Vladimír Urbánek (Kurzy.cz)
Czech markets  |  September 10, 2010 14:44:12

HC2 analysis: No recovery and catalyst, the target reduced to 425 CZK, the recommendation to keep


We confirm our recommendation HC2 CR hold shares while reducing the annual target share price from 470 CZK to 425 CZK. The main reason is to reduce the growth rate of sales from 2% to 1% and the EBIT margin from 25% to 22% in our model for the period after 2015. We believe that the company lags behind its competitors in network development and instead concentrated on short-term profits. This time could reduce long-term competitiveness and profitability levels. Sales call center may mean an increase in our estimate of profits and dividends. Otherwise, we see only a limited number of positive catalystsfor shares.

O        HC2 CR invested in VDSL or fiber, and therefore lags behind the UPC, which since the middle of last year, offers broadband Internet services based on fiber optic technology.In the segment of mobile phones, the company focuses on extending coverage EDGE and 3G. Commercial launch of LTE and 4G is expected in 2015.

O        This second quarter we have seen recovery, although the rate of decline in comparable sales and OIBDA, compared with 1 quarter slowed. However, some other performance indicators such as the loss of fixed line and IPTV growth in revenues from mobile data continued to deteriorate. By 2011, we do not expect recovery.

Martin Krajhanzl
Czech Savings Bank, Inc.

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Analýza TO2: Bez oživení a katalyzátoru, cíl snížen na 425 Kč, doporučení držet

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