Last week, our Equity Research team, together with our dear clients from Sweden, traveled to Budapest where we organized a total of six meetings with leading Hungarian blue-chip companies. Therefore, we decided to share some of the key takeaways from these discussions, along with perspectives on the much talked about political and macroeconomic situation facing our northern neighbors.
Hungary faces a pivotal year with parliamentary elections scheduled for April 2026. GDP growth expectations remain subdued at around 0.5% for 2025, while 2026 could see an acceleration to above 2% in the post-election period. Inflation is expected to average around 4.5% in 2025 and gradually moderate toward 3.5% in 2026, remaining above the EU average. Structurally, Hungary continues to post a trade surplus, current account surplus, and high foreign-exchange reserves, supported by pro-business tax policies. However, the combination of expansionary fiscal measures, broad-based subsidies and election-related spending has pushed the budget deficit to an estimated 5.9% of GDP in 2025, while EU funds remain frozen amid persistent tensions between Budapest and Brussels.
The upcoming election is widely viewed as the first in 15 years where an opposition victory appears realistic, with Viktor Orbán and Péter Magyar expected to run a tight race. The outcome remains highly uncertain, particularly with respect to future economic policy direction. Market consensus broadly views the opposition as more pro-European, although the extent of any policy shift remains unclear. A potential opposition victory could be received positively by markets, as it may open the door to a gradual unfreezing of EU funds. Conversely, companies with (in)direct political exposure – especially smaller, domestically focused names – could face increased risk under a change in government.
BUX index composition
Source: Budapest Stock Exchange, Inter Capital Research
Given the high concentration of the BUX index, we begin with its heavyweights: OTP Bank, MOL Group and Richter Gedeon.
OTP Bank operates one of the most diversified banking footprint in CEE, with clear regional segmentation. Hungary, Slovenia and Serbia are markets more exposed to industrial production, Croatia, Albania, Montenegro, and Bulgaria benefit from service-oriented economies, while Russia, Ukraine, Moldova, and Uzbekistan represent the Group’s ex-CIS exposure. This diversification underpins organic loan growth expectations of 10-15%, allowing OTP to outpace regional peers by focusing on higher-growth markets. Hungary remains a low-growth outlier, while markets such as Uzbekistan and parts of the Balkans provide structurally higher growth opportunities. The Group also benefits from a strong capital position and solid asset quality, and notably, OTP’s credit rating remains stronger than that of the Hungarian sovereign. On the other hand, special sector-specific taxes continue to weigh on profitability, while Russia operations face a 50% quarterly earnings repatriation cap, constraining capital deployment from that geography. Meanwhile, Bulgaria’s euro adoption will reduce mandatory reserves from 12% to the ECB’s 1%, unlocking meaningful excess capital.
MOL stands as the fully integrated energy group with upstream, downstream, gas midstream, consumer services, and waste management operations. Production is split roughly evenly between Hungary and Croatia, and other markets like Azerbaijan, Iraqi Kurdistan, Russia, and Pakistan, supported by a low break-even oil price. In downstream, the ongoing Pančevo refinery acquisition offers solid infrastructure and represents a major opportunity to solidify MOL’s position in Serbia and the broader region. The petrochemicals business remains challenged across Europe due to overregulation and intensifying Asian competition, resulting in negative EBITDA in recent years. Waste management also posts negative EBITDA as it is a relatively new vertical, but is expected to break even soon, standing as a key synergy opportunity in the domestic market.
Richter Gedeon, Hungary’s pharmaceutical giant, continues to anchor its business in central nervous system therapies, complemented by a rapidly growing women’s healthcare vertical focused on contraception, fertility and menopause, while biosimilars and general medicines provide stability. One of Richter’s key strengths is its long-standing partnership with AbbVie, which plays a central role in R&D collaboration and project selection. Several promising development programs are linked to dopamine-3 compounds in the CNS segment, while they are possible opportunities for inorganic expansion in WHS segment as well. The flagship product, Vraylar, retains exclusivity until March 2030, providing ample runway for cash generation while the Company continues to build its next generation of growth drivers through a combination of internal R&D and partnerships.
Moving to telecommunications, Magyar Telekom is the clear market leader in mobile and fixed services in Hungary and member of the Deutsche Telekom Group, closely resembling Hrvatski Telekom in structure and strategy. In addition to Hungary, the Group operates Makedonski Telekom in North Macedonia and holds smaller market positions in Bulgaria and Romania. Financial performance has benefited from price indexation in recent years, while major spectrum licenses have been extended well into the mid-2030s, ensuring long-term network stability.
By contrast, 4iG represents a more complex and rapidly evolving story. Historically an IT services company, the Group entered telecommunications following a change in ownership, consolidating the market through the acquisition of Vodafone Hungary, Digi Hungary and several other smaller operators. The entry of Rheinmetall as a strategic shareholder market the launch of the Group’s space and defense segment, which is expected to grow to roughly one-third of total revenues in the coming years. Operations include the production of tanks, helicopters, firearms, and small satellites in Hungary, alongside partnerships with German, Czech, Israeli and other international players. The Group is also engaged in the data center business with expansion plans. While the business model is compelling, it is also highly capital-intensive, resulting in elevated leverage that is expected to increase further as expansion continues.
But it’s not only defense and military facilities being constructed in Hungary. Hungary’s role as a regional logistics hub should not be overlooked, as the country has become a major automotive manufacturing center, hosting production facilities for BMW, Mercedes-Benz and Volkswagen, as well as Chinese BYD. This underscores Hungary’s logistics importance in the region, benefiting Waberer’s as one of Europe’s largest logistics service providers. The Group’s warehouse investments are closely linked to automotive and electronics facilities across the country, while its insurance business contributes a substantial share of overall profitability. Waberer’s is also expanding into specialized niches within international transportation. Fun fact: Budapest has emerged as one of Europe’s largest cargo airport hubs, alongside Liege, driven by e-commerce-related flows.
Average daily turnover (EURm)
Source: Bloomberg, InterCapital Research
Most of these companies have long outgrown the Hungarian domestic market, and pose as regional leaders. While they continue to defend and strengthen their home positions, their strategic focus is increasingly regional, targeting Central Europe, the Balkans and selected CIS markets. Against this backdrop, Hungary’s evolving political landscape will be an important factor to watch, as it continues to shape capital markets and investment sentiment in the coming months.