Today, we are presenting an overview of the P/E ratio and the cash-adjusted P/E ratio for Croatian blue-chip companies, based on the data reported for the first half of 2024.
First, a few disclaimers are necessary. The data for balance sheet items, such as cash and cash equivalents, is sourced from the Q2 2024 reports, while profit and loss items, specifically net profit, are based on trailing twelve months (TTM) data ending in the first half of 2024 to ensure a consistent basis for comparison. HPB has been excluded from this analysis, as it operates in the financial and banking sector, making it incomparable with other companies presented here. Although only Adris (pref.) is a component of the CROBEX10 index, both the regular and preferred shares of Adris Grupa are included in this analysis. Cash and cash equivalents are applied to both share types, meaning that the P/E and cash-adjusted P/E ratios reflect the company’s performance as a whole. Additionally, the net profit to majority shareholders is used in the analysis, and adjustments have been made for treasury shares held by the respective companies. By considering these factors, we aim to provide a clear and accurate representation of the P/E and cash-adjusted P/E ratios for the top Croatian companies.
P/E of Croatian blue-chip companies (TTM H1 2024 results, points)
Source: Companies’ data, InterCapital Research
Starting with the P/E ratios, Span recorded the highest at 78.3x. This marks a decrease compared to the previous quarter, largely due to improvements in profitability, as the price remained relatively stable. The net result was bolstered by the consolidation of the Estonian company GT Tarkvara and further amplified by contributions from the Ukraine segment. Additionally, the significant growth in OPEX seen in prior quarters, primarily driven by the hiring of new employees, has slowed down, having a positive impact on earnings. This combination of factors contributed to a more favorable P/E ratio for the Company.
Valamar Riviera recorded the second-highest P/E ratio at 35.5x. The Company experienced significant operating revenue growth of 15%, driven by a 15% increase in prices, while the number of units sold was only 2% lower. However, profitability was negatively impacted by the costs associated with opening of new hotels and hiring staff, resulting in some Q3 expenses being recognized in Q2. As a result of lower earnings and the relatively stable share price, the P/E ratio increased accordingly.
Atlantska Plovidba holds third place with a P/E ratio of 20.0x. This significant increase is due to the share price remaining stable while net income saw a substantial improvement, as last year’s H1 results showed a net loss.
The lowest P/E ratio among Croatian blue-chip companies was recorded by Končar. This is primarily due to the stellar growth of the Company’s share price, although earnings also saw an increase. There is an upside in this analysis, that being that no CROBEX10 constituents recorded net losses, meaning none of the P/E ratios are negative.
Cash-adjusted P/E of Croatian blue-chip companies (TTM H1 2024 results, points)
Source: Companies’ data, InterCapital Research
Moving forward, we present the cash-adjusted P/E ratios, given that Croatian blue-chip companies typically hold substantial amounts of cash and cash equivalents. The most significant change is observed in Span, where the cash-adjusted P/E decreases by 13.7x, bringing it down to 64.6x. This is followed by Atlantska Plovidba, which sees a reduction of 9.0x, and Adris Grupa, with a 6.2x decrease in its cash-adjusted P/E compared to the conventional P/E ratio. This revision provides a clearer picture of the underlying valuations by adjusting for excess cash holdings.
Cash & cash equivalents (H1 2024) to current Market cap of Croatian blue-chip companies (%)
Source: Companies’ data, InterCapital Research
In the graph above, we illustrate the percentage of each company’s market capitalization that is made up of cash and cash equivalents. Atlantska Plovidba leads, with cash accounting for 45.1% of its market cap, followed by Adris Grupa at 34.6%. Ericsson NT holds the third-highest percentage, at 28.4%, while Podravka has the lowest, at 4.4%, highlighting the varying degrees of liquidity held by Croatian blue-chip companies.
