Coca Cola HBC: Strong Volume and Pricing Trends Led by Emerging Markets; Shares Remain Undervalued

Narrow-moat bottler Coca Cola HBC posted a solid first-quarter trading update with volumes up 2% and organic revenue up 13%, led by strong performance in the emerging and developing markets (67% of total sales) despite geopolitical and macro headwinds in Eastern Europe and Africa. We see management’s 2024 outlook for organic sales and operating profit growth both in the midsingle digits as achievable, and we are maintaining our projections for a mid-single-digit sales CAGR and an 11% average operating margin over the five-year horizon. Our GBX 2,800 fair value estimate is intact. The share price has gained 10% since April, when we called out the valuation discount relative to close peer, narrow-moat CCEP, but we think the stock remains slightly undervalued.