intact.
 Results outlook. We estimate that our FY2014/15 sales forecast
is secured by the backlog in 100%/80%, which is high. We
maintain our view that the company’s sales should rebound after
2015 thanks to EU funds’ flow. According to initial estimates, PKP
PLK may get up to PLN45bn from the EU for railway tracks’
construction/renovation in the 2014–2020 period (cash transfers
over 2016– 2022). All in all, spending might reach a total of
approx. PLN60bn, assuming PKP PLK’s contribution is at 25%. If
PKP uses 75% of the available funds, annual investments could
reach PLN6.4bn. We estimate that this would be 35% more than
the average for the 2009–2015E period.
 Triggers & Risks. Potential triggers: 1) strong 4Q14 results, 2)
further leverage reduction, 3) signing of new large railway
contracts co-financed by EU finds, 4) dividend payment, 5)
expansion into new foreign markets (Scandinavia, Belarus).
Risks: 1) growth in construction material prices at times of an
accumulation of construction projects in the railway sector, 2)
foreign contractors putting pressure on margins in the sector, 3)
PKP PLK’s inefficiency in utilising EU funds and distributing
contracts to contractors.
 Change in Valuation & Recommendation. We maintain our TP
for Trakcja at PLN1.22. We also maintain our Buy
recommendation.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
1 675.0
73.6
50.5
37.7
12.5
7.8
2014E
1 756.3
88.2
64.8
41.9
11.3
7.2
2015E
1 750.0
74.1
50.1
30.2
15.7
8.7
151
2016E
1 841.3
86.3
61.7
38.5
12.3
7.5
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
3.1
Buy
10-22-2014
1.11
1.22
3.6%
Hold
7-9-2014
1.00
0.97
11.0%
5.9
Sell
4-28-2014
1.30
0.93
-23.1%
-21.4
Sell
1-30-2014
1.3
0.8
0.0%
-2.3
Sell
10-23-2013
1.1
0.8
18.2%
23.7
COMPANY DESCRIPTION
Trakcja is a contractor with focus on building railways and
roads. The insignificant part of the Company’s business
constitutes residential development activity.
Main shareholders
Comsa
ING pension fund
% of votes
28.8%
12.9%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
TRKP.WA / TRK PW
473
411.2
Free float (%)
60.6%
2.0
1M
3M
YTD
Price performance
3.6%
13.9%
-10.9%
Fig. 1. Trakcja: 3Q14 results review
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
y/y (%)
q/q (%)
Sales
726.5
748.7
201.2
381.6
404.0
359.0
150.0
405.8
531.3
587.8
239.1
340.0
459.0 -13.6%
35.0%
EBITDA
EBITDA margin
32.3
4.4%
93.2
12.4%
-0.2
-0.1%
50.6
13.3%
12.9
3.2%
-12.9
-3.6%
-11.4
-7.6%
36.0
8.9%
33.1
6.2%
15.8
2.7%
3.9
1.6%
28.5
8.4%
38.7
8.4%
16.8%
35.9%
0.4
0.0
EBIT
EBIT margin
22.2
3.1%
67.9
9.1%
-6.3
-3.1%
43.1
11.3%
5.9
1.5%
-19.6
-17.1
-5.5% -11.4%
30.3
7.5%
27.5
5.2%
9.8
1.7%
-1.9
-0.8%
22.5
6.6%
32.6
7.1%
18.7%
45.0%
0.4
0.1
Net profit
1.0
84.8
-7.8
Net margin
0.1% 11.3% -3.9%
28.3
7.4%
-1.1
-0.3%
-33.6
-21.3
-9.4% -14.2%
21.8
5.4%
21.3
4.0%
16.0
2.7%
-5.1
-2.1%
14.1
4.2%
23.8
5.2%
11.6%
68.0%
0.3
0.2
Fig. 2. Trakcja: Forecasts changes
2014E
New Previous
1756
Sales
1756
88
EBITDA
88
65
EBIT
65
42
Net profit
42
New
1750
74
50
30
Change
0%
0%
0%
0%
2015E
Previous
1750
74
50
30
New
1841
86
62
39
Change
0%
0%
0%
0%
3Q14
2016E
Previous
1841
86
62
39
Change
0%
0%
0%
0%
Fig. 3. Trakcja: Valuation changes
New
1.22
0.89
DCF valuation
Previous
1.22
0.89
Change
0%
0%
Fig. 4. Trakcja: Income statement forecast
Fig. 5. Trakcja: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
1347
1675
1756
1750
1841
Current assets
628
923
927
948
1024
COGS
1305
1530
1637
1646
1721
Fixed assets
699
720
713
706
698
Gross profit
42
108
119
104
120
Total assets
1327
1643
1640
1653
1723
SG&A
58
59
54
54
58
669
875
848
831
861
45
1
0
0
0
186
202
202
200
200
EBITDA
55
74
88
74
86
164
133
115
115
116
Operating profit
28
50
65
50
62
111
69
50
50
50
-28
-18
-13
-13
-14
494
635
677
707
745
1327
1643
1640
1653
1723
205
181
147
2016E
Profit before tax
Current liabilities
bank debt
bank debt
Equity
1
33
52
37
48
Total liabilities
Income tax
-13
5
-10
-7
-9
Net profit
-12
38
42
30
39
Net debt
176
188
Gross margin
3.1%
6.5%
6.8%
6.0%
6.5%
EBITDA margin
4.1%
4.4%
5.0%
4.2%
4.7%
Operating margin
2.1%
3.0%
3.7%
2.9%
3.4%
Net profit margin
-0.9%
2.2%
2.4%
1.7%
2.1%
Fig. 6. Trakcja: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
118
-120
12
54
65
CF from investment
-66
-10
-16
-17
-16
-116
-5
-33
-15
-15
-37
22
33
CF from financing
Net change in cash
-63
-136
152
Poland
November 12, 2014
RECOMMENDATION
UNIBEP
BUY (INITIATION)
Capitalizing on housing boom




Equity Story. Unibep has become the ‘first choice contractor’ for
many top residential developers, thanks to its high-quality service
in home-building. We think that the housing boom in Poland
should further support the company’s backlog development and
performance of the construction division, as well as homes sale
volumes of its Unidevelopment subsidiary. We also believe the
company already learnt its lesson from its presence in the
Norwegian market and the modular home construction there, as
well as road construction in Poland (poor margins so far). This is
why we think the profitability of both these business lines should
finally reach targeted levels. Valuation-wise, Unibep is relatively
cheap. The P/E multiple for 2015 at 11.1x is not demanding and
offers a double-digit discount for the peers’ median.
Financials. The 4Q14 outlook is promising. The company is
scheduled to complete two residential projects (Lycke and
Czarnieckiego), which should boost its q/q notary sales. We also
expect y/y growth in sales and profits from residential business in
2015E. Residential construction is a high margin business line
and these projects should strongly and positively help Unibep’s
quarterly figures, in our view. In 2015E, we forecast a double-digit
profit growth on some margin rebound and a marginal sales
increase. In details, we forecast flat sales from the construction
business, with risk on the upside, and a slight (6%) increase in
sales from the modular home construction, with respect to the
company’s further expansion into Norway and Germany. We also
expect a flat sales from road projects. Beyond 2015, we forecast
flat sales from the aforementioned business lines and gross
margin stabilisation.
Triggers/Risks. The company’s high reliance on the construction
business in Eastern markets (>20% of backlog) is the major risk
factor. Any worsening of the investment climate in Russia may
harm business development there. On the other hand, the
expected profit growth in 2015E might be a trigger for the share
market price. Also conclusion of the disposal of non-core property
(of BV of c. PLN22mn) could be another share price trigger.
arrived at 12 month TP at PLN9.2 per share. We issue Buy
recommendation.
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
-
-
-
-
absolute
relative
(p.p)
-
-
COMPANY DESCRIPTION
Unibep is a general contractor and residential projects
developer. Company is focusiing on general construction
works and roads construction.
Main shareholders
Ms. Zofia Mikoluszko
Ms. Zofia Iwona Stajkowska
Ms. Beata Maria Skowronska
Aviva pension fund
Aviva mutual fund
% of votes
26.2%
17.1%
16.9%
9.8%
5.0%
ANALYST
Adrian Kyrcz
(+48) 22 586 81 59
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
920.5
34.0
28.1
16.2
16.9
7.4
2014E
1 177.8
34.1
27.9
20.7
13.2
8.9
2015E
1 204.1
39.1
32.9
24.6
11.1
7.4
153
2016E
1 186.6
36.4
30.2
22.7
12.1
7.5
UERB.WA / ERB PW
279.2
35.1
Free float (%)
38.9%
0.1
3M
3M
YTD
Price performance
7.6%
10.6%
-0.5%
Fig. 1. Unibep: DCF valuation
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cash flow
Sum of FCFFs PVs
Risk free rate
WACC
Residual value
Unibep’s EV
Dividends
Equity value
No. of shares (m)
Equity value of Unibep per share (PLN)
Month
Current equity value of Unibep per
share (PLN)
12M equity value per share (PLN)
Real estate per share (PLN)*
12M TP inc. Real Estate (PLN)
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
1178
28
5
23
6
-67
-6
-44
93.6
1204
33
6
27
6
-4
-6
22
1187
30
6
24
6
3
-6
27
1197
31
6
25
6
-2
-6
23
1190
29
6
24
6
1
-6
25
1183
28
5
23
6
1
-6
24
1183
27
5
22
6
0
-6
22
1183
27
5
22
6
0
-6
22
1183
26
5
21
6
0
-6
21
1183
25
5
20
7
0
-7
20
3.0%
8.0%
1.0%
292.7
135.7
229.3
90.5
67.4
4.2
248.2
35.1
7.1
11
7.6
8.2
0.9
9.2
Source: Company data, DM BZ WBK estimates, *please see table below for details
Fig. 2. Unibep: Real estate value calculation
Property name
Prymasa Tysiaclecia
Przytycka
Property
Land
Land
BV
22
31
Discount applied
Estimated value
20%
50%
Estimated value per share (PLN)
17.7
15.3
0.50
0.44
Fig. 3. Unibep: Comparable valuation
P/E
Name
2014E
Acciona
Astaldi
Bilfinger Berger
Eiffage
Ferrovial
Skanska
Strabag
Vinci
Hochtief
Median - Western peers
Atrem
Tesgas
Erbud
Trakcja
Budimex
Elektrobudowa
Median - Polish peers
Average implied share price of Unibep in PLN (Polish peers)
Average implied share price of Unibep in PLN (Western peers)
Average implied share price of Unibep (PLN)
51.2
5.8
12.7
12.7
33.7
17.2
13.0
12.6
17.5
13.0
13.1
15.5
10.8
20.7
15.3
15.3
9.2
8.5
2015E
27.0
4.9
9.9
10.6
30.0
15.0
11.2
12.4
14.3
12.4
24.1
12.6
13.5
15.0
19.8
10.1
14.3
10.2
8.5
EV/EBITDA
2016E
2014E
18.6
4.3
8.7
8.9
25.9
13.9
9.8
11.6
11.8
11.6
11.3
7.9
11.8
11.7
14.7
8.5
11.5
7.6
7.3
8.8
5.6
6.0
7.8
20.1
11.3
3.6
7.5
4.3
7.5
5.0
6.1
15.5
8.7
10.6
6.3
7.5
6.6
6.6
7.8
Source: Bloomberg, BZ WBK research, company data
154
2015E
8.4
5.2
4.9
7.6
19.2
10.2
3.4
7.4
4.1
7.4
6.5
4.8
13.6
7.5
9.8
4.7
7.0
7.5
8.0
2016E
8.1
4.9
4.4
7.3
18.3
9.7
3.3
7.2
3.9
7.2
4.3
2.8
11.9
8.5
6.7
4.2
5.5
5.9
7.7
Fig. 4. Unibep: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
y/y
q/q
Sales
271.3
300.0
141.6
225.5
250.5
220.3
195.5
240.2
256.1
228.8
201.3
260.6
307.2
19.9%
17.9%
EBITDA
11.6
4.3%
15.3
5.1%
6.6
4.6%
4.7
2.1%
10.3
4.1%
4.1
1.9%
5.8
3.0%
9.0
3.8%
9.5
3.7%
9.7
4.3%
4.4
2.2%
10.3
3.9%
10.0
3.2%
4.8%
-3.1%
-0.1
-0.2
9.9
3.7%
15.2
5.1%
5.2
3.7%
3.3
1.5%
9.0
3.6%
2.7
1.2%
4.3
2.2%
7.6
3.2%
8.0
3.1%
8.2
3.6%
2.7
1.4%
8.6
3.3%
8.2
2.7%
3.0%
-3.7%
-0.1
-0.2
3.8
11.0
2.4
1.4%
3.7%
1.7%
Net margin
Source: Company data. DM BZ WBK estimates
6.4
2.9%
4.1
1.7%
3.8
1.7%
2.5
1.3%
4.1
1.7%
4.5
1.8%
2.5
1.1%
3.0
1.5%
4.7
1.8%
4.7
1.5%
4.6%
1.1%
-0.1
-0.1
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 5. Unibep: Forecast changes
2014E
New Previous
n.a.
Sales
1178
n.a.
EBITDA
34
n.a.
EBIT
28
n.a.
Net profit
21
New
1204
39
33
25
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
n.a.
n.a.
n.a.
n.a.
New
1187
36
30
23
Change
n.a.
n.a.
n.a.
n.a.
2016E
Previous
n.a.
n.a.
n.a.
n.a.
Change
n.a.
n.a.
n.a.
n.a.
Fig. 6. Unibep: Valuation changes
New
9.2
7.8
DCF valuation
Previous
-
Change
-
Fig. 7. Unibep: Income statement forecast
Fig. 8. Unibep: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
838
921
1178
1204
1187
Current assets
473
409
498
521
532
COGS
788
862
1119
1140
1124
Fixed assets
107
145
145
145
145
Gross profit
49
58
59
64
62
Total assets
580
554
643
666
677
SG&A
31
31
31
32
32
Current liabilities
299
245
307
312
308
2
1
0
0
0
107
33
33
33
33
EBITDA
26
34
34
39
36
109
123
134
135
134
Operating profit
20
28
28
33
30
24
34
34
34
34
-5
-5
-2
-3
-2
Equity
172
186
202
220
235
Profit before tax
580
554
643
666
677
23
9
-8
bank debt
bank debt
15
23
26
30
28
Total liabilities
Income tax
1
-7
-5
-6
-5
Net profit
17
16
21
25
23
Net debt
94
-23
Gross margin
5.9%
6.3%
5.0%
5.4%
5.3%
EBITDA margin
3.1%
3.7%
2.9%
3.2%
3.1%
Operating margin
2.4%
3.1%
2.4%
2.7%
2.5%
Net profit margin
2.0%
1.8%
1.8%
2.0%
1.9%
Fig. 9. Unibep: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
29
46
-31
33
37
CF from investment
-58
81
-5
-5
-4
23
-72
-10
-13
-15
-46
14
17
CF from financing
Net change in cash
-6
54
155
156
FINANCIALS
Poland
NOVEMBER 12, 2014
RECOMMENDATION
VOTUM
BUY (INITIATION)
History likes to repeat itself?
Equity Story. Votum provides a broad range of services related to
STOCK PERFORMANCE
assistance in obtaining compensation from insurance companies.
7
6
Oct-14
estimates, the company trades at 10x 2015E P/E and an EV/BITDA of
Jul-14
0
Apr-14
court proceedings, allowing Votum to earn a higher fee. Based on our
Jan-14
1
Jul-13
2
complex or larger cases that are typically settled by Votum’s law firm in
Oct-13
3
more (c. 2x) than they would pay the claimants otherwise and the more
Apr-13
4
segments: cases settled directly with insurers that typically agree to pay
Oct-11
breakeven point in 2014). Votum derives its revenues from two main
WIG
Relative
VOT
5
Jan-13
clients and those injured can get rehab (the clinic should be around its
8
Jul-12
majority of its business. The company also has its own clinic, where its
Sell
Oct-12
victims, bodily injuries and death of a close relative represents the vast of
9
Hold
Apr-12
Assistance in claiming compensation for personal injuries of road accident
Buy
Jan-12

5.8x. Our DCF and peer group-derived TP of PLN9.9/share implies a 32%
upside potential. We are initiating our coverage with a BUY rating.

Financials. We expect strong growth in the years ahead. We expect a
more modest growth rate ahead resulting in a CAGR of 15% in revenues.
Rec.
Date
This, coupled with stable margins, should translate into a 24% CAGR of
net profit in the period. Strong cash generation should allow Votum to pay
Price
Price performance
on issue 12 month
date
target
n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
substantial dividends (pay-out ratio of PLN6mn and 50% above the
COMPANY DESCRIPTION
PLN6mn of net profit) and, unless it embarks on major acquisitions or
broader geographical expansion, its dividend yield could be as high as 8%
in 2016E vs. 6% in 2013. Its ROE could be above 41% by 2016.

Votum specialises in servicing personal injury claims typically
on behalf of victims of motor accidents. It is one of the
leading player in Poland. It’s in house legal practice pursues
more complex cases in courts..
Triggers/Risks. In 2Q14, Votum’s casework was worth PLN970mn
(PLN394mn in courts and PLN577 pre-courts), up from PLN358mn in
YE12. The number of cases rose to 24 from 14 in 2012. The average
length of a court case is about two years and one year for the pre-court
cases. We expect cases from 2012-2013 to start closing in 2015-2016
and the company is set to show a significant rise in revenues and
Main shareholders
% of votes
DSA Financial Group
Mr. Adam Gilowski
Quercus TFI
Mr. Andrzej Dadełło
47.3%
22.3%
7.1%
5.8%
earnings. The story should be similar to EuCO’s in 2013.

ANALYSTS
Valuation & recommendation. We have set a 12-month TP of PLN
Andrzej Bieniek
9.9/share using a blend of DCF and comparable company multiples. The
implied 32% upside may seem steep, but at our TP Votum multiples
(13.5x 2015 earnings and 8.3 EV/EBITDA) it would only be marginally
above the current median for the peers. We think our TP is justified by
Dariusz Górski
Votum’s superb ROE and net profit margin (11%).
Company Data
PLNmn
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
58
7
6
5
17.6
10.9
2014E
69
10
8
6
14.9
7.9
2015E
79
13
11
9
10.5
6.0
157
2016E
88
14
13
10
9.3
5.5
VOT.WA / VOT PW
90
12
Free float (%)
17.5%
Avg. daily turnover 3M (PLNths)
11
1M
3M
YTD
Price performance
4.2%
14.5%
19.64
Fig. 1.Votum: DCF valuation
2014E
Net sales
68.6
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
78.9
88.4
97.6
106.3
114.0
120.5
125.5
128.7
130.0
15%
12%
10%
9%
7%
6%
4%
3%
1%
8.3
11.3
12.8
13.6
14.3
14.7
15.0
15.0
14.7
14.2
12.1%
14.4%
14.4%
13.9%
13.4%
12.9%
12.4%
11.9%
11.4%
10.9%
Taxes on EBIT
1.6
2.2
2.4
2.6
2.7
2.8
2.8
2.8
2.8
2.7
NOPAT
6.7
9.2
10.3
11.0
11.6
11.9
12.1
12.1
11.9
11.5
Depreciation
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
Capex
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
-1.3
WC change
-0.5
-0.5
-0.5
-0.5
-0.5
-0.5
-0.5
-0.5
-0.5
-0.5
6.2
8.7
9.8
10.5
11.1
11.4
11.6
11.6
11.4
11.0
y/y
EBIT
EBIT margin
Free cash flow
WACC (2014-23E)
9.1%
PV FCF (2014-23E)
64
Terminal growth
1.0%
PV Terminal value
58
Total EV
121
Net debt (cash) (YE13)
11
Equity value
110
12.0
Equity value per share-current (PLN)
9.2
Target price (12-month)
10.0
Upside/downside
33%
Fig. 2. Votum: Comparable valuation
Market Cap
Company
Price
Currency
(EURm)
Kruk S.A.
106.35
PLN
429
EuCO
25.50
PLN
Open Finance SA
5.78
Magellan SA
77.99
GPW
43.85
Current
fiscal year
P/E
EV/EBITDA
2014E
2015E
2016E
2014E
2015E
2016E
12/14 Y
13.3
12.0
10.0
12.7
11.3
9.7
34
12/14 Y
11.5
10.6
9.8
9.6
8.3
7.5
PLN
74
12/14 Y
9.4
7.2
5.8
5.1
5.0
4.6
PLN
122
12/14 Y
10.0
8.8
7.9
22.1
21.0
20.1
PLN
436
12/14 Y
16.6
15.1
14.1
10.8
9.3
8.5
Median
11.5
10.6
9.8
10.8
9.3
8.5
International peers Median
16.7
14.8
13.8
10.8
9.6
9.2
Median
Domestic peers
13.0
11.4
10.0
10.8
9.4
8.6
Votum
14.9
10.5
9.3
7.9
6.0
5.5
Premium/(discount), %
15%
-8%
-7%
-27%
-36%
-36%
6.5
8.1
8.1
8.7
9.9
10.1
17%
17%
17%
17%
17%
17%
Votum - implied share price (PLN)
Weights
Votum - implied fair value (PLN)
8.6
158
Fig. 3. Votum: 3Q14 results review
1Q12
2Q12
Revenues
12.9
13.3
Gross profit
1.8
2.2
Opex
-11.1
-11.1
EBITDA
2.9
1.5
EBIT
1.7
2.2
Net profit
1.4
1.4
Gross profit margin
13.8% 16.7%
EBITDA margin
22.8% 11.6%
EBIT margin
13.4% 16.4%
Net profit margin
10.5% 10.2%
3Q12
12.1
0.9
-11.2
1.2
0.9
0.7
7.2%
9.7%
7.3%
6.0%
4Q12
13.7
1.5
-12.2
1.6
1.3
1.8
11.1%
11.8%
9.4%
13.5%
1Q13
13.1
0.9
-12.2
1.4
1.1
1.2
7.0%
10.6%
8.3%
9.0%
2Q13
15.3
2.2
-13.1
2.1
1.8
1.5
14.2%
13.7%
11.6%
9.5%
3Q13
12.9
0.7
-12.2
1.0
0.7
0.5
5.4%
8.0%
5.2%
4.1%
4Q13
16.4
2.2
-14.2
2.5
2.2
1.9
13.3%
15.3%
13.1%
11.8%
1Q14
15.0
1.7
-13.3
2.0
1.6
1.2
11.4%
13.3%
10.7%
8.1%
2Q14
17.6
2.7
-14.9
2.8
2.4
1.7
15.4%
15.8%
13.6%
9.5%
3Q14
16.6
2.6
-14.0
2.3
2.3
1.8
15.5%
14.1%
14.1%
11.0%
y/y q/q
29% -5%
267% -5%
15% -5%
127% -16%
246% -2%
244% 10%
n.a
n.a
n.a
n.a
n.a
n.a
n.a
n.a
New
88
14
13
10
2016E
Previous
n.a.
n.a.
n.a.
n.a.
Fig. 4. Votum: Forecast changes
2014E
New Previous
Sales
69
n.a.
EBITDA
10
n.a.
EBIT
8
n.a.
Net profit
6
n.a.
2015E
Previous
n.a.
n.a.
n.a.
n.a.
New
79
13
11
9
Change
0%
0%
0%
0%
Change
0%
0%
0%
0%
Change
0%
0%
0%
0%
Fig. 5. Votum: Valuation changes
New
9.2
8.6
9.9
DCF valuation
Previous
n.a.
n.a.
n.a.
Change
0%
0%
0%
Fig. 6. Votum: Income statement forecast
2012 2013 2014E 2015E 2016E
Fig. 7. Votum: Balance Sheet forecast
Net Sales
Current assets
52
58
69
79
88
6
6
9
12
13
-46
-52
-59
-67
-75
EBITDA
7
7
10
13
14
EBIT
6
6
8
11
13
Pre-tax profit
7
6
8
11
13
Income tax
-2
-1
-2
-3
-3
Net profit
5
5
6
9
10
Gross profit
Opex
2012
2013 2014E 2015E 2016E
15.7
17.7
20.7
24.7
28.6
7.0
7.6
8.6
11.1
13.5
18.3
22.0
21.7
22.0
22.5
12.0
15.7
15.8
15.9
15.9
Total assets
34.0
39.7
42.3
46.7
51.0
Current liabilities
13.2
15.3
17.1
18.9
20.5
Bank debt/bonds
0.7
0.9
0.9
0.9
0.9
2.0
5.6
5.6
5.6
5.6
Bank debt/bonds
0.6
3.7
3.7
3.7
3.7
Cash and equivalents
L-t
PP&E
Gross margin
12.3%
10.3%
13.0%
15.0%
15.0%
Equity
18.5
18.5
19.6
22.2
24.9
EBITDA margin
14.0%
12.2%
14.0%
16.1%
16.0%
Total liabilities and equity
33.7
39.4
42.3
46.7
51.0
EBIT margin
11.7%
9.9%
12.1%
14.4%
14.4%
4.0
6.5
9.0
Pre-tax margin
13.1%
10.8%
11.4%
14.1%
14.2%
Net debt
5.7
3.0
Effective tax rate
22.3%
18.2%
22.7%
22.7%
22.7%
Net profit margin
10.1%
8.8%
8.8%
10.9%
11.0%
Fig. 8. Votum: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
3.9
6.9
8.8
11.2
12.2
CF from investment
-3.0
-3.6
-1.2
-1.2
-1.2
CF from financing
-5.4
-2.8
-6.5
-7.5
-8.5
1.0
2.5
2.4
Net change in cash
-4.6
0.6
159
160
Health Care
Poland
NOVEMBER 12, 2014
RECOMMENDATION
VOXEL
HOLD (INITIATION)
Play for M&A


Triggers/Risks. Concentrating on a single customer – NFZ – is the
largest threat to Voxel and other clinic operators. NFZ is a very tough
negotiations partner and contracting decisions are not always reasonable.
Voxel learnt this the hard way when it had nearly completed a PLN40mn
investment programme and all the new clinics lacked contracts and
generated losses for 12 months. Voxel is fully consolidating its three new
PET-CT clinics in Brzozow, Bialystok and Katowice. JV with Enterprise
Investors Exira (operator of Gamma Knife) is not consolidated, but it can
count on loans from Voxel until it secures its NFZ contract. It looks like
Brzozow and Bialystok will have contracts for 2015. The “when” and
“which” big contracts Voxel will have is the key driver of the company’s
results in upcoming years.
12-month TP of PLN12.5 per share. The TP implies a 14% upside
potential, which caused us to initiate our coverage of the stock with a Hold
recommendation. The comparative valuation points to PLN12.1 per share.
Hold
Sell
30
25
WIG Relative
20
VOX
15
10
5
Oct-14
Jul-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
0
Apr-12
Financials. We expect Voxel to perform 6.0k PET-CT procedures in
2015E in four clinics and 7.7k procedures in 2016E in five locations,
assuming another contract for PET-CT and Gamma Knife in Katowice in
2016E. The company may also decide to relocate the device to another
city. We expect Voxel’s average revenue from the PET-CT procedures to
drop to PLN3.3k in 2015E and 3.0k from 2017E (to the end of the forecast
period) from PLN4.1k in 2014E. We expect no large new investments. At
the same time, better utilisation of the devices should increase the
company’s EBITDA margin to above 18% from current 16%. In 2016E, its
EBITDA should exceed PLN20mn. We believe that the net debt may
slightly rise due to further loans to Exira. The company trades at a 2014E
and 2015E EV/EBITDA of 10.0x and 9.2x, which is demanding but fair
valued. The stock offers some upside in case of a M&A story and a
positive scenario in PET-CT and Gamma Knife contracting.
STOCK PERFORMANCE
Buy
Oct-11

Equity Story. Voxel’s core business is operating imaging diagnostic
clinics; five PET-CT clinics with own cyclotron, Gamma Knife and over a
dozen CT/MRI clinics. Due to the limited contracts with the Public
Healthcare Fund NFZ, all the PET/CT clinics are working way below their
potential. The new oncology law, due to come into force in 2015, should
boost the company’s volumes. Therefore, we see Voxel and Synektik as
best investments in light of the upcoming new regulations. We also think
Voxel could be a potential acquisition target, valued at a large discount
compared with the recent transactions (Lux-Med, EMC and Enel-Med
clinics sold at double-digit EV/EVITDA). The restructuring of Alteris, a
distributor of diagnostic devices, should also allow for some savings in
2015.
Jan-12

COMPANY DESCRIPTION
Operator of medical diagnostic clinics and distributor of
radiology devices.
MAIN SHAREHOLDERS
Voxel International
PZU mutual fund
% of votes
60.5%
11.4%
5.4%
ANALYST
Lukasz Kosiarski
(+48) 22 586 82 25
Company Data
PLNmn
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
103.2
16.4
6.1
3.0
38.3
10.1
2014E
101.0
16.5
3.5
-0.5
n.a.
10.2
2015E
108.3
19.0
6.0
1.2
97.0
9.2
161
2016E
120.3
21.8
8.8
3.5
33.0
7.7
VOXP.WA / VOX PW
118.2
10.5
Free float (%)
27.4%
0.0
1M
3M
YTD
Price performance
14.7%
-1.3%
-31.0%
Fig. 1. Voxel: DCF valuation
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
WACC (2014-23)
PV FCF 2014-23
Terminal growth
Terminal Value (TV)
PV TV
Total EV
Net debt
Equity value
Month
2014E
101.0
3.5
0.6
3.0
13.0
1.8
11.6
2.5
7.7%
77.4
1.0%
180.0
85.7
163.0
49.2
113.8
10.50
10.84
11
11.61
12.50
2015E
108.3
6.0
1.1
4.8
13.0
0.9
6.5
10.4
2016E
120.3
8.8
1.7
7.1
13.0
1.5
6.8
11.8
2017E
126.5
10.2
1.9
8.3
13.0
0.8
7.1
13.4
2018E
132.7
11.7
2.2
9.5
13.0
0.8
7.4
14.3
2019E
134.2
11.5
2.2
9.3
13.0
0.2
7.7
14.4
2020E
135.7
11.0
2.1
8.9
13.0
0.2
8.0
13.8
2021E
137.3
10.6
2.0
8.6
13.0
0.2
8.2
13.2
2022E
138.9
10.1
1.9
8.2
13.0
0.2
8.4
12.6
2023E
140.6
9.7
1.8
7.8
13.0
0.2
8.7
12.0
Fig. 2. Voxel: Comparable valuation
Company
Voxel
Peers
Synektik
Medicalgorithmics
Eckert & Ziegler
Ion Beam Applications
Centrum Medyczne Enel-Med
Sonic Healthcare
Source Bioscience
Oral Hammaslaakarit
Clinica Baviera
Athens Medical Center
Digirad
CHC Healthcare
Median
Price
11.25
Currency
PLN
Market
Cap
(EURmn)
35
23.53
204.00
23.67
13.75
11.20
19.02
10.13
6.48
7.50
0.80
4.02
65.10
PLN
PLN
EUR
EUR
PLN
AUD
GBp
EUR
EUR
EUR
USD
TWD
59
208
157
487
78
6,548
51
71
153
87
75
277
Implied price (PLN)
2014E
-252.7
P/E
2015E
99.2
2016E
33.8
EV/EBITDA
2014E
2015E 2016E
10.3
9.3
7.8
24.8
37.1
13.0
20.2
7.3
18.3
14.5
25.9
38.9
40.0
33.5
19.4
22.5
17.7
19.3
11.7
17.4
52.1
16.5
12.7
15.4
24.4
n.a.
16.1
16.2
16.5
15.8
12.9
10.8
16.9
42.3
15.3
11.3
13.0
17.4
n.a.
11.5
n.a.
14.1
11.6
30.9
5.4
15.4
4.9
11.8
6.7
n.a.
13.1
16.7
n.a.
11.9
11.8
8.5
14.6
4.8
12.3
12.7
10.6
5.7
n.a.
9.9
16.7
n.a.
n.a.
10.6
7.3
8.9
4.1
9.8
11.2
9.8
4.7
n.a.
8.0
n.a.
n.a.
n.a.
8.4
-1.0
1.9
4.7
13.6
13.7
12.4
12.1
162
Fig. 3. Voxel: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
20.0
34.9
22.3
23.8
20.2
40.2
19.3
25.3
32.9
25.7
21.4
22.7
2.1
10.4%
4.6
13.0%
4.4
19.8%
2.4
10.2%
3.2
15.7%
11.2
27.9%
5.0
26.2%
3.5
13.6%
3.6
10.9%
4.3
16.7%
5.7
26.5%
2.9
12.6%
3.9
16.7%
9.9%
5.8
37.4%
4.0
0.1
0.7%
2.4
6.9%
2.2
9.7%
0.1
0.5%
0.8
4.0%
8.8
21.9%
2.5
13.1%
0.9
3.5%
1.0
3.1%
1.7
6.6%
2.4
11.1%
0.1
0.4%
1.2
4.9%
13.0%
1.8
13x
4.5
Net profit
-1.0
-0.4
0.7
Net margin
-5.2% -1.1%
3.0%
-0.8
-3.2%
-0.5
-2.6%
6.9
17.1%
1.4
7.5%
0.5
2.0%
0.4
1.3%
0.6
2.5%
1.3
6.2%
-0.9
-3.7%
-0.2
-0.8%
n.a.
-2.2
n.a.
2.9
Sales
EBITDA
EBITDA margin
EBIT
EBIT margin
Fig. 4. Voxel: Forecast changes
2014E
New Previous
Sales
101.0
n.a.
EBITDA
16.5
n.a.
EBIT
3.5
n.a.
Net profit
-0.5
n.a.
New
108.3
19.0
6.0
1.2
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
n.a.
n.a.
n.a.
n.a.
New
120.3
21.8
8.8
3.5
Change
n.a.
n.a.
n.a.
n.a.
3Q14E
y/y
q/q
23.7 -28.1%
4.1%
2016E
Previous
n.a.
n.a.
n.a.
n.a.
Change
n.a.
n.a.
n.a.
n.a.
Fig. 5. Voxel: Valuation changes
New
12.5
12.1
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Voxel: Income statement forecast
Fig. 7. Voxel: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
106.5
103.2
101.0
108.3
120.3
COGS
80.1
77.0
76.1
80.2
88.7
Gross profit
26.5
26.3
24.9
28.1
SG&A
19.7
21.2
21.6
22.1
5.2
1.0
0.3
0.0
0.0
EBITDA
21.2
16.4
16.5
19.0
21.8
Operating profit
11.9
6.1
3.5
6.0
8.8
-5.6
-3.5
-4.1
-4.5
-4.4
Net sales
2012
2013
2014E
2015E
34.3
40.2
48.4
45.2
53.4
Fixed assets
160.3
175.2
173.9
177.4
171.2
31.6
Total assets
194.6
215.4
222.3
222.5
224.6
22.9
Current liabilities
41.9
46.0
55.8
57.4
60.0
12.4
17.6
30.0
30.0
30.0
62.2
60.5
58.0
55.5
51.5
34.9
36.5
36.5
36.5
35.0
90.6
108.9
108.4
109.6
113.1
10.5
Current assets
bank debt
bank debt
Equity
2016E
Profit before tax
6.3
2.6
-0.6
1.5
4.3
share capital
9.7
10.5
10.5
10.5
Income tax
0.2
-0.4
-0.1
0.3
0.8
Minority Interest
0.6
0.6
0.6
0.6
0.6
Net profit
6.1
3.0
-0.5
1.2
3.5
Total liabilities
194.6
215.4
222.3
222.5
224.6
52.6
58.3
52.7
Gross margin
24.8%
25.4%
24.6%
25.9%
26.3%
EBITDA margin
19.9%
15.9%
16.4%
17.5%
18.1%
Operating margin
11.2%
5.9%
3.5%
5.5%
7.3%
Net profit margin
5.7%
2.9%
-0.5%
1.1%
2.9%
Net debt
42.0
49.2
Fig. 8. Voxel: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
7.1
-0.4
2.8
20.8
12.5
CF from investment
-14.4
-26.5
-11.6
-16.5
-6.8
-0.3
22.1
12.4
0.0
-1.5
3.5
4.3
4.1
CF from financing
Net change in cash
-7.6
-4.7
163
164
Industrials
Poland
NOVEMBER 12, 2014
RECOMMENDATION
WIELTON
HOLD (INITIATION)
Risky business
Equity Story. Wielton, similarly to Amica and other successful Polish
STOCK PERFORMANCE
exporters on the Russian market, has grown rapidly in the last few years
7
6
5
4
need to be addressed. The company has obsolete assets that will force
Wielton to incur additional CAPEX, an already high market share in
Jul-14
Oct-14
0
Apr-14
success in our model). Secondly, Fruehauf itself has some problems that
1
Jan-14
labour unions are extending a tad long (we assumed a 75% probability of
Jul-13
Firstly, however, this deal need to be finalised and talks with the French
WIG Relative
2
Oct-13
Western markets using its fresh acquisition – the French Fruehauf SAS.
WLT
3
Oct-11
revenue whole. But what is the next step? Wielton will try to conquer
Apr-13
back of the broadening of the product mix have been enough to cover this
8
Jan-13
Countries) and the rise in the market share on the domestic market on the
9
Jul-12
direction. So far growth on other markets (Southern Europe, Baltic Sea
Sell
Oct-12
now that the fountain of growth is drying out fast, it is time to change
Hold
Apr-12
(2009-2012 volumes CAGR at 46%, 187% on the Russian market). But
Buy
Jan-12

France (no space for growth) and no export sales that will need to be built
(and the company was unsuccessful here in the past). We believe that the
acquisition might actually work out because moving part of the production
(chassis) to Poland should yield cost synergies, helping Fruehauf to
become more competitive on other markets. But we believe that Wielton is
a risky pick (hence the high WACC) due to the cyclicality of the semitrailer business itself, exposure to the Eastern markets and the probability
COMPANY DESCRIPTION
that the acquisition will burden its balance sheet (net/EBITDA’14 at 2.9x, if
Wielton is Poland biggest’s semi-trailers and trailers producer
and one of the 10 leading producers in Europe.
Fruehauf acquisition is finalised).

Financials. We believe that further falls on the Eastern markets will be
offset by growth on other markets but the pace of growth will not be
impressive – volumes 14-17 CAGR at a meagre 2.2%. The company will
also manage to keep its gross profit margin at about 16%. As far as
Fruehauf is concerned, due to the operational leverage and cost
synergies, its margins should converge to those of Wielton.

Triggers/Risks. We listed the key risks in the equity story section. The
Main shareholders
MP-FUND FIZAN
Jakub Prozner
Lukasz Tylkowski
Pawel Szataniak
Mariusz Szataniak
Aviva mutual fund
% of votes
37.9%
13.2%
10.6%
6.7%
6.7%
6.3%
completion of the Fruehauf acquisition could add another PLN0.25 to our
ANALYST
current valuation.

Valuation & recommendation. Our DCF model values Wielton’s
Tomasz Kucinski
current business at PLN5.3 per share. The Fruehauf acquisition (at 75%
+48 22 534 16 10
probability) is adding PLN0.6 to the current valuation. All in all, we set the
TP at PLN6.0 with a Hold recommendation.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
588.1
50.6
35.8
25.6
13.2
7.8
2014E
595.4
40.6
25.9
21.2
16.0
9.0
2015E
609.2
45.2
30.5
27.8
12.2
8.1
165
2016E
623.8
45.9
31.2
27.5
12.3
7.7
WLTP.WA / WLT PW
328.4
60.4
Free float (%)
37.9%
0.2
1M
3M
YTD
Price performance
-10.8%
-9.6%
-21.2%
Fig. 1. Wielton: DCF valuation
Revenues
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Net investment
Free cash flow
WACC
PV FCF 2014-2023
Terminal growth
Terminal value (TV)
PV TV
Total EV
Net debt
Equity value
Month
Fruehauf acquisition (75% probability)
12M target price
2014E
595.4
25.9
0.0
25.9
14.7
4.7
14.7
4.7
21.2
9.8%
163.4
2.0%
357.3
153.5
316.9
28.6
288.3
60.4
4.8
11.0
4.7
0.6
6.0
2015E
609.2
30.5
0.7
29.7
14.7
2.0
14.7
2.0
27.7
2016E
623.8
31.2
0.9
30.3
14.7
2.2
14.7
2.2
28.2
2017E
635.7
31.8
6.0
25.7
14.7
1.8
14.7
1.8
24.0
2018E
653.7
32.7
1.8
30.9
14.7
2.7
14.7
2.7
28.2
2019E
672.1
33.6
2.0
31.6
14.7
2.7
14.7
2.7
28.9
2020E
691.2
34.6
2.2
32.4
14.7
2.8
14.7
2.8
29.6
2021E
708.2
35.4
2.3
33.1
14.7
2.5
14.7
2.5
30.6
2022E
725.7
36.3
2.5
33.8
15.7
2.6
15.7
2.6
31.2
2023E
743.6
37.2
7.1
30.1
16.7
2.6
16.7
2.6
27.5
Fig. 2. Wielton: Comparable valuation
Price
Wielton SA
5.25
Inter Cars SA
206.5
SAF-Holland SA
10.415
Wabash National Corp
10.64
MAN SE
91.8
Volvo AB
85.45
Median
Currency
75
692
472
590
13,436
19,772
P/E
EV/EBITDA
2014E
2015E
2016E
2014E
2015E
2016E
16.0
16.5
12.1
13.4
113.9
22.8
16.5
-2.9%
12.2
15.0
9.4
11.1
49.6
14.4
14.4
-15.4%
12.3
13.9
8.5
9.3
25.9
11.0
11.0
11.9%
9.0
12.6
n.a.
6.3
20.6
12.2
12.4
-27.6%
8.1
11.4
n.a.
5.7
17.3
9.4
10.4
-22.1%
7.7
10.7
n.a.
5.1
12.4
8.0
9.3
-17.6%
166
Fig. 3. Wielton: 3Q14 results preview
Sales
3Q11
135.8
4Q11
149.5
1Q12
154.7
2Q12
160.5
3Q12
156.2
4Q12
133.9
1Q13
109.3
2Q13
163.6
3Q13
164.6
4Q13
150.6
1Q14
147.4
2Q14
158.8
12.1
8.8
9.5
14.5
10.8
8.7
6.7
15.5
17.0
11.6
10.4
11.3
8.9%
5.9%
6.1%
9.0%
6.9%
6.5%
6.1%
9.5%
10.3%
7.7%
7.1%
7.1%
9.1
5.9
6.4
11.2
7.3
5.0
3.1
11.7
13.2
8.0
6.8
7.6
6.7%
3.9%
4.1%
7.0%
4.7%
3.7%
2.9%
7.1%
8.0%
5.3%
4.6%
4.8%
3.3
6.9
7.0
7.2
5.6
3.1
2.1
8.0
10.6
5.4
2.7
8.7
2.4%
4.6%
4.5%
Net margin
4.5%
3.6%
2.3%
1.9%
4.9%
6.5%
3.6%
1.9%
5.5%
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Wielton: Forecast changes
2014E
New Previous
Sales
595.4
n.a.
EBITDA
40.6
n.a.
EBIT
25.9
n.a.
Net profit
21.2
n.a.
New
609.2
45.2
30.5
27.8
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
New
623.8
45.9
31.2
27.5
3Q14E
154.2
y/y
-6.3%
q/q
-2.9%
12.1 -28.8%
7.2%
7.8%
-2.5
0.7
8.4 -36.5%
10.3%
5.4%
-2.6
0.6
7.0 -34.3%
-19.6%
4.5%
-1.9
-0.9
2016E
Previous
Change
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Fig. 5. Wielton: Valuation changes
New
6.0
6.3
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Wielton: Income statement forecast
Net sales
Fig. 7. Wielton: Balance Sheet forecast
2012
605
2013
588
2014E
595
2015E
609
2016E
624
Current assets
2012
222
2013
225
2014E
258
2015E
258
2016E
270
512
493
501
512
524
Fixed assets
157
154
126
141
141
Gross profit
93
95
95
97
100
Total assets
379
379
384
398
410
SG&A
67
60
67
67
69
Current liabilities
162
147
153
156
158
4
0
-2
0
0
32
30
30
30
30
EBITDA
43
51
41
45
46
54
58
53
48
44
Operating profit
30
36
26
30
31
46
53
47
43
38
2
11
7
2
3
163
174
178
195
208
124
COGS
bank debt
bank debt
Equity
28
25
18
28
28
share capital
78
90
93
110
Income tax
5
0
-3
0
0
Minority Interest
0
0
0
0
0
Net profit
23
26
21
28
28
379
379
384
398
410
29
28
17
15.3%
16.2%
15.9%
16.0%
16.0%
EBITDA margin
7.1%
8.6%
6.8%
7.4%
7.4%
Operating margin
4.9%
6.1%
4.4%
5.0%
5.0%
3.8%
4.4%
Net profit margin
3.6%
4.6%
4.4%
2014E
31
2015E
41
2016E
40
Profit before tax
Gross margin
Total liabilities
70
56
Net debt
Fig. 36. Wielton: Cash flow forecast
CF from operations
2012
2
2013
44
CF from investment
-12
-14
14
-29
-15
8
-11
-23
-15
-18
22
-4
7
CF from financing
-2
19
Net change in cash
167
168
Retail
Poland
NOVEMBER 12, 2014
RECOMMENDATION
WOJAS
HOLD (INITIATION)
NON-CORE INVESTMENTS TRIMMS UPSIDE

Equity Story. On first sight, Wojas looks just like another
successful Polish retail company that has been continuously
improving its sales and profits since the post-crisis bottom in
2008. Ever since then, the company has improved its sales to
PLN214mn (vs. PLN85mn in 2008) and its net profit to PLN9.5mn
(vs. 1mn in 2008) in 2014E. On the other hand, we believe that
there are some elements that effectively trim the upside. We do
not share the opinion that the debt financed (PLN10m) non-core
investment in the leisure & entertainment industry, like the
recently announced purchase of a 33% stake in Termy
Chocholowskie (no matter how profitable) create value for the
shoe retailer. We believe that it would be better for Wojas’s
business multiple valuation to remain a clean shoe retailer.
Moreover, the JPY denominated debt (cPLN18mn) also creates a
significant and unnecessary currency risk,, something that could
be easily avoided.
 Financials. We expect Wojas to stay on its growth path in the
coming years. We assume that the company will add 1,345
(+7.7%)/1,121 (+6.0%) and 561 sqm in 2014-16E, respectively.
We also expect the LfL at 5.6%, 2.0% and 2.0% in 2014-16E,
respectively. Based on these assumptions, we expect Wojas to
report sales at PLN214mn (+14%y/y), PLN226mn (+5.3%y/y) and
PLN235mn (+4.2%y/y) in 2014-16E. We expect the gross margin
to grow to 44.6% (+138bps), 43.6% (-97bps) and 44.1% (+
47bps) in 2014-16E. In regards to SG&A, we expect the
SG&A/avg. sqm at PLN4,580 (+5.4% y/y), PLN4,387 (-4.2% y/y)
and PLN4,464 (+1.8% y/y). Overall, we expect Wojas to earn an
EBITDA of PLN21.0mn, PLN20.9mn and PLN21.3mn, while its
net profit should come in at PLN9.5mn, PLN9.3mn and
PLN9.7mn in 2014-16E, respectively.
 Valuation & recommendation. Wojas is currently trading with a
PE of 10.5x and 10.9x in 2014-15E. Taking into account its
growth, ROE (14%) and leverage, we believe that a PE at c.12x
would be fairer. In this light, Wojas’ current multiple valuation
leaves some upside, which, however, might be trimmed by some
corporate governance issues. Based on our DCF model, we
8% upside potential. We initiate coverage with a Hold rating.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
187.8
16.4
10.0
10.0
10.2
8.2
2014E
215.1
20.7
14.0
10.0
10.1
6.1
2015E
226.5
21.2
14.1
9.5
10.6
5.9
2016E
236.1
21.6
14.1
10.0
10.1
5.5
169
STOCK PERFORMANCE
COMPANY DESCRIPTION
Wojas is a retail company selling shoes under the brand
Wojas and Relaks.
Main shareholders
Mr. Wieslaw Wojas
Free Float
% of votes
83.9%
16.1%
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Free float (%)
1M
Price performance
0.1%
WOJ.WA / WOJ. P
101.4
12.7
16.1%
0.0
3M
YTD
-9.3%
26.4%
Fig. 1. Wojas: DCF valuation
2014E
214
14
2
13
7
8
8
3
7.9%
53.2
2.5%
152.1
71.0
124.2
33.0
91.2
12.7
7.2
11
7.7
8.4
Revenues
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
WACC (2014-2023, %)
PV FCF 2013-2023
Terminal growth (%)
Terminal Value (TV)
PV TV
Total EV
Net debt
Equity value
Month
2015E
226
14
2
12
7
3
8
8
2016E
235
14
2
12
7
3
7
9
2017E
243
10
1
9
8
2
7
7
2018E
251
11
2
9
8
2
8
7
2019E
257
9
2
8
9
2
6
8
2020E
262
11
2
8
9
1
7
10
2021E
266
12
3
9
9
1
7
11
2022E
270
14
4
10
10
1
7
11
2023E
275
14
4
9
10
1
11
8
Fig. 2. Wojas: Comparable valuation
P/E
Name
EV/EBITDA
PEG
ROE
DY
2014E
2015E
2016E
2014E
2015E
2016E
1Y
2Y
2014E
2015E
2016E
2014E
2015E
2016E
LPP
33.1
28.7
22.2
20.3
17.7
13.8
1.5
0.7
30.2%
28.9%
30.6%
1.0%
1.2%
1.4%
Monnari
11.0
11.9
13.8
8.4
7.4
6.8
0.8
2.6
26.4%
19.3%
14.9%
0.0%
0.0%
5.0%
Bytom
13.9
10.5
10.9
9.3
7.4
6.4
0.02
0.01
29.3%
32.0%
27.5%
0.0%
4.9%
6.7%
average
19.3
17.1
15.6
12.7
10.8
9.0
0.8
1.1
28.6%
26.8%
24.4%
0.3%
2.0%
4.4%
CCC
26.2
19.9
16.9
18.1
14.1
12.2
0.9
0.4
28.7%
31.2%
1.2%
1.9%
2.5%
0.0%
Wojas
10.1
10.6
10.1
6.1
5.9
5.5
14.5
-2.5
14.8%
12.3%
11.4%
1.3%
1.9%
0.0%
Gino Rossi
20.5
13.4
12.3
8.4
7.2
6.6
0.1
0.0
10.5%
14.2%
13.5%
0.0%
0.0%
0.0%
average
18.9
14.6
13.1
10.9
9.1
8.1
5.1
-0.7
18.0%
19.2%
8.7%
1.1%
1.5%
0.0%
Total - average
19.1
15.9
14.4
11.8
10.0
8.5
3.0
0.2
23.3%
23.0%
16.5%
0.7%
1.7%
2.2%
170
Fig. 3. Wojas: 3Q14 results review
Sales
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13E
1Q14
2Q14
3Q14
y/y
q/q
33.8
38.3
40.5
54.7
35.9
45.0
46.1
60.8
44.5
54.3
49.7
7.7%
-8.5%
-39.4%
3.0
2.9
2.7
6.7
1.6
3.0
3.0
8.8
3.2
5.1
3.1
2.9%
9.0%
7.5%
6.8%
12.2%
4.5%
6.6%
6.5%
14.4%
7.1%
9.4%
6.2%
-29
-318
1.6
1.4
1.4
5.2
0.1
1.4
1.4
7.1
1.6
3.5
1.4
0.0%
-59.4%
4.6%
3.6%
3.4%
9.4%
0.2%
3.1%
3.1%
11.7%
3.5%
6.4%
2.8%
-22
-356
0.8
-0.3
0.6
1.4
0.1
1.7
1.4
6.8
0.3
2.5
1.4
0.0%
-44.6%
Net margin
2.4%
-0.8%
1.4%
2.5%
0.3%
3.7%
3.0%
11.2%
0.7%
4.6%
2.8%
-22
-182
EBITDA
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 4. Wojas: Forecast changes
New
2014E
Previous
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
215
n.a.
n.a.
226
n.a.
n.a.
236
n.a.
n.a.
21
n.a.
n.a.
21
n.a.
n.a.
22
n.a.
n.a.
14
n.a.
n.a.
14
n.a.
n.a.
14
n.a.
n.a.
10
n.a.
n.a.
10
n.a.
n.a.
10
n.a.
n.a.
Sales
EBITDA
EBIT
Net profit
Fig. 5. Wojas: Valuation changes
New
8.4
13.9
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 6. Wojas: Income statement forecast
Fig. 7. Wojas: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
167
188
215
226
236
Current assets
88
83
94
103
114
COGS
94
107
122
128
132
Fixed assets
55
52
54
56
56
Gross profit
73
81
93
99
104
Total assets
143
135
148
159
170
SG&A
64
71
80
85
90
56
42
45
47
48
0
0
1
0
0
51
49
56
64
70
15
16
21
21
22
39
30
30
30
30
9
10
14
14
14
2
0
0
0
0
-6
2
-2
-2
-2
48
63
73
82
92
Profit before tax
3
12
12
12
12
share capital
3
1
1
1
1
Income tax
1
2
2
2
2
Minority Interest
0
0
0
0
0
Net profit
3
10
10
10
10
143
135
148
159
170
26
23
18
43.8%
43.2%
43.4%
43.6%
44.1%
EBITDA margin
9.2%
8.7%
9.6%
9.4%
9.2%
Operating margin
5.7%
5.3%
6.5%
6.2%
6.0%
4.7%
4.2%
4.2%
Net sales
EBITDA
Operating profit
Gross margin
Net profit margin
1.7%
5.3%
Current liabilities
bank debt
bank debt
Equity
Total liabilities
Net debt
42
33
Fig. 8. Wojas: Cash flow forecast
2012
2013
2014E
2015E
2016E
CF from operations
-2
11
9
13
15
CF from investment
-18
-3
-9
-9
-8
10
-12
0
0
0
0
4
7
CF from financing
Net change in cash
-9
-3
171
172
Poland
NOVEMBER 12, 2014
RECOMMENDATION
WORK SERVICE
HOLD (PREV. RESTRICTED)
TARGET PRICE: PLN19.5 (PREV. RESTRICTED)
Cash recent gains

Equity story. Following the completion of four takeovers in
2013/14, Work Service is not resting on its laurels. We expect the
company to maintain a fast growth path, this time aiming at the
Romanian temporary staffing market. As well as M&A, Work
Service should not slow down its organic growth in the coming
years, benefiting from its competitive advantages, positive
structural market changes and supportive forecasts pointing to
GPD growth. Based on these factors, we see Work Service to
show notable growth in sales and net profit, which we expect to
increase at 39% and 47%, on average, over 2014–16E.

Change in valuation & recommendation. We have updated our
DCF model by 5mn new share issue as well as higher intrest
costs paid by company. Our DCF model implies 12 month TP at
PLN19.5/share. Following a recent price surge Work Service is
trading with PE’14-15 of 24.1x and 17.5x, respectively which
implies double digit premiums on FY14-16 numbers, which are
not justified, in our view. In this light, we are reinitiating coverage
of Work Service with a Hold recommendation and a 12-month
Target Price of PLN19.5/share.
STOCK PERFORMANCE
Rec.
Date
Price
Price performance
on issue 12 month
date
target
absolute
relative
(p.p)
U/R
10/28/2014
n.a.
n.a.
n.a.
n.a.
Buy
6/8/2014
15.3
19.0
n.a.
n.a.
COMPANY DESCRIPTION
Work Service is the largest HR services company in Poland,
with rising regional exposition in CEE and Germany.
ANALYST
Tomasz Sokolowski
(+48) 22 586 82 36
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x), adj.
EV/EBITDA (x), adj.
2013
918
53
48
27
47.1
25.1
2014E
1,677
93
87
52
24.1
14.6
2015E
2,172
118
110
71
17.5
11.1
2016E
2,482
136
127
83
15.1
9.4
173
WSE.WA / WSE PW
1,140.8
60.0
Free float (%)
25.7%
0.8
1M
3M
YTD
Price performance
1.6%
33.3%
52.0%
Fig. 1. Work Service: 3Q14 results preview
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
y/y (%)
q/q (%)
Sales
158.5
174.9
170.6
182.8
186.7
187.3
188.7
221.4
238.9
269.4
345.9
390.0
495.0 107.2%
26.9%
EBITDA
8.3
5.2%
11.8
6.8%
8.6
5.0%
9.5
5.2%
8.9
4.8%
15.2
8.1%
10.2
5.4%
9.6
4.3%
12.3
5.2%
20.5
7.6%
17.8
5.2%
18.3
4.7%
23.9
4.8%
94.0%
-33
30.6%
13
8.3
5.2%
11.0
6.3%
7.7
4.5%
8.4
4.6%
8.9
4.8%
14.1
7.5%
9.1
4.8%
8.5
3.9%
11.2
4.7%
19.2
7.1%
16.2
4.7%
16.2
4.1%
22.0
4.4%
96.1%
-25
36.1%
30
5.4
10.5
3.9
3.4%
6.0%
2.3%
Net margin
3.4
1.9%
2.0
1.1%
11.0
5.9%
5.7
3.0%
2.5
1.1%
4.5
1.9%
13.8
5.1%
11.5
3.3%
3.2
0.8%
11.0 147.2% 247.6%
2.2%
36
141
EBITDA margin
EBIT
EBIT margin
Net profit
Fig. 2. Work Service: Forecast changes
2014E
New Previous
Sales
1,677
n.a.
EBITDA
93
n.a.
EBIT
87
n.a.
Net profit
52
n.a.
3Q14E
Change
New
2015E
Previous
Change
New
2016E
Previous
Change
n.a.
2,172
n.a.
n.a.
2,482
n.a.
n.a.
n.a.
118
n.a.
n.a.
136
n.a.
n.a.
n.a.
110
n.a.
n.a.
127
n.a.
n.a.
n.a.
71
n.a.
n.a.
83
n.a.
n.a.
Fig. 3. Work Service: Valuation changes
New
19.5
14.1
DCF valuation
Previous
n.a.
n.a.
Change
n.a.
n.a.
Fig. 4. Work Service: Income statement forecast
Fig. 5. Work Service: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
2012
2013
2014E
2015E
2016E
Net sales
727
918
1,677
2,172
2,482
Current assets
171
251
484
646
777
COGS
652
806
1,476
1,913
2,185
Fixed assets
185
219
333
337
342
75
113
201
259
297
Total assets
355
470
816
983
1,119
SG&A
36
64
114
149
170
Current liabilities
189
158
296
361
401
(0)
1
0
-
-
69
37
77
77
77
EBITDA
43
53
93
118
136
44
77
142
162
162
Operating profit
39
48
87
110
127
14
16
21
16
16
Profit before tax
25
32
66
94
110
Income tax
4
6
14
22
Net profit
20
27
52
71
Gross profit
Gross margin
38
74
139
159
159
113
224
359
430
513
share capital
5
6
7
7
7
28
Minority Interest
10
11
19
30
42
83
Total liabilities
355
470
816
983
1,119
107
63
24
2016E
10.4%
12.3%
12.0%
11.9%
12.0%
EBITDA margin
6.0%
5.7%
5.6%
5.4%
5.5%
Operating margin
5.4%
5.2%
5.2%
5.1%
5.1%
3.1%
3.3%
3.3%
Net profit margin
2.8%
2.9%
bank debt
bank debt
Equity
Net debt*
104
76
Fig. 6. Work Service: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
-5
-19
-2
45
41
CF from investment
-58
-42
-120
-12
-14
66
91
195
31
12
74
64
39
CF from financing
Net change in cash
3
29
174
Chemicals
Poland
NOVEMBER 12, 2014
RECOMMENDATION
ZA PULAWY
BUY (MAINTAINED)
Company hits its low in 3Q
PUBLICATION DATE
3Q14 Results Preview. As usual, the company’s earnings in 3Q
should be affected by maintenance stoppages and an off-seasonal
NOVEMBER 12, 2014
drop in demand and fertiliser prices. Nitrogen fertilizer prices hit their
3Q14E
856
67
31
28
inter-year low in 3Q14, keeping a lid on the company’s earnings
benzene. All in all, we expect Pulawy to show 2% higher revenues y/y
PLN31mn (+67% y/y). The bottom line is estimated at PLN28m
210
(+58% y/y). Outcome: NEGATIVE.
190
TP
130
50
Oct-11
Jul-14
remained flat y/y. The Polish gas tariff was 1.5% higher y/y, while
Oct-14
70
Apr-14
melamine lost 6% y/y and 2% q/q, while average caprolactam prices
WIG Relative
ZAP
Oct-12
Ammonium sulphate prices went up 10% y/y and 16% q/q. Prices of
90
Jan-13
110
Outlook for future / our view on the stock. We believe Pulawy is
150
were 8% higher y/y and q/q, while of UAN -1% y/y and -2% q/q.
benzene recorded a 10% y/y hike (up 5% q/q).
Sell
170
Jul-12
Ammonium Nitrate price dropped 1% y/y and 7% q/q. Prices of urea
Hold
Apr-12
Fertiliser & chemical products’ price trends. 3Q14 brought about
a seasonal decrease in the benchmark fertiliser prices q/q. The

Buy
Jan-12

q/q
3%
76%
156%
162%
STOCK PERFORMANCE
at PLN856mn; EBITDA at PLN67mn (+23% y/y) and EBIT at
Jan-14
affected by the relatively tight spread between caprolactam and
y/y
2%
23%
67%
58%
Oct-13
basis. We Also expect the company’s financial performance to be
Sales
EBITDA
EBIT
Net profit
Apr-13
growth. Some nitrogen fertiliser prices were even lower on a y/y
Jul-13

TARGET PRICE: PLN170.4 (M AINTAINED)
the first company that should benefit from a recovery in the fertiliser
markets. Although we have a negative view of the company’s
earnings, we keep our positive view on the stock. We prefer Azoty
Rec.
Date
Pulawy vs. Azoty Police, given its much bigger potential for

Price performance
absolute
relative
(p.p)
profitability improvement, cash generation capabilities and lower
Buy
10/27/2014
141.0
170.4
3.3%
3.1
valuation multiples.
Buy
7/9/2014
145.8
174.5
-3.3%
-8.8
Buy
4/28/2014
136.9
174.5
6.5%
8.2
Change in Forecasts. We made no changes to our forecasts for 2014E

Price
on issue 12 month
date
target
Change in Valuation & Recommendation. The applied changes in
COMPANY DESCRIPTION
ZA Pulawy is one of the largest nitrogen fertilizer
manufacturer in Poland, with exposure to fast developing
melamine and caprolactam segments.
our modelling and forecasting led to our DCF-based Target Price of
ANALYST
PLN170.4 per share (17% upside potential). We keep our BUY
Tomasz Kasowicz
(+48) 22 586 81 55
recommendation.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
12/13
3,886
554
429
390
7.2
4.2
2014E*
5,451
491
347
308
9.0
5.2
2015E
3,928
457
327
275
10.1
5.2
2016E
4,024
534
403
339
8.2
4.3
PULW.WA / ZAP PW
2,783
19.1
Free float (%)
4.0%
0.0
1M
3M
YTD
Price performance
4.0%
4.1%
-16.3%
Source: Company data, Bloomberg, BZ WBK Brokerage, *Leap year consisting of six quarters 3Q13-4Q14
175
Fig. 1. Azoty Pulawy: 3Q14 results preview
3Q'11
4Q'11
1Q'12
2Q'12
3Q'12
4Q'12
2Q'13
3Q'13
4Q13
1Q14
2Q14
Sales
821
996
1,115
1,016
878
973
930
840
923
983
880
939
12%
-6%
EBITDA
EBITDA margin
140
206
323
109
67
121
142
55
57
149
118
79
44%
50%
17.1%
20.7%
29.0%
10.7%
7.6%
12.4%
15.2%
6.5%
6.2%
15.1%
13.4%
8.4%
1.9
-5.1
112
176
292
84
37
91
110
19
21
111
80
43
128%
87%
13.7%
17.6%
26.2%
8.3%
4.2%
9.4%
11.9%
2.2%
2.3%
11.3%
9.1%
4.5%
2.3
-4.5
Net profit
99
137
Net margin
12.1% 13.7%
245
120
34
87
105
18
19
98
73
37
111%
96%
21.9%
11.8%
3.9%
9.0%
11.3%
2.1%
2.1%
10.0%
8.3%
3.9%
1.9
-4.3
EBIT
EBIT margin
Fig. 2. Azoty Pulawy: Forecast changes
2014E
New Previous
Sales
3,688
3,688
EBITDA
456
456
EBIT
307
307
Net profit
271
271
New
3,928
457
327
275
Change
0%
0%
0%
0%
2015E
Previous
3,928
457
327
275
2016E
Previous
3,953
460
329
278
New
3,953
460
329
278
Change
0%
0%
0%
0%
Change
0%
0%
0%
0%
Fig. 3. Azoty Pulawy: Valuation changes
New
170.4
189.0
DCF valuation
Previous
170.4
189.0
Weight
100%
0%
Change
0%
0%
Fig. 4. Azoty Pulawy: Income statement forecast
Fig. 5. Azoty Pulawy: Balance sheet forecast
11/12
12/13 2014E*
2015E
2016E
3,948
3,886
5,451
3,928
4,024
11/12
12/13
2014E
2015E
2016E
Current assets
1,461
1,431
1,642
1,448
-2,914
-3,011
-4,476
-3,190
1,548
-3,208
Fixed assets
1,756
1,982
2,142
2,301
1,034
875
975
2,424
738
816
Total assets
3,218
3,412
3,784
3,749
397
458
3,972
635
411
414
Current liabilities
566
504
784
564
26
575
12
6
0
0
7
9
22
20
EBITDA
24
779
554
491
457
534
192
237
218
205
201
Operating profit
664
429
347
327
403
23
24
22
13
16
687
453
368
340
419
85
69
60
65
80
601
390
308
275
339
Gross margin
26.2%
22.5%
17.9%
18.8%
20.3%
EBITDA margin
19.7%
14.3%
9.0%
11.6%
13.3%
Operating margin
16.8%
11.0%
6.4%
8.3%
10.0%
Net sales
COGS
Gross profit
SG&A
Profit before tax
Income tax
Net profit margin
15.2% 10.0%
5.6%
7.0%
8.4%
Source: Company data, BZ WBK Brokerage, *leap-year 3Q13-4Q14; FY14
results: Revenues PLN3.69bn; EBITDA PLN455mn; EBIT PLN307mn; Net
profit PLN271mn
bank debt
bank debt
32
51
33
20
16
2,445
2,656
2,767
2,965
3,180
share capital
429
429
429
429
429
Minority Interest
15
15
15
15
15
3,218
3,412
3,784
3,749
3,972
Net debt
-472
-430
-225
-425
-507
2016E
Equity
Total liabilities
Fig. 6. Azoty Pulawy: Cash flow forecast
11/12
12/13
2014E
2015E
CF from operations
820
461
277
555
444
CF from investment
-393
-313
-305
-290
-255
-13
-168
-182
-79
-107
Net change in cash
414
-20
-211
185
82
176
Chemicals
Poland
NOVEMBER 12, 2014.
RECOMMENDATION
ZCH POLICE
SELL (MAINTAINED)
TARGET PRICE: PLN11.60 (M AINTAINED)
Y/y rebound in earnings

PUBLICATION DATE
3Q14 Results Preview. We expect Police to report a multicomponent fertiliser volumes at 241kt (+20%y/y), with the fertilizer
NOVEMBER 12, 2014
segment’s revenues 23% higher y/y. Compared with 3Q13, we expect
the company’s fertiliser business profitability to be supported by (1)
larger supplies of cheaper phosphate rock from Senegal and (2)
cheaper gas costs from other-than-PGNiG suppliers. The titanium
dioxide (TiO2) segment’s volumes are assumed at 10.0k tonnes
2Q14E
608.1
47.8
30.5
22.0
Sales
EBITDA
EBIT
Net profit
(+2% y/y), while prices (in EUR) at around -2% y/y (but +1% q/q). We
q/q
-1%
-7%
-4%
-16%
STOCK PERFORMANCE
expect Azoty Police to report the headline EBITDA at PLN47.8mn

y/y
19%
97%
455%
222%
Buy
(+97% y/y), the EBIT at PLN30.5mn (vs. PLN5.5mn in 3Q13), while
35
the bottom line at PLN22.0mn (vs. PLN6.8mn in 3Q13). Outlook:
30
POSITIVE.
25
Fertilisers price trends in 3Q14: The multi-component fertiliser
20
benchmark prices varied in the last quarter. The DAP prices rose 9%
15
Hold
Sell
WIG Relative
TP
PCE
q/q and 11% y/y. The benchmark NPK(16,16,16) went up 3% q/q, but
10

Outlook for 2014 and beyond. Given the expected strong harvest
Jul-14
Oct-14
Apr-14
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
0
flat q/q (-4% y/y).
Oct-12
chloride climbed 2% q/q (-20% y/y), while phosphate rock remained
Apr-12
5
Oct-11
and y/y, while those of ammonia rose 13% y/y (flat q/q). Potassium
Jan-12
dropped 3% y/y. The urea benchmark prices were 8% higher both q/q
season and lower grains’ quotations, we see no reasons for the multicomponent fertiliser prices to go significantly up in coming years.

Date
Change in Valuation & Recommendation. We leave our DCFbased Target Price unchanged at PLN11.6 per share (46% downside
potential). We keep our SELL recommendation.
Price
Price performance
on issue 12 month
date
target
Change in Forecasts. We made no changes to our forecasts for 2014E

Rec.
absolute
relative
(p.p)
-6.8
Sell
10/27/2014
23.0
11.6
-6.7%
Sell
7/9/2014
23.3
11.9
-1.3%
-6.8
Sell
4/28/2014
20.0
11.9
16.5%
18.2
COMPANY DESCRIPTION
ZCh Police is the largest domestic NPK fertilizer
manufacturer in Poland, with exposure to titanium dioxide
and nitrogen fertilizers segments.
ANALYST
Tomasz Kasowicz
(+48) 22 586 81 55
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
2,464
142
56
51
31.3
8.1
2014E
2,448
173
87
66
24.4
7.0
2015E
2,599
230
139
100
16.1
5.8
Source: Company data, Bloomberg, BZ WBK Brokerage
177
2016E
2,745
298
202
151
10.7
4.9
Free float (%)
1M
Price performance
-6.6%
PICE.WA / PCE PW
1,610
75.0
20.2%
0.1
3M
YTD
1.0%
-10.9%
Fig. 1. Azoty Police: 3Q14 results preview
3Q'11
Sales
EBITDA
EBITDA margin
4Q'11
1Q'12
2Q'12
3Q'12
4Q'12
1Q'13
2Q'13
3Q'13
4Q'13
1Q14
2Q14
591.9 884.0
726.3
923.4
759.6
571.9
725.4
728.4
510.4
500.1
631.5
617.2
608.1
19%
-1%
71.0 101.1
82.6
57.9
50.1
20.3
61.3
52.8
24.2
3.6
50.7
51.7
47.8
97%
-7%
12.0% 11.4%
11.4%
6.3%
6.6%
3.6%
8.5%
7.2%
4.7%
0.7%
8.0%
8.4%
7.9%
3.1
-0.5
455%
-4%
52.0
79.9
61.8
37.9
29.9
-1.8
39.6
31.9
5.5
-20.7
20.1
31.7
30.5
8.8%
9.0%
8.5%
4.1%
3.9%
-0.3%
5.5%
4.4%
1.1%
-4.1%
3.2%
5.1%
5.0%
3.9
-0.1
Net profit
46.3 150.1
43.3
Net margin
7.8% 17.0%
6.0%
31.7
28.6
0.6
32.2
23.4
6.8
-10.9
16.3
26.2
22.0
222%
-16%
3.4%
3.8%
0.1%
4.4%
3.2%
1.3%
-2.2%
2.6%
4.3%
3.6%
2.3
-0.6
EBIT
EBIT margin
Fig. 2. Azoty Police: Forecast changes
2014E
New Previous
Sales
2,448
2,448
EBITDA
173
173
EBIT
87
87
Net profit
66
66
New
2,599
230
139
100
Change
0%
0%
0%
0%
2015E
Previous
2,599
230
139
100
2016E
Previous
2,745
298
202
151
New
2,745
298
202
151
Change
0%
0%
0%
0%
Change
0%
0%
0%
0%
Fig. 3. Azoty Police: Valuation changes
DCF valuation
New
11.6
Previous
11.6
Change
0%
15.2
15.2
0%
Weight
100%
0%
Fig. 4. Azoty Police: Income statement forecast
Net sales
COGS
Gross profit
Fig. 5. Azoty Police: Balance sheet forecast
2012
2013
2014E
2015E
2016E
2,981
2,464
2,448
2,599
2,745
2012
2013
2014E
2015E
Current assets
653
713
691
728
-2,707
-2,226
-2,140
-2,236
761
-2,317
Fixed assets
918
1,275
1,295
1,390
1,459
Total assets
1,571
1,988
1,986
2,118
2,220
378
619
487
527
536
136
197
147
171
164
214
303
393
417
410
72
55
147
171
164
977
970
1,013
1,080
1,181
750
750
750
750
750
2
96
93
93
93
1,571
1,988
1,986
2,118
2,220
Net debt
157
169
212
255
237
2016E
274
239
308
363
427
-185
-229
-224
-225
-225
39
46
4
0
0
EBITDA
211
142
173
230
298
Operating profit
128
56
87
139
202
-14
-7
-13
-16
-16
Profit before tax
114
50
75
123
185
share capital
Income tax
-20
-10
-15
-23
-35
Minority Interest
104
51
66
100
151
Total liabilities
Gross margin
9.2%
9.7%
12.6%
14.0%
15.6%
EBITDA margin
7.1%
5.8%
7.1%
8.9%
10.9%
Operating margin
4.3%
2.3%
3.6%
5.3%
7.4%
Net profit margin
3.5%
2.1%
2.7%
3.9%
5.5%
SG&A
Current liabilities
bank debt
bank debt
Equity
2016E
Fig. 6. Azoty Police: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
146
220
76
150
206
CF from investment
-114
-158
-115
-182
-160
-29
-29
38
36
-41
Net change in cash
3
33
-1
5
5
178
UTILITY
Poland
November 12, 2014
RECOMMENDATION
ZE PAK
HOLD (INITIATION)
Prime Polish play on electricity price
Equity Story. ZE PAK operates 2.5GW of lignite-fuelled old generation
STOCK PERFORMANCE
units, of which 600MW is to be switched off in 2018 and 1.3GW in 2029.
outlays will exceed its OpCF until 2017E (construction of gas-fired units)
further.

26
24
22
20
18
Oct-12
but a potential investment into another unit may delay this moment
ZEP
28
Financials. 3Q14 is certain to come in below expectations on the back of
the recently announced provision. Still, if the current prices of electricity
futures and CO2 certificates remain unchanged, ZE PAK is poised to
deliver a very strong EBITDA / bottom line expansion until 2017E – we
Rec.
Date
Price
Price performance
on issue 12 month
date
target
see its operating profit doubling in 2014-17E. Lignite extraction should
continue delivering +PLN200mn EBITDA p.a., while generation should
Oct-14
of the free certificates held, is the key risk for the stock. PAK’s investment
30
Jul-14
seems reasonable. CO2 pricing, in light of today’s respective low volume
WIG Relative
32
Apr-14
delivering decent gains on cost optimisation and further upside there
34
Jan-14
relatively high generation fleet and low-cost units. The company is also
36
Oct-13
company is a key play on the growing Polish electricity price through its
Sell
Jul-13
company requires no external fuel except for its 50MW biomass unit. The
Hold
Apr-13
The company is vertically integrated via its own lignite mines – the
Buy
Jan-13

n.a.
n.a.
n.a.
n.a.
absolute
relative
(p.p)
n.a.
n.a.
provide the strongest electricity price-driven upside, up from PLN296mn in
COMPANY DESCRIPTION
2014E to PLN674mn in 17E. Still, the switch-off scheduled for 2018
should trim PAK’s results substantially (see next page for EBIT at DCF).

Triggers / Risks. Growth in the electricity price beyond the current
market prices is the key upside for the company. Further cost optimisation
ZE PAK is the largest non-Treasury controlled electricity
producer in Poland. Its assets consist of 2.5GW of mostly
lignite-fired units, vertically integrated with adjacent lignite
mines. ZE PAK produces over 10TWh of electricity per
annum, a 7% of total Polish production.
could also add value to ZE PAK. On the side of risks, the company’s
NetFCF may be delayed with the decision on the gas-fired unit
investment. Moreover, ZE PAK is a dirty producer and has a relatively
small amount of free CO2 certificates – any strong growth in their price
Main shareholders
Zygmunt Solorz-Żak
ING Pension Fund
% of votes
51.55%
9.97%
would leave the stock exposed. Finally, uncertainty over rights to future
lignite extraction remains intact.

12M TP of PLN20.8 per share, depressed with the high value of the
company’s provisions. On the other hand, the short-term inexpensiveness
ANALYST
at the P/E and EV/EBITDA ratios implies a per share price of PLN41.9.
(+48) 22 586 80 95
With such a discrepancy in outcomes, we applied two valuation outcomes
with a 50% weight each, yielding a 12M TP of PLN31.9. We initiate the
stock with a Hold recommendation.
Company Data
PLNm
Sales
EBITDA
EBIT
Net income
P/E (x)
EV/EBITDA (x)
2013
2,764
716
359
217
7.0
3.0
2014E
2,416
497
144
74
20.5
5.1
2015E
2,558
662
311
197
7.7
4.3
179
2016E
2,701
786
438
286
5.3
3.9
ZEEP.WA / ZEP PW
1,516.6
50.8
Free float (%)
48.4%
2.0
1M
3M
YTD
Price performance
-0.5%
6.6%
19.3%
Fig. 1. ZE PAK: DCF valuation
2014E
2,416
144
27
117
353
-2
632
-160
Net sales
EBIT
Cash taxes on EBIT
NOPAT
Depreciation
Capital expenditure
Free cashflow
2015E
2,558
311
59
252
351
1
872
-270
2016E
2,701
438
83
355
348
1
872
-170
2017E
2,826
625
119
507
345
1
852
-1
2018E
2,371
239
45
193
343
-3
212
327
2019E
2,368
254
48
206
324
0
212
318
PV FCF PV TV
Total
Regulated businesses
Distribution
Heat
Renewables
Sub-total
Non-regulated businesses
Systemic generation
Coal extraction
Sales & others
Sub-total
0
0
0
0
0
0
0
0
0
0
0
0
-102
523
18
439
1,065
653
19
1,737
963
1,176
37
2,176
Net Debt, provisions, other
2020E
2,366
197
37
159
305
0
212
253
2021E
2,379
219
42
177
286
0
212
252
2022E
2,391
241
46
195
268
0
212
251
2023E
2,404
263
50
213
249
0
212
250
1,261*
Total DCF Valuation [PLNmn, Jan2014]
916
Number of shares [mn]
50.8
SOPT / DCF valuation per share [PLN, Jan2014]
18.0
SOTP / DCF valuation per share - current [PLN, Nov2014]
19.3
12-month Target Price [PLN]
20.8
Source: Company data, DM BZ WBK estimates. * includes PLN599mn of provisions. .
Fig. 2. ZE PAK: Comparable valuation
Price
Currency
P/E
2014E
ZE PAK
CEZ
Public Power Corp
Drax Group
Enel
RWE
SSE
E.ON
2015E
EV/EBITDA
2016E
2014E
2015E
2016E
29.84
PLN
20.5
7.7
5.3
5.1
4.3
3.9
604.50
6.68
580.50
3.97
28.68
1581.00
13.58
CZK
EUR
GBp
EUR
EUR
GBp
EUR
11.1
12.6
26.4
12.5
13.2
13.3
14.9
13.2
6.4
17.3
11.7
13.2
13.5
14.4
14.4
5.0
11.1
11.2
13.7
12.9
14.4
7.1
6.0
11.1
6.0
4.9
10.1
5.6
7.6
5.4
8.7
5.9
4.6
10.1
5.5
7.7
5.0
6.5
5.8
4.4
9.7
5.3
13.2
13.2
12.9
6.0
5.9
5.8
Median
Source: BZ WBK Brokerage research, Bloomberg.
180
Fig. 3. ZE PAK: 3Q14 results preview
3Q11
4Q11
1Q12
Sales
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E*
y/y
q/q
631.4
712.8
735.3
663.2
664.1
689.5
747.0
667.7
677.1
676
-2.0%
-0.2%
140 -35.2%
-0.6%
EBITDA
EBITDA margin
99.8
117.1
139.5
96.2
106.7
216.0
134.1
169.0
140.8
15.8%
16.4%
19.0%
14.5%
16.1%
31.3%
18.0%
25.3%
20.8%
99.8
116.9
130.4
87.1
97.9
128.0
45.5
80.6
49.5
15.8%
16.4%
17.7%
13.1%
14.7%
18.6%
6.1%
12.1%
7.3%
58.8
101.8
90.2
47.3
48.3
102.7
18.6
52.4
34.4
EBIT
EBIT margin
Net profit
Net margin
9.3% 14.3% 12.3%
7.1%
7.3% 14.9%
2.5%
7.9%
5.1%
Source: Company data, DM BZ WBK estimates. * based on market consensus, not adjusted for PLN76mn write-down in 3Q14.
Fig. 4. ZE PAK: Forecast changes
2014E
New Previous
Sales
2,416
n.a.
EBITDA
497
n.a.
EBIT
144
n.a.
Net profit
74
n.a.
New
2,558
662
311
197
Change
n.a.
n.a.
n.a.
n.a.
2015E
Previous
n.a.
n.a.
n.a.
n.a.
New
2,701
786
438
286
Change
n.a.
n.a.
n.a.
n.a.
20.7%
-10.6
-0.1
51 -60.2%
3.1%
7.5%
-11.0
0.2
36 -65.0%
4.8%
5.3%
-9.6
2016E
Previous
n.a.
n.a.
n.a.
n.a.
0.3
Change
n.a.
n.a.
n.a.
n.a.
Fig. 5. ZE PAK: Valuation changes
New
20.8
42.9
31.9
DCF valuation
Weighted valuation*
Previous
n.a.
n.a.
n.a.
Change
n.a.
n.a.
n.a.
Source: Company data, DM BZ WBK estimates. Based on 50% DCF valuation and 50% comparative valuation.
Fig. 6. ZE PAK: Income statement forecast
Fig. 7. ZE PAK: Balance Sheet forecast
2012
2013
2014E
2015E
2016E
Net sales
2,723
2,764
2,416
2,558
2,701
Current assets
COGS
1,960
2,047
1,919
1,896
1,915
Gross profit
764
716
497
662
786
SG&A
137
152
0
0
0
-4
1
0
0
0
EBITDA
764
716
497
662
786
Operating profit
484
359
144
311
438
13
-59
-40
-51
-65
497
300
104
260
374
share capital
Income tax
94
68
20
49
71
Minority Interest
Net profit
406
217
74
197
286
Gross margin
28.0%
25.9%
20.6%
25.9%
29.1%
EBITDA margin
28.0%
25.9%
20.6%
25.9%
29.1%
Operating margin
17.8%
13.0%
6.0%
12.2%
16.2%
Net profit margin
14.9%
7.8%
3.1%
7.7%
10.6%
Profit before tax
2012
2013
2014E
2015E
900
1,132
700
718
775
Fixed assets
5,360
5,339
5,605
6,131
6,660
Total assets
6,259
6,471
6,305
6,849
7,436
925
1,072
988
1,023
1,057
462
406
406
406
406
1,792
1,616
1,495
1,842
2,142
Current liabilities
bank debt
bank debt
Equity
Total liabilities
2016E
790
652
652
950
1,200
3,542
3,783
3,822
3,985
4,237
104
102
102
102
102
0
0
0
0
0
6,259
6,471
6,305
6,849
7,436
1,003
1,305
1,521
2016E
Net debt
934
627
Fig. 8. ZE PAK: Cash flow forecast
2012
2013
2014E
2015E
CF from operations
791
577
379
551
634
CF from investment
-373
-307
-731
-832
-831
-99
-156
-24
276
232
0
0
-35
-35
-35
-376
-5
34
dividends
Net change in cash
318
113
181
182
Dom Maklerski BZ WBK
Jana Pawla II Avenue 17
00-854 Warszawa
fax. (+48) 22 586 81 09
Equity Research Department
Pawel Puchalski, CFA, Head
tel. (+48) 22 586 80 95
tel. (+48) 22 586 81 00
dariusz.gorski@bzwbk.pl
tel. (+48) 22 586 81 55
tel. (+48) 22 586 82 36
tel. (+48) 22 586 81 59
tel. (+48) 22 586 82 25
Andrzej Bieniek, Securities Broker, Investment Adviser tel. (+48) 22 586 85 21
andrzej.bieniek@bzwbk.pl
Telecommunications, Metals & Mining, Power
Dariusz Gorski, Deputy Head
Strategy, Banks
Tomasz Kasowicz
Oil&Gas, Chemicals
Tomasz Sokolowski
Pharma, Retail
Adrian Kyrcz
Construction, Real Estate
Lukasz Kosiarski
Media, IT, IT distribution, Video Games, Health Care
Financials
Tomasz Kucinski
tel. (+48) 22 534 16 10
tel. (+48) 22 586 82 33
Industrials
Michal Sopiel
Wood, Quantitative Analysis
Sales & Trading Department
Piotr Zagan , Head
tel. (+48) 22 586 80 84
piotr.zagan@bzwbk.pl
Wojciech Wosko
tel. (+48) 22 586 80 82
wojciech.wosko@bzwbk.pl
Kamil Cislo
tel. (+48) 22 586 80 90
kamil.cislo@bzwbk.pl
Grzegorz Kolodziejczyk, Securities Broker
tel. (+48) 22 586 81 93
grzegorz.kolodziejczyk@bzwbk.pl
Blazej Leskow, Securities Broker
tel. (+48) 22 586 80 83
blazej.leskow@bzwbk.pl
Marcin Kuciapski, Securities Broker
tel. (+48) 22 586 80 96
marcin.kuciapski@bzwbk.pl
Marek Wardzynski, Securities Broker
tel. (+48) 22 586 80 87
marek.wardzynski@bzwbk.pl
Alex Kaminski
tel. (+48) 22 586 80 63
alex.kaminski@bzwbk.pl
Robert Chudala
tel. (+48) 22 586 85 14
robert.chudala@bzwbk.pl
183
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When particular stocks are marked with Overweight/Underweight/Neutral - such information should not be construed as investment recommendation concerning a given financial
instrument.
The recommendation system of BZ WBK Brokerage S.A. is based on determination of target prices and their relations to current prices of financial instruments; in addition, when
recommendations are addressed to a wide range of recipients, two methods of valuation are required. Overweight/Underweight/Neutral information contained herein does not meet
any of the aforementioned requirements. Furthermore, depending on the situation, it can be grounds for taking different (including opposing) investment action in the case of
particular investors.
Mid-caps - if a stock is included into a mid-cap portfolio it means that, according to the authors of this document, a particular stock price may outperform the WIG20 index during one
month.
Stocks are added to or deleted from the list on the basis of the requirement to rotate the stocks included in the list.
Any change in weight of stocks already included in the portfolio should not be construed as investment recommendation. Such changes are aimed exclusively at making the total
weight of all stocks equal 100%.
DM BZ WBK confirms that the adjustment for dividend paid, adjustment for preemptive rights, share split or merger, or any other purely technical adjustments to the share price will
result in corresponding changes in the stocks' target prices - such situations must be considered within purely technical context and should not be considered as changes to
recommendations in the meaning of the law.
Explanations of special terminology used in the recommendation:
EBIT - earnings before interest and tax
EBITDA - earnings before interest, taxes, depreciation, and amortization
P/E - price-earnings ratio
EV - enterprise value (market capitalisation plus net debt)
PEG - P/E to growth ratio
EPS - earnings per share
CPI - consumer price index
WACC - weighted average cost of capital
CAGR - cumulative average annual growth
P/CE - price to cash earnings (net profit plus depreciation and amortisation) ratio
NOPAT - net operational profit after taxation
FCF - free cash flows
BV - book value
ROE - return on equity
P/BV - price-book value
Recommendation definitions:
Buy - indicates a stock's total return to exceed more than 15% over the next twelve months.
Hold - indicates a stock's total return to be in range of 0%-15% over the next twelve months.
Sell - indicates a stock's total return to be less than 0% over the next twelve months.
In the opinion of DM BZ WBK., this document has been prepared with all due diligence and excludes any conflict of interests which could influence its content. DM BZ WBK is not
obliged to take any actions which could cause financial instruments that are the subject of the valuation contained in this document to be valued by the market in accordance with the
valuation contained in this document.
Brokerage activity conducted by DM BZ WBK, which is a separate organizational unit of Bank Zachodni WBK S.A., is subject to the supervision of the Financial Supervision
Commission.
The date on the first page of this report is the date of preparation and publication of the document.
ANY PERSON WHO ACCEPTS THIS DOCUMENT AGREES TO BE BOUND BY THE FOREGOING DISCLAIMER AND LIMITATIONS.
184
Dom Maklerski BZ WBK is a separate organizational unit of Bank Zachodni WBK S.A. with its registered office in Wrocław, ul. Rynek 9/11, 50-950 Wrocław, registered by the District
Court in Wrocław - Fabryczna, VI Commercial Division of the National Court Register under the number 0000008723. Share capital - PLN 992 345 340 fully paid up. Taxpayer
Identification Number (NIP) 896-000-56-73.
---------------------------------------------------------------------------------------------------------------------------------------DISCLOSURES
This report contains recommendations referring to company/companies: AB S.A., ABC Data S.A., Action S.A., Alumetal S.A., Ambra S.A., Amica Wronki S.A., Apator S.A., Arctic
Paper S.A., ASBISc Enterprises PLC, Asseco Business Solutions S.A., Asseco Poland S.A., Asseco South Eastern Europe S.A., Atrem S.A., Automotive Components Europe S.A.,
Bank BPH S.A., Bank Ochrony Środowiska S.A., Benefit Systems S.A., Budimex S.A., CCC S.A., CD Projekt S.A., CEZ A.S., CI Games S.A., Ciech S.A., Colian S.A., Comarch S.A.,
Cyfrowy Polsat S.A., Dom Development S.A., Echo Investment S.A., Elemental Holding S.A., Emperia Holding S.A., Enea S.A., Energa S.A., Erbud S.A., Eurocash S.A., Europejskie
Centrum Odszkodowań S.A., Fabryka Mebli Forte S.A., Farmacol S.A., Giełda Papierów Wartościowych w Warszawie S.A., Gino Rossi S.A., Grupa Azoty S.A., Grupa Azoty Zakłady
Azotowe Puławy S.A., Hawe S.A., Integer.pl S.A., International Personal Finance plc, Jastrzębska Spółka Węglowa S.A., Kęty S.A., KGHM "Polska Miedź" S.A., Kruk S.A., Lotos
S.A., LPP S.A., Lubelski Węgiel "Bogdanka" S.A., M.W. Trade S.A., Magellan S.A., mBank S.A., Medicalgorithmics S.A., Midas S.A., Monnari Trade S.A., Netia S.A., Neuca S.A.,
Open Finance S.A., Orange Polska S.A., Ovostar Union N.V., P.R.E.S.C.O. Group S.A., Paged S.A., Pekaes S.A., Pelion S.A., Pfleiderer Grajewo S.A., PGNiG S.A., PKN Orlen
S.A., Polska Grupa Energetyczna S.A., Polski Holding Nieruchomości S.A., Pozbud T&R S.A., Prime Car Management S.A., PZ Cormay S.A., Robyg S.A., Ronson Europe NV,
Synektik S.A., Synthos S.A., Tauron Polska Energia S.A., Tesgas S.A., Trakcja S.A., TVN S.A., Unibep S.A., Vantage Development S.A., Votum S.A., Voxel S.A., Wielton S.A.,
Wojas S.A., Work Service S.A., Zakłady Chemiczne Police S.A., Zakłady Odzieżowe Bytom S.A., Zespół Elektrowni "Pątnów-Adamów-Konin" S.A. ("Issuer").
DM BZ WBK emphasizes that this document is going to be updated at least once a year.
This document has not been disclosed to Issuer.
In preparing this document DM BZ WBK applied at least two of the following valuation methods:
discounted cash flows (DCF),
comparative,
mid-cycle,
dividend discount model (DDM),
residual income,
warranted equity method (WEV),
SOTP valuation,
liquidation value.
The discounted cash flows (DCF) valuation method is based on expected future discounted cash flows. One advantage of the DCF valuation method is that it takes into account all
cash streams reaching Issuer and the cost of money over time. Some disadvantages of the DCF valuation method are that a large number of parameters and assumptions need to
be estimated; and the valuation is sensitive to changes in those parameters.
The comparative valuation method is based on the economic rule of "one price". Some advantages of the comparative valuation method are that the analyst need only estimate a
small number of parameters; the valuation is based on current market conditions; the relatively large accessibility of indicators for companies being compared; and that there is an
extensive knowledge of the comparative method among investors. Some disadvantages of valuation by the comparative method are the considerable sensitivity of the results of the
valuation on the choice of companies to the comparative group; the method can lead to a simplification of the picture of the company which in turn can lead to omitting certain
important factors (e.g. growth dynamics, extra-operational assets, corporate governance, the repeatability of results, differences in applied accounting standards); and the uncertainty
of the effectiveness of a market valuation of companies being compared.
The mid-cycle valuation is based on long-term averages for the two-year forward consensus P/E and EV/EBITDA multiples for the members of the peer group. The methodology is
aimed calculating a fair, through the cycle value of cyclical stocks. Among its shortfalls is that at peaks and/or troughs of the cycle, the implied fair value may deviate substantially
from the market's value of an analysed stock as well as the methods' reliance on the quality of external data (we use Bloomberg consensus here). Simplicity and average throughcycle value allowing to capture over as well as under-valuation of a given stock are the main advantages of this methodology.
The dividend discount model (DDM) valuation is based on the net present value of the future dividends that are expected to be paid out by the company. Some advanta ges of the
DDM valuation method are that it takes into account real cash flows to equity-owners and that the methodology is used in respect to companies with long dividend payout history.
Main disadvantage of the DDM valuation method is that dividend payouts are based on a large number of parameters and assumpti ons, including dividend payout ratio.
Residual income method is conceptually close to the discounted cash flows method (DCF) for non-financial stocks, the difference being that it is based on expected residual income
(returns over COE) rather than expected future cash flows. One advantage of this valuation method is that it captures the excess of profit potentially available to shareholders and the
cost of money over time. Main disadvantage of the valuation method is that a large number of parameters and assumptions need to be estimated; and the valuation is sensitive to
changes in those parameters.
The warranted equity method (WEV) is based on the formula P/BV = (two year forward ROE less sustainable growth rate)/(Cost of equity less sustainable growth rate) which allows
estimating a fair value (FV) of a given stock in two years time. Subsequently the FV is discounted back to today. The main advantage of the WEV method is that it is a transparent
one and based on relatively short term forecasts, hence substantially reducing the margin of forecasting error. The main disa dvantage in our view is that the model is based on the
principle that stock price should converge towards its fair value implied by company's ROE and COE.
SOTP valuation - different assets of a company are being valued according to different valuation methods, and the sum of these valuations represents the final valuation of the
company. SOTP valuation advantages / disadvantages are identical to advantages and disadvantages of the specific valuation methods used.
Liquidation value method - liquidation value is the estimated amount of money that an asset or company could be quickly sold for, such as if it were to go out of business. Then, the
estimated assets value is adjusted for liabilities and liquidation expenses. One advantage of this valuation method is its simplicity. This method does not account for intangible assets
as goodwill, which is the main disadvantage.
Over the last three months Dom Maklerski BZ WBK issued 27 Buy recommendations, 9 Hold recommendations and 8 Sell recommendations.
Rating
Buy
Hold
Sell
Under Review
% of Companies
Covered with This Rating Provided with Investment Banking in Past 12M
58,06
5,56
20,97
7,69
12,90
25,00
8,06
20,00
Definition of each rating was provided in the above section Limitation of liability.
The Stock performance charts in this report include line graphs of the securities' daily closing prices for one year period. Information rel ating to a longer period (max 3 years) is
available upon request.
The Issuer may hold shares of BZ WBK S.A.
Members of the Issuer's authorities or their relatives may be members of the management board or supervisory board of BZ WBK S.A.
Among those, who prepared this document, as well as among those who didn't prepare it but had or might have had the access to it, there are such individuals who hold shares or
financial instruments whose value is connected with the value of the financial instruments issued by: Giełda Papierów Wartościowych w Warszawie S.A., Grupa Azoty Zakłady
Azotowe Puławy S.A., KGHM "Polska Miedź" S.A., Lotos S.A., PGNiG S.A., PKN Orlen S.A., PKO Bank Polski S.A., PZ Cormay S.A., Synthos S.A., Tauron Polska Energia S.A.,
Trakcja S.A., Zakłady Chemiczne Police S.A. BZ WBK Group, its affiliates, representatives or employees may occasionally undertake transactions or may be interested in acquiring
securities of issuers directly or indirectly related to those being analysed.
During the last 12 months DM BZ WBK has been a party to agreements relating to the offering of financial instruments issued by Action S.A., Work Service S.A.
During the last 12 months DM BZ WBK was a member of syndicate for financial instruments issued by Elemental Holding S.A., Energa S.A., Prime Car Management S.A.
DM BZ WBK S.A. acts as market maker, on principles specified in the Regulations of the Warsaw Stock Exchange, for the shares of ABC Data S.A., Amica Wronki S.A., Asseco
Poland S.A., Cyfrowy Polsat S.A., Enea S.A., Energa S.A., Eurocash S.A., Europejskie Centrum Odszkodowań S.A., Grupa Azoty S.A., Hawe S.A., Jastrzębska Spółka Węglowa
S.A., Kęty S.A., KGHM "Polska Miedź" S.A., Lotos S.A., LPP S.A., Lubelski Węgiel "Bogdanka" S.A., Netia S.A., Orange Polska S.A., Pelion S.A., PGNiG S.A., PKN Orlen S.A.,
Polska Grupa Energetyczna S.A., Polski Holding Nieruchomości S.A., Synthos S.A., Tauron Polska Energia S.A., Tesgas S.A., TVN S.A.
DM BZ WBK S.A. acts as issuer's market maker, on principles specified in the Regulations of the Warsaw Stock Exchange, for the shares of ABC Data S.A., Action S.A., Amica
Wronki S.A., Benefit Systems S.A., CCC S.A., Dom Development S.A., Enea S.A., Erbud S.A., Europejskie Centrum Odszkodowań S.A., Fabryka Mebli Forte S.A., Hawe S.A.,
International Personal Finance plc, KGHM "Polska Miedź" S.A., Monnari Trade S.A., P.R.E.S.C.O. Group S.A., Pelion S.A., Polski Holding Nieruchomości S.A., Pozbud T&R S.A.,
Robyg S.A., Tesgas S.A., Work Service S.A.
DM BZ WBK is not a part to the agreement with the Issuer related to issuing recommendations.
During the last 12 months DM BZ WBK S.A. has received remuneration for providing services for the Issuer. These services covered acting as issuer's market maker for ABC Data
S.A., Action S.A., Amica Wronki S.A., CCC S.A., Dom Development S.A., Enea S.A., Erbud S.A., Europejskie Centrum Odszkodowań S.A., Fabryka Mebli Forte S.A., Hawe S.A.,
International Personal Finance plc, KGHM "Polska Miedź" S.A., Monnari Trade S.A., P.R.E.S.C.O. Group S.A., Polski Holding Nieruchomości S.A., Pozbud T&R S.A., Robyg S.A.,
Tesgas S.A., Work Service S.A., managing the deposit of financial instuments issued by ABC Data S.A., Action S.A., Atrem S.A., Elemental Holding S.A., Kęty S.A., Magellan S.A.,
Ovostar Union N.V., Polska Grupa Energetyczna S.A., Polski Holding Nieruchomości S.A., Tesgas S.A., providing services of Lead Manager for Amica Wronki S.A., Apator S.A.,
Europejskie Centrum Odszkodowań S.A., KGHM "Polska Miedź" S.A., Synthos S.A., acting as issuing agent for ABC Data S.A., Gino Rossi S.A., managing the managerial scheme
for ABC Data S.A., Kęty S.A., Kruk S.A., carrying out the over-the-market transaction for Paged S.A., conducting the tender offer for TVN S.A.
185
During the last 12 months BZ WBK S.A. has received remuneration for providing services of investment banking from Action S.A., Budimex S.A., KGHM "Polska Miedź" S.A., Polska
Grupa Energetyczna S.A., TVN S.A., Work Service S.A.
BZ WBK S.A. may be indirectly connected with the Issuer and does not rule out that in the period of preparing this document any Affiliate of BZ WBK S.A. might purchase shares of
the Issuer or any financial instruments being the subject of this document which may cause reaching at least 5% of the share capital.
BZ WBK Group has hold, in the period of preparing this document, shares of the following issuers:
AB S.A., ABC Data S.A., Action S.A., Alumetal S.A., Ambra S.A., Asseco Business Solutions S.A., Asseco Poland S.A., Asseco South Eastern Europe S.A., Automotive Components
Europe S.A., Budimex S.A., CCC S.A., CD Projekt S.A., Dom Development S.A., Echo Investment S.A., Erbud S.A., Fabryka Mebli Forte S.A., Farmacol S.A., Kęty S.A., Kruk S.A.,
Lubelski Węgiel "Bogdanka" S.A., Magellan S.A., Medicalgorithmics S.A., Netia S.A., Open Finance S.A., Ovostar Union N.V., Pelion S.A., Pfleiderer Grajewo S.A., PKN Orlen S.A.,
Synektik S.A., Tesgas S.A., Unibep S.A., in the amount reaching at least 5% of the share capital.
BZ WBK Group may have hold, in the period of preparing this document, shares of the Issuer, in the amount reaching at least 1% of the share capital.
Subject to the above, the Issuer are not bound by any contractual relationship with BZ WBK, which might influence the objectivity of the recommendations contained in this
document. BZ WBK S.A. has hold, in the period of issuing this document, financial instruments issued by Action S.A., Amica Wronki S.A., Benefit Systems S.A., CI Games S.A., Kęty
S.A., Lubelski Węgiel "Bogdanka" S.A., Netia S.A., Polski Holding Nieruchomości S.A., Work Service S.A. (except on the basis of being market maker and issuer's market maker).
However, it cannot be ruled out that, in the period of the next twelve months or the period in which this document is in force, BZ WBK S.A. will submit an offer to provide services for
the Issuer or will purchase or dispose of financial instruments issued by the Issuer or whose value depends on the value of financial instruments issued by the Issuer. Except for
broker agreements with clients under which DM BZ WBK sells and buys the shares of the Issuer at the order of its clients, DM BZ WBK is not party to any agreement which would
depend on the valuation of the financial instruments discussed in this document.
Remuneration received by the persons who prepare this document may be dependent, in an indirect way, from financial results gained from investment banking transactions, related
to financial instruments issued by the Issuer, made by DM BZ WBK or its Affiliates.
186

TPSA: 2Q`06 results review

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