Erste Group Research
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Erste Group Research
Erste Group Research – Company Report Otmuchow | Confectionary | Poland 4 April 2013 Otmuchow from Buy to Accumulate PLN mn 2011 2012 Net sales 228.8 315.4 EBITDA 21.4 25.4 EBIT 14.3 13.6 Net result after min. 8.7 6.5 EPS (PLN) 0.68 0.51 CEPS (PLN) 1.86 1.34 BVPS (PLN) 9.36 9.86 Div./share (PLN) 0.00 0.00 EV/EBITDA (x) 7.0 8.4 P/E (x) 8.4 20.9 P/CE (x) 3.1 8.0 Dividend Yield 0.0% 0.0% Share price (PLN) close as of 02/04/2013 Number of shares (mn) Market capitalization (PLN mn / EUR mn) Enterprise value (PLN mn / EUR mn) 2013e 335.5 30.2 17.8 10.6 0.83 1.86 10.69 0.00 7.0 13.7 6.1 0.0% 2014e 356.9 31.2 19.4 12.2 0.96 1.94 11.65 0.00 6.2 11.9 5.8 0.0% 11.4 12.7 145 / 35 211 / 50 52 weeks 15 14 13 12 11 10 9 8 Performance in PLN Otmuchow SA WIG (Rebased) 12M 6M 3M 1M 15.9% 13.7% 4.0% -14.5% Reuters OTMP.WA Free float Bloomberg OTM PW Shareholders Div. Ex-date Target price 13.0 Homepage: 49.1% Zarus HL (50.9%) PZU PF (14.2%) www.zpcotmuchow.pl Anticipating benefits from higher margins Analyst: Marek Czachor +48 22 330 62 54 [email protected] After a period that saw heavy CAPEX (new product lines and the acquisition of Odra), the company is set to concentrate on the improvement of its margins. The acquisition of Odra, which burdened the results in 2012, should translate into growth of the group’s margins and make the company less dependent on its main client. Due to its exposure to the quickly growing discount segment in Poland and the recently installed modern product lines, we see Otmuchow as an attractive acquisition target. Alongside the cut in profit forecasts for the coming fiscal years, we slash our 12M target price to PLN 13. However, we issue an Accumulate recommendation on the stock, as we believe in the longer-term growth of Otmuchow profits. Erste Group Research – Company Report 04 April 2013 All prices are those current at the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Page 1 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Investment story The weaker than anticipated 4Q12 results (especially on the top line) prompted us to revise down our forecasts for the coming years. After three years of heavy CAPEX on new production lines and the acquisition of Odra (financed by debt and a new share issue), the company plans to concentrate on the improvement of its margins, which should lead to a better return on invested capital. Our assumption includes only slight growth of profitability - not to the levels reported in 2008-09. We anticipate that the operating improvement in 2013 will come mainly from subsidiary Odra, the restructuring of which burdened the 2011-12 results. Otmuchow has exposure to the quickly growing market of private labeled brands in discount chains and needs to strengthen its second leg of branded products business. Additionally, it has recently installed modern production lines. Thus, despite the current slowdown of top line growth, we see its fundamental valuation as cheap and thus issue an Accumulate recommendation, with a 12M target price of PLN 13. Financials Change in estimates Consolidated, IFRS (PLN, mn) 2012 2013e 2014e Reported Before Change Now Before Change Now Before Change Sales 315.4 340.5 -7% 335.5 408.6 -18% 356.9 441.2 -19% Gross profit 73.6 79.8 -8% 79.5 95.1 -16% 84.4 102.7 -18% 23.3% 23.4% -0.1% 23.7% 23.3% 0.4% 23.7% 23.3% 0.4% EBITDA 25.4 29.3 -14% 30.2 35.3 -14% 31.2 37.2 -16% margin margin 8.0% 8.6% -0.6% 9.0% 8.6% 0.4% 8.8% 8.4% 0.3% EBIT 13.6 17.9 -24% 17.8 24.2 -27% 19.4 26.1 -26% Interest paid 4.7 4.5 3% 4.4 4.1 8% 3.4 3.0 14% Net profit 6.5 10.8 -40% 10.6 16.3 -35% 12.2 18.8 -35% Operating CF 11.6 11.9 -2% 18.3 25.1 -27% 25.3 29.0 -13% Net investments -4.6 -5.7 -19% -4.3 -5.4 -22% -4.3 -10.4 -59% DPS 0.0 0.0 0% 0.0 0.0 0% 0.0 0.7 Net debt 63.5 64.5 -2% 53.8 48.9 10% 36.2 33.4 8% Source: Otmuchow, Erste Group Research The lower level of sales, which we feel will not be balanced by an improvement of margins in the short term, prompted us to cut EBITDA and net profit forecasts for the coming fiscal years, as well as CAPEX assumptions, as we expect Otmuchow to increase the utilization of its product lines. Erste Group Research – Company Report 04 April 2013 Page 2 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Margins 35% 30% 25% 20% 15% 10% 5% 0% ROIC ROE EBITDA margin net margin 2008 13% 22% 8% 4% 2009 18% 30% 12% 8% 2010 10% 13% 11% 7% 2011 5% 7% 9% 4% 2012 3% 5% 9% 3% 2013e 5% 7% 9% 4% 2014e 6% 8% 8% 4% 2015e 7% 9% 8% 4% 2016e 9% 9% 8% 4% Source: Company data, Erste Group estimates Cash flow 40 PLN mn 20 0 -20 -40 -60 -80 -100 dividend Net Investments Operating net cash 2007 0 -1 4 -10 2008 0 -24 1 -23 2009 0 -22 19 -27 2010 0 -35 7 -11 2011 0 -89 26 -66 2012 0 -6 12 -65 2013e 0 -4 18 -54 2014e 0 -4 25 -36 2015e 0 -4 25 -17 2016e -4 -4 25 -2 Source: Company data, Erste Group estimates Valuation We employed a DCF model as our valuation tool, based on our forecasts for 2014-17. We used a discount rate based on WACC and a terminal value based on perpetuity and the diluted number of shares. The DCF model led us to a 12-month target price of PLN 13 per share, which, in our opinion, reflects the value of the company in a more proper way than a peer comparison, as it includes future prospects. Erste Group Research – Company Report 04 April 2013 Page 3 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 WACC calculation 2013e 2014e 2015e 2016e 2017e NY/TV Risk free rate Equity risk premium Beta Cost of equity 4.0% 6.0% 1.0 10.0% 4.0% 6.0% 1.0 10.0% 4.0% 6.0% 1.0 10.0% 4.0% 6.0% 1.0 10.0% 4.0% 6.0% 1.0 10.0% 5.0% 5.7% 1.0 10.7% Cost of debt Effective tax rate After-tax cost of debt 6.5% 19.0% 5.3% 6.5% 19.0% 5.3% 6.5% 19.0% 5.3% 6.5% 19.0% 5.3% 6.5% 19.0% 5.3% 7.5% 19.0% 6.1% 80% 9.1% 89% 9.5% 97% 9.9% 98% 9.9% 85% 9.3% 85% 10.0% (PLN mn) 2013e 2014e 2015e 2016e 2017e NY/TV Sales growth EBIT EBIT margin Tax rate Taxes on EBIT NOPLAT 6.4% 17.8 5.3% 19.0% -3.4 14.4 6.4% 19.4 5.4% 19.0% -3.7 15.7 6.4% 21.2 5.6% 19.0% -4.0 17.2 6.4% 22.5 5.6% 19.0% -4.3 18.2 6.4% 23.9 5.6% 19.0% -4.5 19.4 1.5% 25.1 5.8% 19.0% -4.8 20.3 12.5 34.5% -9.7 -48.2% -4.3 11.8 36.3% -2.7 n/a -4.3 10.5 40.8% -2.9 0.0% -4.3 10.1 42.5% -3.0 -12.5% -4.3 9.7 44.3% -3.2 -12.5% -4.3 12.0 100.0% -0.8 -12.6% -12.0 12.9 20.6 20.6 21.0 21.5 19.5 13.7 1.5% 233.2 148.8 Equity weight WACC DCF valuation + Depreciation Capital expenditures / Depreciation +/- Change in working capital Chg. working capital / chg. Sales - Capital expenditures Free cash flow to the firm Terminal value growth Terminal value Discounted free cash flow - Dec 31 2012 Enterprise value - Dec 31 2012 11.8 222.4 Minorities Non-operating assets Net debt Other adjustments Equity value - Dec 31 2012 12.1 0.0 63.5 0.0 146.8 Number of shares outstanding (mn) Cost of equity 12M target price per share (PLN) 12.7 10.0% 13.0 Current share price (PLN) Up/Downside 11.4 13.8% Enterprise value breakdown 17.4 15.9 14.7 Sensitivity (per share) 13 4.8% 5.3% 5.8% 6.3% 6.8% WACC PV of terminal value 67% PV of detailed period 33% 9.0% 9.5% 10.0% 10.5% 11.0% 12.0 11.3 10.6 10.0 9.5 13.4 12.5 11.8 11.1 10.5 14.7 13.8 13.0 12.2 11.6 16.1 15.1 14.2 13.4 12.7 17.4 16.3 15.4 14.5 13.7 WACC Terminal value EBIT margin 13 9.0% 9.5% 10.0% 10.5% 11.0% 0.5% 12.8 12.1 11.5 10.9 10.4 2.0% 15.9 14.8 13.9 13.0 12.3 2.5% 17.2 16.0 14.9 13.9 13.1 Source: Erste Group Research Erste Group Research – Company Report 04 April 2013 Page 4 Terminal value growth 1.0% 1.5% 13.7 14.7 12.9 13.8 12.2 13.0 11.5 12.2 10.9 11.6 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 In comparison with international companies from the confectionary segment, Otmuchow is traded at a 40% discount for the 2013 fiscal year, based on P/E, EV/EBIT and EV/EBITDA multiples, and at a 50% discount for 2014. Such a discount comes from the weaker balance sheet in comparison to its peers’ and a strong dependence on sales of private labeled brands to discount chains. Peer group comparison P/E EV/EBIT EV/EBITDA 2012 2013e 2014e 2012 2013e 2014e 2012 2013e 2014e Wawel 17.9 16.5 14.3 14.6 12.6 11.1 12.6 11.1 9.6 Mieszko 15.5 12.5 10.9 14.0 12.9 11.8 9.5 8.8 8.1 Colian 7.3 10.8 8.1 8.2 9.0 9.4 5.6 5.5 6.1 Ulker Biskuvi Sanayi 29.0 29.6 26.8 22.0 20.2 18.4 17.3 16.0 14.8 Want Want China 32.9 29.3 25.0 24.6 22.1 18.5 23.9 19.7 16.6 Lindt & Spruengli Kraft 20.5 22.8 20.3 22.0 20.2 18.4 17.3 16.0 14.8 22.1 19.6 17.4 14.3 14.7 13.2 11.1 11.7 10.8 Nestle 20.4 19.0 17.5 15.0 15.6 14.3 12.2 12.6 11.6 Hershey 26.9 23.8 21.8 13.9 11.2 10.1 11.8 9.7 8.8 Median total 12.7 11.7 14.6 10.2 12.9 11.9 10.7 10.1 9.5 Otmuchów 20.9 13.7 11.9 15.6 11.9 10.0 8.4 7.0 6.2 Premium/discount 64% 17% -19% 54% -8% -17% -22% -31% -35% Implied value 10.3 14.1 20.2 8.3 18.5 18.5 18.6 22.0 21.7 Polish peers Emerging markets peers Developed markets peers Source: Factset, Erste Group Research Assumptions Our estimates are based on the following assumptions: Risk-free rate at 4.0%, equity premium at 6.0%, debt premium 2.5% and beta 1.0. CAPEX below depreciation in 2013-17. Effective tax rate at 19% in 2013-17. Terminal value growth rate at 1.5%. We do not include any acquisitions in our forecasts Erste Group Research – Company Report 04 April 2013 Page 5 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Income Statement (IFRS, PLN mn, 31/12) Net sales Cost of goods sold Gross profit SG&A Other operating revenues Other operating expenses EBITDA Depreciation/amortization EBIT Financial result Extraordinary result EBT Income taxes Result from discontinued operations Minorities and cost of hybrid capital Net result after minorities Balance Sheet 2009 2010 2011 2012 2013e 2014e 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 142.81 -105.34 37.48 -22.52 0.40 -0.75 17.77 -3.16 14.61 -0.87 0.00 13.74 -2.63 0.00 0.00 11.12 156.67 -120.02 36.65 -23.44 1.08 -0.59 17.86 -4.17 13.69 -0.89 0.00 12.80 -2.32 0.00 0.00 10.48 228.76 -172.42 56.34 -39.49 2.32 -4.92 21.36 -7.11 14.25 -2.07 0.00 12.18 -2.48 0.00 -1.04 8.66 315.38 -241.75 73.62 -59.73 2.76 -3.07 25.37 -11.78 13.58 -4.88 0.00 8.70 -2.04 0.00 -0.14 6.52 335.46 -255.94 79.52 -61.75 0.00 0.00 30.22 -12.45 17.77 -4.34 0.00 13.43 -2.55 0.00 -0.30 10.58 356.86 -272.46 84.40 -65.00 0.00 0.00 31.23 -11.84 19.39 -3.36 0.00 16.04 -3.05 0.00 -0.80 12.19 2009 2010 2011 2012 2013e 2014e 0.62 60.38 0.68 61.68 5.72 37.07 1.42 0.58 44.79 106.47 44.49 0.00 0.00 0.00 4.64 19.81 0.00 19.81 8.19 29.35 37.53 106.47 4.91 87.92 11.03 103.85 9.70 48.65 0.38 21.26 80.00 183.85 110.90 0.55 0.00 0.00 4.56 22.89 0.00 22.89 9.09 35.87 44.96 183.85 22.96 162.90 2.94 188.80 18.20 69.28 0.78 1.51 89.76 278.56 119.26 12.07 0.00 0.00 12.88 38.43 1.50 39.93 28.75 65.68 94.43 278.56 22.24 158.09 2.37 182.70 19.07 80.51 0.52 4.52 104.61 287.31 125.70 12.12 0.00 0.00 11.34 29.94 2.76 32.69 38.04 67.41 104.78 287.31 22.24 149.94 2.52 174.70 19.96 93.27 0.55 3.36 117.14 291.84 136.28 12.12 0.00 0.00 12.06 25.19 2.76 27.94 32.01 71.43 102.72 291.84 22.25 142.39 2.69 167.32 21.25 99.22 0.58 3.57 124.63 291.95 148.47 12.12 0.00 0.00 12.83 17.50 2.76 20.26 22.24 76.03 97.51 291.95 2009 2010 2011 2012 2013e 2014e 18.60 -22.27 3.71 0.15 6.67 -34.50 48.76 20.68 25.75 -88.59 43.07 -19.76 11.57 -4.61 -3.96 3.01 18.27 -4.26 -15.17 -1.16 25.32 -4.27 -20.85 0.21 2009 2010 2011 2012 2013e 2014e 22.3% 12.4% 10.2% 7.8% 30.0% 17.9% 41.8% 27.4 5.8 76.5 19.1 9.7% 11.4% 8.7% 6.7% 13.5% 11.0% 60.6% 10.7 34.7 126.7 15.6 46.0% 9.3% 6.2% 4.2% 7.5% 6.7% 47.1% 65.7 -5.4 211.4 12.4 37.9% 8.0% 4.3% 2.1% 5.3% 4.9% 48.0% 63.5 -0.7 215.4 13.0 6.4% 9.0% 5.3% 3.2% 8.1% 6.7% 50.8% 53.8 13.9 217.1 13.1 6.4% 8.8% 5.4% 3.6% 8.6% 7.3% 55.0% 36.2 26.5 212.3 13.2 (IFRS, PLN mn, 31/12) Intangible assets Tangible assets Financial assets Total fixed assets Inventories Receivables and other current assets Other assets Cash and cash equivalents Total current assets TOTAL ASSETS Shareholders'equity Minorities Hybrid capital and other reserves Pension and other LT personnel accruals LT provisions Interest-bearing LT debts Other LT liabilities Total long-term liabilities Interest-bearing ST debts Other ST liabilities Total short-term liabilities TOTAL LIAB. , EQUITY Cash Flow Statement (IFRS,PLN mn, 31/12) Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities CHANGE IN CASH , CASH EQU. Margins & Ratios Sales growth EBITDA margin EBIT margin Net profit margin ROE ROCE Equity ratio Net debt Working capital Capital employed Inventory turnover Source: Company data, Erste Group estimates Erste Group Research – Company Report 04 April 2013 Page 6 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Contacts Group Research Head of Group Research Friedrich Mostböck, CEFA Major Markets & Credit Research Head: Gudrun Egger, CEFA Adrian Beck (Fixed income AT, CH) Benedikt Blum (Quant, Euro) Hans Engel (Equity US) Christian Enger, CFA (Covered Bonds) Mildred Hager-Germain (Fixed income Euro, US) Alihan Karadagoglu (Corporates) Peter Kaufmann (Corporates) Stephan Lingnau (Equity Europe) Elena Statelov, CIIA (Corporates) Thomas Unger; CFA (Agencies) Macro/Fixed Income Research CEE Head CEE: Juraj Kotian (Macro/FI) Chief Analyst: Birgit Niessner (CEE Macro/FI) CEE Equity Research Head: Henning Eßkuchen Chief Analyst: Günther Artner, CFA (CEE Equities) Günter Hohberger (Banks) Franz Hörl, CFA (Steel, Construction) Daniel Lion, CIIA (IT) Christoph Schultes, CIIA (Insurance, Utility) Vera Sutedja, CFA (Telecom) Vladimira Urbankova, MBA (Pharma) Martina Valenta, MBA (Real Estate) Gerald Walek, CFA (Machinery) Editor Research CEE Brett Aarons Research Croatia/Serbia Head: Mladen Dodig (Equity) Head: Alen Kovac (Fixed income) Anto Augustinovic (Equity) Ivana Rogic (Fixed income) Davor Spoljar; CFA (Equity) Research Czech Republic Head: David Navratil (Fixed income) Petr Bittner (Fixed income) Head: Petr Bartek (Equity) Vaclav Kminek (Media) Katarzyna Rzentarzewska (Fixed income) Martin Krajhanzl (Equity) Martin Lobotka (Fixed income) Lubos Mokras (Fixed income) Josef Novotný (Equity) Research Hungary Head: József Miró (Equity) András Nagy (Equity) Orsolya Nyeste (Fixed income) Tamás Pletser, CFA (Oil&Gas) Zoltan Arokszallasi (Fixed income) Research Poland Head: Magdalena Komaracka, CFA (Equity) Marek Czachor (Equity) Adam Rzepecki (Equity) Michal Zasadzki (Equity) Research Romania Head: Mihai Caruntu (Equity) Head: Dumitru Dulgheru (Fixed income) Chief Analyst: Eugen Sinca (Fixed income) Dorina Cobiscan (Fixed Income) Raluca Ungureanu (Equity) Marina Alexandra Spataru (Equity) Research Slovakia Head: Maria Valachyova (Fixed income) Martin Balaz (Fixed income) Research Turkey Head: Can Yurtcan Evrim Dairecioglu (Equity) +43 (0)5 0100 11902 +43 (0)5 0100 11909 +43 (0)5 0100 11957 +43 (0)5 0100 11961 +43 (0)5 0100 19835 +43 (0)5 0100 84052 +43 (0)5 0100 17331 +43 (0)5 0100 19633 +43 (0)5 0100 11183 +43 (0)5 0100 16574 +43 (0)5 0100 19641 +43 (0)5 0100 17344 +43 (0)5 0100 17357 +43 (0)5 0100 18781 +43 (0)5 0100 19634 +43 (0)5 0100 11523 +43 (0)5 0100 17354 +43 (0)5 0100 18506 +43 (0)5 0100 17420 +43 (0)5 0100 16314 +43 (0)5 0100 11905 +43 (0)5 0100 17343 +43 (0)5 0100 11913 +43 (0)5 0100 16360 +420 956 711 014 +381 11 22 09 178 +385 62 37 1383 +385 62 37 2833 +385 62 37 2419 +385 62 37 2825 +420 224 995 439 +420 224 995 172 +420 224 995 227 +420 224 995 289 +420 224 995 232 +420 224 995 434 +420 224 995 192 +420 224 995 456 +420 224 995 213 +361 235-5131 +361 235-5132 +361 373-2026 +361 235-5135 +361 373-2830 +48 22 330 6256 +48 22 330 6254 +48 22 330 6252 +48 22 330 6251 +40 21 311 2754 +40 37226 1029 +40 37226 1026 +40 37226 1028 +40 21 311 2754 +40 21 311 2754 +421 2 4862 4185 +421 2 4862 4762 +90 212 371 2540 +90 212 371 2535 Erste Group Research – Company Report 04 April 2013 Page 7 M. Görkem Göker (Equity) Sevda Sarp (Equity) Sezai Saklaroglu (Equity) Nilufer Sezgin (Fixed income) +90 212 371 2534 +90 212 371 2537 +90 212 371 2533 +90 212 371 2536 Group Institutional & Retail Sales Institutional Equity Sales Core Markets Head: Brigitte Zeitlberger-Schmid +43 (0)5 0100 83123 Cash Equity Sales Hind Al Jassani +43 (0)5 0100 83111 Werner Fuerst +43 (0)5 0100 83121 Josef Kerekes +43 (0)5 0100 83125 Cormac Lyden, CFA +43 (0)5 0100 83127 Stefan Raidl +43 (0)5 0100 83113 Simone Rentschler +43 (0)5 0100 83124 Derivative Sales Christian Luig +43 (0)5 0100 83181 Sabine Kircher +43 (0)5 0100 83161 Christian Klikovich +43 (0)5 0100 83162 Armin Pfingstl +43 (0)5 0100 83171 Roman Rafeiner +43 (0)5 0100 83172 Institutional Equity Sales London Declan Wooloughan +44 20 7623 4154 Institutional Equity Sales Croatia Damir Eror (Equity) + 385 62 37 2836 Zeljka Kajkut (Equity) +38 562 37 28 11 Institutional Sales Czech Republic Head: Michal Rizek +420 224 995 537 Pavel Krabicka (Equity) +420 224 995 411 Radim Kramule (Equity) +420 224 995 537 Jiri Smehlik (Equity) +420 224 995 510 Tomas Vender (Equity) +420 224 995 593 Institutional Sales Hungary Gregor Glatzer (Equity) +361 235 5144 Attila Preisz (Equity) +361 235 5140 Norbert Siklosi (Fixed income) +361 235 5842 Institutional Equity Sales Poland Pawel Czuprynski (Equity) +4822 330 6212 Jacek Krysinski (Equity) +4822 330 6218 Emil Onyszczuk (Equity) +48 22 330 62 14 Grzegorz Stepien (Equity) +48 22 330 6211 Institutional Equity Sales Turkey Simin Öz Gerards (Head) +9 0212 371 2525 Mine Yoruk +9 0212 371 2526 Institutional Equity Sales Slovakia Head: Dusan Svitek +48 62 56 20 Andrea Slesarova (Client sales) +48 62 56 27 Saving Banks & Sales Retail Head: Thomas Schaufler +43 (0)5 0100 84225 Equity Retail Sales Head: Kurt Gerhold +43 (0)5 0100 84232 Fixed Income & Certificate Sales Head: Uwe Kolar +43 (0)5 0100 83214 Treasury Domestic Sales Head: Markus Kaller +43 (0)5 0100 84239 Corporate Sales AT Mag. Martina Kranzl +43 (0)5 0100 84147 Karin Rattay +43 (0)5 0100 84112 Mag. Markus Pistracher +43 (0)5 0100 84152 Günther Gneiss +43 (0)5 0100 84145 Jürgen Flassak, MA +43 (0)5 0100 84141 Antonius Burger-Scheidlin, MBA +43 (0)5 0100 84624 Fixed Income Institutional Desk Head G7: Thomas Almen +43 (0)5 0100 84323 Head Germany: Ingo Lusch +43 (0)5 0100 84111 Fixed Income International & High End Sales Vienna Jaromir Malak/ Zach Carvell +43 (0)5 100 84254 U. Inhofner/ P. Zagan/ C. Mitu +43 (0)5 100 84254 Fixed Income International Sales London Antony Brown +44 20 7623 4159 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Otmuchow SA Rating history Date 09. Oct 12 15.0 Rating Buy Price 9.65 Target Price 14.00 14.0 13.0 12.0 11.0 10.0 Company description 9.0 The confectionary producers specializing in delivering goods under private labelled brands to discount chains. Currently Otmuchow plans to strenghten its brands portfolio and enter fast growing market of products connected with 'healthy life style'. 8.0 7.0 6.0 5.0 4.0 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Target price 12 m fwd Erste Group Research – Company Report 04 April 2013 Page 8 Jun 13 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Important Disclosures THIS DOCUMENT MAY NOT BE TAKEN, TRANSMITTED OR DISTRIBUTED INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR TO ANY U.S. PERSON OR TO ANY INDIVIDUAL OUTSIDE CANADA, AUSTRALIA OR JAPAN WHO IS A RESIDENT OF THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR TO THE PRESS IN THESE COUNTRIES General disclosures All recommendations given by Erste Group Research are independent and based on the latest company, industry and general information publicly available. The best possible care and integrity is used to avoid errors and/or misstatements. No influence on the rating and/or target price is being exerted by either the covered company or other internal Erste Group departments. Each research piece is reviewed by a senior research executive or agreed with a senior analyst/deputy (4-eyed principle). Erste Group Compliance Rules state that no analyst is allowed to hold a direct ownership position in securities issued by the covered company or derivatives thereof. Analysts are not allowed to involve themselves in any paid activities with the covered companies except as disclosed otherwise. No part of their compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or views expressed by them contained in this document. Erste Group may engage in transactions with financial instruments, on a proprietary basis or otherwise, in a manner inconsistent with the view taken in this research report. In addition, others within Erste Group, including strategists and sales staff, may take a view that is inconsistent with that taken in this research report. Disclosure Checklist Company ISIN Otmuchow SA PLZPCOT00018 Disclosure Disclosures of potential conflicts of interest relating to Erste Group AG, its affiliates, subsidiaries (together “Erste Group AG”) and its relevant employees with respect to the issuers, financial instruments and/or securities forming the subject of this document are valid as of the end of the month prior to publication of this document. Updating this information may take up to ten days after month end. Erste Group Research – Company Report 04 April 2013 Page 9 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Description of specific disclosures Erste Group rating definitions Buy > +20% to target price Accumulate +10% < target price < +20% Hold 0% < target price < +10% Reduce -10% < target price < 0% Sell < -10% to target price Our target prices are established by determining the fair value of stocks, taking into account additional fundamental factors and news of relevance for the stock price (such as M&A activities, major forthcoming share deals, positive/negative share/sector sentiment, news) and refer to 12 months from now. All recommendations are to be understood relative to our current fundamental valuation of the stock. The recommendation does not indicate any relative performance of the stock vs. a regional or sector benchmark. Distribution of ratings Coverage universe Recommendation Buy Accumulate Hold Reduce Sell N.R./UND.REV./RESTR. Total No. 45 48 50 12 9 24 188 in % 23.9 25.5 26.6 6.4 4.8 12.8 100.0 Inv. banking-relationship No. in % 4 19.0 6 28.6 6 28.6 3 14.3 1 4.8 1 4.8 21 100.0 Explanation of valuation parameters and risk assessment Unless otherwise stated in the text of the financial analysis/investment research, target prices in the publication are based on either a discounted cash flow valuation and/or comparison of valuation ratios with companies seen by the analyst as comparable or a combination of the two methods. The result of this fundamental valuation is adjusted to reflect the analyst's views on the likely course of investor sentiment. Whichever valuation method is used there is a significant risk that the target price will not be achieved within the expected timeframe. Risk factors include unforeseen changes in competitive pressures or in the level of demand for the company’s products. Such demand variations may result from changes in technology, in the overall level of economic activity or, in some cases, from changes in social values. Valuations may also be affected by changes in taxation, in exchange rates and, in certain industries, in regulations. Investment in overseas markets and instruments such as ADRs can result in increased risk from factors such as exchange rates, exchange controls, taxation, political and social conditions. Erste Group Research – Company Report 04 April 2013 Page 10 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Disclaimer This research report was prepared by Erste Group Bank AG (”Erste Group”) or its affiliate named herein. The individual(s) involved in the preparation of the report were at the relevant time employed in Erste Group or any of its affiliates. The report was prepared for Erste Group clients. 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Erste Group Homepage: www.erstegroup.com On Bloomberg please type: EBS AV and then F8 GO Erste Group Research – Company Report 04 April 2013 Page 11 Erste Group Research – Company Report Otmuchow | Confectionary | Poland 04 April 2013 Erste Group Research – Company Report 04 April 2013 Page 12