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 quarter of 2024.

First, a few disclaimers are necessary. The data for balance sheet items, such as cash and cash equivalents, is derived from the Q1 2024 reports. Profit and loss items, specifically net profit, are based on trailing twelve months (TTM) data ending in the first quarter of 2024 to ensure a consistent comparison. Hrvatska poštanska banka (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 part of the CROBEX10 index, both regular and preferred shares of Adris grupa are included in this analysis. The cash and cash equivalents are applied to both share types, so the P/E and cash-adjusted P/E ratios represent Adris grupa 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 Q1 2024 results)

Source: Companies’ data, ZSE, InterCapital Research

Starting with the P/E ratios, Span recorded the highest at 152x. This increase is attributed to a combination of a decreased bottom line and a rising share price. Despite the company’s sales growing by 33% YoY, net profits fell by 31% due to increased OPEX, primarily driven by the hiring of 200 new employees needed to support future sales growth. As future sales are expected to continue growing, Span’s net income should recover, leading to lower P/E in the future.

Valamar Riviera recorded the next-highest P/E at 25.7x. The company saw significant top-line growth of 58% YoY in Q1 due to an earlier start to the tourist pre-season, especially around Easter. However, this also led to many expenses typically covered in the second quarter being incurred in Q1, resulting in an 8% decrease in net profits YoY. With earnings down and the share price up by 13.2% YTD, the P/E ratio increased accordingly. Atlantic Grupa holds third place with a P/E ratio of 22.7x. This slight decrease is due to the share price remaining stable while net income saw an insignificant increase. On the flip side, Atlantska Plovidba and AD Plastik recorded negative P/E ratios. Atlantska Plovidba had the lowest at -114.8x. Despite achieving a positive bottom line in Q1 2024, the company still has not attained a positive TTM net income after recording losses in the three quarters of 2023. AD Plastik also posted a negative P/E of -74.9x. Although the company achieved a positive bottom line in Q1 2024, it was insufficient to offset losses from 2023.

Cash-adjusted P/E of Croatian blue chips companies (TTM Q1 2024 results)

Source: Companies’ data, ZSE, InterCapital Research

Moving on, we present the cash-adjusted P/E ratios, as 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 drops by 27.2x, bringing it down to 124.8x. This is followed by Adris Grupa, which sees a decline of 13.1x, and Ericsson NT, with a 3.7x reduction in its cash-adjusted P/E.

Cash & cash equivalents (Q1 2024) to current Market cap of Croatian blue-chip companies (%)

Source: Companies’ data, ZSE, InterCapital Research

In the graph above, we illustrate the percentage of each company’s market capitalization that is comprised of cash and cash equivalents. Adris Grupa leads with cash accounting for 61.4% of its market cap, followed by Atlantska Plovidba at 50.8%. Ericsson NT holds the third-highest percentage, while Podravka has the lowest at 4.6%.

Today, we are bringing you an overview of the impact that the positive and negative periods during 2024 had on the trading of the LJSE, as well as a quick analysis of the SBITOP and its constituents in this regard.

In this overview, we’ll look at the average turnover during the bearish (positive) and bullish (negative) periods in the LJSE. The measurement of positive/negative returns is the overall performance of the largest Slovenian blue-chip index, SBITOP. In other words, when SBITOP increases on a daily basis, it could be considered a positive period, and vice versa.

Of course, looking at the turnover itself does not tell the entire story, as this should be combined with the overall performance of the stocks which are analyzed. 2024 thus far has been an extremely strong year for Slovenia, with most of the SBITOP constituents recording double-digit growth rates as can be seen in the graph below:

Performance of SBITOP constituents in 2024 YTD (%)

Source: Bloomberg, InterCapital Research

This performance is also evident if we look at the turnover. In fact, out of the 135 trading days thus far in 2024, 67% could be considered “bullish”, while only 37% could be considered “bearish”. This means that for the majority of the year thus far, SBITOP constituents and by extension, the index itself, recorded positive returns. Cumulatively, this led to the strong performance described above.

There are many reasons for this strong performance by the SBITOP constituents, ranging from more macroeconomic conditions such as the downward trend in inflation to the recent rate cut by the ECB, but the main reason in this category is for sure the more positive sentiment in equity overall, which has been present for much of this year as compared to the previous years. And there are reasons to be positive, besides lower inflation & expectations of lower interest rates, economic growth is also returning, as opposed to the expected recession forecasts from last year for 2024. The geopolitical situation, like the War in Ukraine or the conflict in Gaza, and by extension the trouble with shipping in the Red Sea has also remained relatively stable after the initial shocks seen in 2022 and 2023.

Of course, it isn’t set in stone that any of these things will remain this way, but the current market sentiment expects it to be so. Besides this, individual stocks performed really well in their respective sectors. NLB, which recorded the largest growth on a YTD basis, has been recording extremely positive results in the banking sector, and with news related to its new 2030 business strategy (more on that here), and the Addiko acquisition (more on that here, and here), the outlook for the bank’s future is also positive. A similar situation is present with Krka, who continued to record sales growth across all regions, despite the ever-increasing sanctions on Russia which might affect Krka’s business more severely in the future.

Sava Re also recorded good results, while Petrol’s business outlook improved as the strain from the imposed margins lessened, as did energy prices which severely limited the Group’s profitability in 2022 and 2023. In general, 2024 proved to be a good year both on the macro and operational levels of these companies.

Average turnover of SBITOP constituents in 2024 YTD (EUR ‘000)

Source: Bloomberg, InterCapital Research

Turning our attention to turnover, 2 names stand out once more: Krka at an average of EUR 612k, and NLB at an average of 571k. Only loosely following them we have Cinkarna Celje at EUR 123.4k, Petrol at EUR 102k, Sava Re at EUR 100k, and Triglav at EUR 88k. However, if we look at how much did their turnover changed on the positive and negative days, Krka’s average turnover increased to EUR 620k during the positive and decreased to EUR 581k during the negative days. Following them, there is NLB, whose turnover grows to an average of EUR 581k during the bullish periods, and drops to EUR 550k during the bearish periods.

Increase/decrease in the turnover on positive days as compared to the negative days (%)

Source: Bloomberg, InterCapital Research

The difference in the turnover is most evident when we compare the raw averages on the positive and negative days. The largest difference is recorded by Sava Re, with 53% higher turnover during the positive days, followed by Cinkarna Celje at 17%, Triglav at 8%, and NLB at 6%. On the other hand, Luka Koper, Petrol, and Telekom Slovenije recorded 12%, 11%, and 11% higher turnover during the negative days.

What this data can tell us is that some of these stocks, which are usually less traded do get more spotlight and attention when some news related to them appears. If the news is positive, higher turnover is recorded, and vice versa. Of course, in relative terms, some of these changes might seem large, but in absolute, even the largest difference recorded by Sava Re is only app. EUR 40k.

 

 

 

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