CCEP and CCHBC: We See Investment Opportunity for CCHBC as Market Underestimates Earnings Power

Europe-based Coca-Cola Europacific Partners, or CCEP, and Coca-Cola Hellenic Bottling Company, or CCHBC, rank as the second- and third-largest Coke bottlers globally by volume, and both earn a narrow economic moat rating based on strong route-to-market operations in their authorized territories. We don't foresee material differences in the two bottlers' top-line growth—both are at 4% annually excluding acquisitions—and cash conversion—free cash flows to the firm averaging 6% and 7% of sales, respectively—over the next five years. However, the CCEP stock currently trades at a 12% premium to our EUR 56 fair value estimate, while CCHBC trades at a 15% discount to our GBX 2800-per-share intrinsic valuation. We think the market is underestimating CCHBC's growth and earnings power, and we consequently view CCHBC's shares as attractive.