CROBEX10 & SBITOP Underpriced At Current P/E Levels

Starting today, you can access the forward 2024 P/E multiples of the largest Croatian and Slovenian blue chips in the CROBEX10 and SBITOP indices, available in our daily trading multiples. For 2024, we expect a “reduction” in P/E multiples for both indices, driven by average net income growth across the board. As such, we consider both indices to be underpriced at current levels.

Firstly, it should be noted that the forward multiples are based on the 2024 earnings, as estimated by InterCapital Research or the companies themselves. At the same time, the current share prices are used, and as the share prices will surely develop in one direction or the other in 2024, so will these multiples be updated.


For Croatia’s CROBEX10, we see an improvement in the index’s P/E, from the current 14.5x to 11.7x by the end of 2024. As such, on average we expect net income growth in most companies.

Current* and forward 2024 P/E multiples of CROBEX10 constituents

Source: InterCapital Research estimates, companies’ estimates/plans

*Atlantska Plovidba recorded a negative net income on the TTM 9M 2023 basis, and as such its current P/E is presented as 0

For 2024, we see earnings improvements in 8 out of 10 companies as compared to the estimates for 2023. Regarding the largest companies by weight in the index, we expect Podravka will see a slight decrease in net income in 2024, mainly as we expect lower tax incentives as Podravka became beneficiary of investment support from the Investment Promotion Act in 2023, but we still expect op. profitability growth to offset this decline, albeit not completely.

On the other hand, Hrvatski Telekom, Končar and Adris should all record improvements in their profitability. For HT, due to slight improvement in sales, but also due to improvements in operating profitability, driven by cost optimization and product price increases (inflation indexation). Meanwhile, we find Končar well-positioned, as they have a massive backlog (contracts yet to be realized) of EUR 1.4bn in the next 2 years, besides the strong performance that the Company already recorded thus far. However, we expect that the profitability margins will be somewhat lower than before, leading to slower profitability growth even with higher sales. For Adris, we see them well positioned in all of their segments, especially tourism (Maistra and HUP-Zagreb) and insurance (Croatia osiguranje). Its tourism segment is more geared towards the higher-end luxury segment, whose customers are more resilient to any potential price increases, while Croatia osiguranje maintains its leadership position in the profitable Non-life segment in Croatia.

Atlantic Grupa should see an improvement in profitability in 2024, especially compared to the current P/E, as Q4 2022 was a negative quarter for the Company, due to higher prices of raw materials, especially coffee. While these pressures were present for most of 2022 and a large part of 2023, they have somewhat normalized recently. Furthermore, Atlantic Grupa also increased its product prices, which should also support profitability going forward.

Valamar Riviera and HPB are also expected to grow, Valamar due to its product mix being positioned more towards the higher end, and the same effect that allowed growing margins for Adris will also be present here, even if the same or lower tourist nights are recorded in 2024. For HPB, growth is expected as interest rates on loans are expected to remain elevated for much of 2024, even if interest rate cuts by the ECB begin during the summer. This reason why is the fact that interest rates on loans have a delayed response to the rate changes, as we saw when the rate hikes began in July 2022.

Finally, we have Atlantska Plovidba, Span, and Ericsson NT. Atlantska Plovidba operates in the cyclical shipping industry, which was hit hard during 2023 due to inflation and lower demand. However, the situation “improved” recently, mainly due to higher transport costs as the Crisis in the Red Sea continues. Span, on the other hand, should see improvements in profitability as the investments they made, combined with continued sales growth will materialize positively. Lastly, for Ericsson NT, profitability has been under pressure for much of 2023, and given that we do not expect a large sales growth in 2024, margins are expected to remain subdued, leading to lower profitability.

CROBEX10 constituents earnings growth estimates (2024E vs. TTM 9M 2023*, 2024E vs. 2023E, %)

Source: InterCapital Research estimates, companies’ data

*Atlantska Plovidba recorded a negative net income on the TTM 9M 2023 basis, and as such the comparison to TTM 9M 2023 is not available, and the change is presented as 0


For SBITOP, we also see an improvement in earnings across most blue chips, albeit one lower than in Croatia. As such, we expect the forward P/E multiple of the index at 7.7x in 2024, down from app. 8.9x today.

Current and forward P/E multiples of SBITOP constituents*

Source: InterCapital Research estimates, companies’ estimates/plans

*For the sake of graph clarity, Equinox’s was excluded as its current P/E amounts to app. 155x. Its forward 2024 P/E amounts to 44.4x.

For Slovenia, we see the growth in earnings primarily driven by Triglav, Petrol, Sava Re, and Krka. For the insurers, this is more of a “return to normal”, as the natural disasters in 2023 significantly reduced profitability for both Triglav and Sava Re, while Triglav was also hit with the changes to the Supplementary Health insurance, a negative effect we do not expect in 2024. For Petrol, we expect improvements in profitability, on the back of its solid position in the region, and improved margins. However, we emphasize that if the price regulations that were present on Petrol materialize once again, growth would suffer. Finally, for Krka, we expect profitability growth in line with the Company’s estimates, as Krka continues to record sales growth across all its operating regions, in line with the Pharma industry trends. On the flip side, possible FX losses from the depreciation of the rouble compared to the euro could hurt profitability, but the opposite is also possible.

In our estimates for NLB, we expect a slight reduction in profitability. The reason is the fact that while the expected EU recession has not materialized yet, the possibility of it happening in 2024 is still present, especially in Slovenia’s main trading partners. This could lead to higher provisions for any “bad loans” materializing (measured through higher cost of risk). These higher provisions directly reduce profitability. On the other hand, if this does not happen, profitability could improve even with the expected summer 2024 interest rate cuts by the ECB.

Lastly, we have Telekom Slovenije, Luka Koper, Cinkarna Celje and Equinox. For Telekom Slovenije, we expect slight sales growth on the back of higher prices, which would support profitability growth in 2024. For Luka Koper, we expect a slight improvement in line with the Company’s estimates. A similar situation is present for Cinkarna Celje, albeit the Company’s financials are directly tied to titanium dioxide prices, which boosted its TTM 9M 2023 results significantly and could vary either way during 2024. Finally, we expect a slight improvement in profitability for Equinox, on the back of continued investments in their product portfolio, combined with a modest sales growth.

SBITOP constituents earnings growth estimates (2024E vs. TTM 9M 2023, 2024E vs. 2023E*, %)

Source: InterCapital Research estimates, companies’ data

*We expect Triglav’s net income to be negative in 2023E, and as the change in 2024E vs. 2023E is presented as 0

Mihael Antolić
Category : Blog

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