For today we are bringing you an overview of the share price performance of various sectors in the regional market on a YTD basis to see how sectors performed during the first three quarters of 2023.

For this, we observed primarily the median YTD share price performance of companies in our wider coverage from Croatia, Slovenia, Bulgaria, Romania, and Serbia.

2023 so far was characterized by the positive development in the regional equity markets overall as participants saw the risks tempering with other risks coming to the surface during the previous few weeks. As a result of this sentiment, all sectors besides insurance noted positive share price developments with some solid double-digit returns. The only sector to note a negative median development was Insurance – we’ll get to that soon. However, the decline on a stock exchange is still low single-digit.

Observing the graph below, we can see that the industrial sector has by far the largest increase with a median YTD share price increase of 39.6%. Industrials were primarily driven by both Končar Group as well as its daughter company on ZSE – Končar D&ST. Further, Viktor Lenac noted a solid 47% YTD return, while two regional companies in our scope that reported a decline in market capitalizations are Ericsson NT and Cinkarna with 13.8% and 2.2% decline, respectively.  

Industrials are followed by Pharma with also high median YTD share price performance of 39.6%. However, we note the sample for this category is relatively small and might not be representative on a wider scale. Nevertheless, we note that Krka drove this sector. The previous year started shaky for Krka due to the geographical exposure to Russia but nevertheless noted a solid year for its operations. Currently, Krka’s H1 net profit was down 28% and stood at EUR 170m, while it has exceeded half of the planned 2023 full-year net profit.

Diversified category follows with an attractive double-digit yield of 24.4%. Utility and Diversified follow with a median YTD share price increase of 11.5% for both categories. Diversified noted a positive development due to Podravka, Adris and Petrol. Podravka noted a very strong YTD development with a 55.7% return, currently trading at EV/EBITDA 10.1x taking TTM results into account. Further, within the sector, Petrol has seen a slow but steady recovery in its P&L due to stabilization in energy prices and market priced it in. Infrastructure and Banks follow with 22.6% and 22.1% YTD returns, respectively. Infrastructure was driven by strong returns both from Luka Ploce and Luka Koper with 42.6% and 22.6% return, respectively. Finally, each of the regional banks in our coverage reported a positive share price development, which should not come as a surprise. Banks are currently achieving higher NIM (net interest margin) due to higher interest rates on the market that were raised to shrink elevated inflation.

YTD Returns by sector (%)

Source: Bloomberg, InterCapital Research

Utility median yielded 12.1%. However, we emphasize the price movement was volatile and if a slightly different time frame was used, returns could vary significantly due to previously high energy prices on a global scale. Finally, the only sector in red was insurance, driven by Slovenian insurers, Triglav and Sava Re. 1^st major event this year for Zavarovalnica Triglav was the issuing of Profit Warning. The group issued a profit warning as a result of the Slovenian Government setting the maximum price of supplemental health insurance premiums. The group’s estimate compared to the initially planned EBT of EUR 95 – 110m was a 25-40% decrease. Further, Slovenia unfortunately witnessed strong storms, rails & floods during July & August, which will drive claims both both Triglav and Sava, while the numbers will be seen in Q3. Consequently, Sava also cut its FY 2023 profit target by 25%. Nevertheless, those companies should long-term benefit from a higher interest rate due to their portfolio being invested with higher yields. 

TeraPlast, one of the representatives of the industrial sector in BET index with a market cap of EUR 220m, has published its 9M 2023 results along with FY 2023 expectations. In 9M 2023, Teraplast recorded a revenue decline of 8% YoY, an EBITDA decrease of 7%, and a net profit of RON 6.8m, a 58.5% YoY decrease.

TeraPlast one of the largest PVC processors in the Eastern EU has published its 9M 2023 results. In the report, the Company has also announced its FY 2023 expectations. The company managed to show a positive net result in the 9M as a result of Q3 performance. Looking at the last quarter, the management of the company emphasized that their activity accelerated driven by infrastructure works and export, partially offset by the below-expected evolution of subsidiaries’ businesses – window & door and packaging segments. Accelerated movement in Q3 specifically reflected more quantities sold with 14% YoY growth in the quarter.

Quantities evolution by quarter; tons

Source: BVB, InterCapital Research

Teraplast noted a decrease in its top line by 8% in 9M 2023, while looking at Q3 the accelerated demand started to kick in with the aforementioned 14% growth in quantities sold – resulting in 4% topline growth for the last quarter. In 9M 2023, the Company’s EBITDA decreased to RON 45m, a decrease of 7% YoY, which resulted that its EBITDA margin reached 8.7% (down 2.8 p.p. YoY). However, just as the top line noted a positive development in the last quarter, so did Teraplast’s profitability with an EBITDA margin amounting to 11% in Q3.

Teraplast key financials (9M 2023 vs 9M 2022, RON m)

Source: BVB, InterCapital Research

Looking at the FY 2023 company’s forecast, Teraplast expects another solid upcoming quarter with an acceleration of the growth rate, after already strong reported Q3. For the FY company expects its top line to decrease 5% YoY, while for its EBITDA to grow 6% YoY with an 8.3% margin (vs 7.3% in 2022). The profitability improvement is expected to arise by the evolution of average prices that dilute the potential effect of the increase in volumes for the FY. Also, the Group believes that an improvement in subsidiaries’ profitability is to be seen.

Here you can find the dates for the upcoming events of the regional companies.

Due to the nature of these events, they are subject to change (might be postponed or canceled).