We maintain our Neutral rating on COCA COLA HBC, but cut our price target to £40.0 (approx. €47.95), following reports that its Russian subsidiary, Multon Partners, could be seized by the Russian authorities, Citi analysts write in a report on the listed company.
Russia is critically important to COCA COLA HBC, as it is estimated to contribute 33% of consolidated earnings per share (EPS) in financial year 2026, through its growing contribution to EBIT (about 21% of the group) and interest income on restricted funds of €1.05 billion.
COCA COLA HBC issued a statement saying it had received no information from the Russian government about any changes to its operations. We believe the outcome is binary: if the assets are formally expropriated, COCA COLA HBC’s valuation excluding Russia would stand at £34.10, 16% below the current share price.
Moreover, even if the assets are not seized, we believe a permanent compression in the valuation multiple applied to the remaining earnings from Russia will limit the share price recovery to about £43.75, leaving just 8% upside.
Russian newspaper Kommersant reported on 5 November that Bochkari had asked President Putin to transfer control of COCA COLA HBC’s Russian business. The report follows an announcement that Russia is taking control of the local operations of Japan Tobacco.
After The Coca-Cola Company withdrew from Russia in 2022, COCA COLA HBC continued to operate independently in the local market through its subsidiary, Multon Partners.
The increase in EBIT from €150 million in financial year 2021 to an estimated €315 million in 2026, together with restricted local funds of €1,046 million that generate significant interest income, underpins our estimate that Russia contributes 33% of COCA COLA HBC’s consolidated EPS in 2026.
If the Russian authorities formally seize COCA COLA HBC’s local assets, we estimate that the company’s EPS excluding Russia will be €2.04 in 2027. Applying a P/E multiple of 20x to these remaining earnings implies a fair value of £34.10, indicating a further 16% downside from the current share price.
Even if the assets are retained, ongoing geopolitical risk will impose a structural discount on the valuation of cash flows from Russia. Applying a P/E multiple of 10x to the remaining earnings from Russia and 20x to earnings outside Russia gives a combined fair value of £43.75, leaving just 8% upside.