Broker snap: Nomura cuts Coca Cola Hellenic to reduce

29th Oct 2013 10:46

Analysts at Nomura have downgraded their recommendation for shares of Coca Cola Hellenic as they believe that the positive technical impact of the company's inclusion in the FTSE indices has likely run its course.They now think the shares are more likely to trade in-line with fundamentals. In that regard, they highlight how Street expectations for a recovery in earnings "look high" and they now see risk of a de-rating. Thus, their current price target of 1,500p now offers a 17% downside to the share price. More specifically, they see a slower growth outlook for global beer over the medium-term and a slower volume growth trajectory for the company versus the good years (2004-2008). Nomura is also below market consensus when it comes to operating (EBIT) margins. "Although we see greater stability on input costs, negative geographic and channel mix will act as a restraint on gross margin expansion, in our view, and we do not anticipate material restructuring moves, having already delivered over €330m cost savings since 2008," it adds. The broker sees margins at 6.8% and 7.3% this year and next, instead of the 7.6% and 8.2% penciled in by the street.Lastly, they add that on their estimated forward price-to-earnings multiple of 23.9 the firm's shares look expensive, given negative earnings and de-rating risk; hence their decision to downgrade the shares to reduce from neutral. Longer-term Coca Cola Hellenic holds a number of attractions, including strong market shares in key territories, a balanced portfolio mix (circa 70% sparkling, circa 30% still) and an opportunity for per capita consumption to rise as the macroeconomic environment improves, they admit.As of 11:41 shares of Coca Cola Hellenic are off by 1.6% to the 1,794p mark. AB