The first three quarters of 2024 have just ended, and today we’re bringing you the performance of the regional equity markets, with the main focus on Croatia, Slovenia, and Romania.
Croatia
For the majority of Croatian blue chips, 2024 has proven to be a really solid year, with one outstanding performer above the rest: Končar. With the addition of Končar’s subsidiary Končar D&ST into the CROBEX10 index, we now actually have two strong performers, but since Končar is the Group and D&ST is part of that Group, we can look at them as equals.
During the first nine months, Končar D&ST and Končar shares have recorded extremely strong returns, of 102% and 98%, respectively. This was supported by the strong operating performance that Končar, and in particular its subsidiary Končar D&ST recorded during the last year, year and a half. This was further supported by the huge backlog (contracts signed that still have to be performed) by the Group, meaning that more good results and margin improvements can be expected in the future.
Croatian blue chip performance in 9M 2024 (%)
Source: Bloomberg, InterCapital Research
Following Končar’s success, in third place, there is HPB, which due to the high interest rates in the banking environment has had good results during the last 2 years, although profit growth did somewhat slow down in the last available quarter (Q2). HPB is also the only bank with a large enough free float and size on the Exchange, and if ZABA shared these characteristics it would likely have been placed here and above HPB.
After HPB there’s HT, which on the back of operational efficiency improvements, 5G and fiber expansion, as well as higher prices due to price indexation has recorded single-digit revenue growth and strong improvements on EBITDA and net income lines. Combined with a good dividend payout ratio, it has been spurred forward in price.
After these companies, we come to single-digit growth territory, with Valamar Riviera and Adris (pref.) recording growth of 6% and 5%, respectively, supported by good results from the tourist season for the former, and good tourism and insurance results for the latter. On the other hand, Span recorded no growth since the start of the year, while Podravka and Ericcson NT recorded 6% declines, respectively, and Atlantic Grupa was the only one with a double-digit decrease of 12%.
The reasons for this are numerous; Span and Podravka both recorded strong price growth last year and for a part of 2024, meaning that the decline can be seen more as an “adjustment”, while for Ericsson NT and Atlantic Grupa, pressures on the top line and profitability both took their mark, affected by things such as the non-renewal of the HT contract with Ericsson NT, and higher prices, such as prices of coffee and especially cocoa for Atlantic Grupa.
Top 5 most traded stocks in 9M 2024 on ZSE (EURm)
Source: ZSE, InterCapital Research
Both the positive and negative price dynamics were also present in trading, as Ericsson NT, HT, Podravka, ZABA, and Valamar Riviera all recorded equity turnover of >EUR 10m during the first 9M.
Slovenia
9M 2024 also proved to be good for the Slovenian blue chips, with all the companies recording >10% returns during 9M 2024.
Slovenian blue chip performance in 9M 2024 (%)
Source: Bloomberg, InterCapital Research
Leading the way in overall performance were Sava Re, NLB, and Cinkarna, with returns of 42%, 41%, and 39%, respectively. Sava Re recorded good financial results in 2024 and an improvement over 2023 when it was hit, although not as severely as Triglav for insurance damages following the floods in Slovenia and the broader region during the summer of 2023.
For NLB, it was also one of the best regional banking performers, with strong growth in new loan issuance, recurring and non-recurring banking income, and improvements to profitability. While NLB did start the year strong, the recent news that it was unable in the end to acquire Addiko did put some price pressure on the Company’s stock in the last couple of months, although given that it reached its all-time high value just before this, it could also be seen as an adjustment.
Next up, Petrol, Krka, and Luka Koper recorded returns of 28%, 24%, and 20%, respectively. Petrol’s returns came due to the normalization of margins & commodity prices, especially when it comes to oil and gas. For Krka, continued top-line growth is recorded across most if not all regions, with new medicines and patents, constantly developed, it is unlikely that there would be a slowdown in this. The situation in Russia remains volatile but has largely stabilized. Meanwhile, Luka Koper was initially hit at the beginning of the year by reduced flows, especially from East Asia following the start of the Israeli-Hamas conflict in the Middle East, and the subsequent closing of the Red Sea to most traffic due to the unsafe situation in the region. However, after a period of adjustment, maritime throughput is largely stable, although financial growth has normalized from the previous year’s growth rates, also influenced by a reduction in warehousing times which benefitted the port during that period.
Lastly, Equinox and Triglav recorded returns of 12% and 10%, respectively, with Equinox recording continued top line and profit growth, especially after the full reopening of Grand Hotel Union, while Triglav, similarly to Sava Re recorded far better financials this year, unburdened by flood damages from last year.
Top 5 most traded Slovenian blue chips in 9M 2024 (EURm)
Source: Bloomberg, InterCapital Research
For the most traded stocks, Krka and NLB remain the most liquid and “interesting” Slovenian blue chips, with several times higher turnovers compared to the rest of the pack.
Romania
For Romania, given the diversity of its main index BET both in terms of the number of companies and the industries they operate in, the situation is more mixed. Out of the 20 companies observed, 14 recorded positive returns.
Romanian blue chip performance in 9M 2024 (%)*
Source: Bloomberg, InterCapital Research
*Premier Energy’s share return as of the listing in May 2024
Leading the way in terms of performance is one of the recent newcomers to the BET index, Antibiotice, which recorded a 137% return during the 9M period. The Company’s performance was supported by double-digit growth in revenue and earnings. Earnings were particularly positive, with around 23% annual growth rate for the Company in the past five years. When combined with the strong dividends and the inclusion of the Company into BET, we get the strong performance recorded thus.
After Antibiotice, we have several good performers from different industries. Leading the way is Aquila with a 56% return, followed by MedLife and Sphera, both at 54%, respectively, and Digi, at 51%. Aquila has recorded good earnings growth and operational expansion thus far, further cementing its logistics and distribution market leadership. For MedLife, the Company recorded double-digit growth in both revenue and EBITDA, and it continues to expand its presence in the medical services sector.
Meanwhile, Sphera Franchise Group also recorded positive results, and with the continued expansion of its restaurant network, it should continue posting more growth in the future. Lastly, Digi similarly to HT maintains a leadership telecom position in Romania, and it has benefited from continued investment into fiber-optic networks, combined with growth in the subscriber base.
Moving on down the pack, the financial (banking) and energy companies all recorded returns between app. 30% and 15%, and in general it could be said that for energy, the stabilization of commodity prices as well as the easing of certain measures regarding electricity prices have allowed these companies more room to maneuver. Meanwhile, Banca Transilvania and BRD both benefited from high interest rates in the sector, which are even higher than in the Eurozone as Romania has its currency.
On the flip side, Fondul Proprietatea and One United Properties lost 29% and 26% from the start of the year, for similar reasons more related to stocks than the companies’ performance. For Fondul, after last year’s IPO of Hidroelectrica, and considerations of doing the same for the rest of the companies in the portfolio, it was natural that the price decreased as its NAV (which also takes the companies’ value into account) dropped.
On the other hand, One United Properties recently did a share capital increase in the first stage at prefeed rights issued at a nominal price of RON 0.2 vs. RON 0.9 market share price at the time. This led to a share price adjustment downwards. The company added EUR 68m of fresh capital by adding 44% of existing shares on the market for financing of new projects and entrance in development of Bucharest hospitality market. Lastly, TeraPlast also recorded a similar 24% decline in 9M 2024, as it also did capital increase for 9% of its shareholding at nominal price.
Top 5 most traded Romanian blue chips in 9M 2024 (EURm)
Source: Bloomberg, InterCapital Research
While not one of the top performers, Hidroelectrica with a slight 2% price decline recorded almost EUR 500m in turnover during 9M, followed by Banca Transilvania and OMV Petrom. This is to be expected as these companies are also the largest in the BET fund.
Overall, 9M 2024 was a good period for most regional stock exchanges and individual companies. While some industries benefitted more than others, many of the ones that were under pressure, either by geopolitical or macroeconomic events have shown their resilience. With the expected rate cuts across Europe and more broadly, the world, more positive news from equity could be expected going forward.
