Berenberg raises target price on Coca‑Cola HBC ahead of African acquisition

(Sharecast News) - Analysts at Berenberg nudged their target price for CocaCola HBC higher on Tuesday, lifting it from 5,453p to 5,483p, as they reiterated a 'buy' rating on the stock and said the forthcoming acquisition of CocaCola Beverages Africa would materially strengthen the group's longterm growth profile.

Berenberg said the deal would give CCH access to a large, fastgrowing consumer base, positioning the bottler among the quickestexpanding operators globally and enabling it to benefit from favourable demographics and rising carbonated soft drink penetration.

It argued that CCBA's core markets offer a significant "demographic dividend", with workingage populations expected to grow at more than twice the pace of CCH's existing footprint and urbanisation rates rising from a low base. All of CCBA's topfive markets also sit below the $10,000 GDP per capita threshold where CSD consumption typically accelerates.

Berenberg highlighted a sizeable margin opportunity, noting CCBA's FY24 operating margin of 7.4% remained weak relative to peers and its own history, partly due to inflation and EM currency pressure but also, it said, a lack of operational focus under previous ownership. It believes CCH can unlock meaningful improvement.

The German bank also described the transaction as financially attractive, citing implied multiples of 12.9x EV/EBIT, 7.4x EV/EBITDA and 0.9x EV/sales. Berenberg expects the deal to be immediately EPSaccretive by around 1.5% even before synergies, with an initial ROIC of 5.4% that could rise quickly as efficiencies are realised.

Reporting by Iain Gilbert at Sharecast.com