Today, we’re bringing you the overview of the P/E as well as the cash-adjusted P/E for Croatian blue chips, based on the recent FY23 reported data.
With the release of the FY 2023 results for all CROBEX10 constituents, we bring you an updated overview of their P/E ratio as well as their cash-adjusted P/E ratio. As a reminder, cash adjusted P/E means that we take out the cash and cash equivalents (cash in the bank + short-term assets that can be turned into cash) a company has out of its operating business, in order to give a more clear view. This is done in order to point out that some companies have a lot of cash at hand, and this does have an impact on their P/E ratios. Finally, the net profit to majority was used, while the number of shares outstanding, was adjusted for the number of treasury shares held by respective companies.
P/E of Croatian blue chip companies (FY 2023 results)
Source: Companies’ data, ZSE, InterCapital Research
Starting off with the P/E, Span recorded the largest one, at 77.9x. The group is trading for a long time at a high multiple due to a low bottom line. Span recorded a low bottom line due to the expansion cycle made during 2021, greatly enlarging its workforce in high-added-value segments materializing in the form of top-line & staff cost growth, resulting in lower profitability margins. However, seeds from the mentioned investments should be seen during 2024 & 2025. However, despite experiencing a profitability setback in 2023, this is in line with Span’s strategic objectives and we see the Group well-positioned and moving in a commendable direction with the cybersecurity segment expected to perform strongly, mainly on the NIS2 directive.
Atlantic Grupa follows Span with a high P/E of 24.7x, especially driven by the solid recent performance of stock share price on ZSE. Following Atlantic, there is Valamar Riviera, at 23.5x. Both of these companies’ bottom lines were under pressure in the previous year, leading to an increased P/E at the moment, while both of these companies noted a normalization during 2023. Next up, there is HT at a P/E of 18.1x, Podravka at 16.6x and Končar at 14.1x.
On the flip side, two companies to record a negative P/E was Atlantska Plovidba at -49.2x (N/A in other words) and AD Plastik at -21.2x. Atlantska Plovidba’s share price has been somewhat subdued, especially compared to previous years. The Company is tied to the movements in the shipping industry. While this allowed it to achieve some of the best results in its history during 2021 and partly in 2022, now that the shipping industry is under pressure due to the macroeconomic and geopolitical situation, so are the profits of the companies operating in it, including Atlantska Plovidba. As such, the results it recorded are what could be expected in the industry right now. Finally, Končar reported interesting, but relatively stable P/E multiple development. Currently, Končar Group is trading at a P/E of 14.1x, while in the prior year, it was not that much different. The group’s bottom line increased sharply this year, however, the Group’s share price did too. Ericsson NT is being traded at the lower chosen multiple from taken companies, currently standing at 12.5x.
Cash-adjusted P/E of Croatian blue chips companies (FY 2023 results)
Source: Companies’ data, ZSE, InterCapital Research
Moving on, we presented you the cash-adjusted P/E, as Croatia blue chips generally have a lot of cash & cash equivalents. The largest change can be seen by Span, Ericsson NT and Valamar Riviera with a decline to 65x, 9x and 20.6x, respectively. Končar’s cash-adjusted P/E amounts to 10.8x.
Cash & cash equivalents (FY 2023) to current market capitalization of Croatian blue chip companies (%)
Source: Companies’ data, ZSE, InterCapital Research
Of course, the amount of cash and cash equivalents available for the companies in question played a huge role here. For example, Končar’s cash accounted for 26.3% of the combined market cap, and Ericsson’s cash accounted for 27.7% of the market cap. On the flip side, Podravka’s cash and cash equivalents were the lowest as compared to their market cap, at 4.6%.
