Erste raises the target price for TTS shares to 25.4 lei, 20% above the market price

Erste Group recommends "Buy" for Transport Trade Services (TTS) shares, with a target price of 25.4 lei in the next twelve months, according to the latest analysis report signed by Caius Râpanu, which was published on the BVB Research website Hub.

It's a 23% price target above yesterday's market price as of 1:00 p.m. In the previous report, which was published on June 1, Erste estimated a target of 16.6 lei for the titles of the freight carrier on the Danube, which was exceeded in the meantime.

The recent rating was updated after Transport Trade Services published its first half results, which Erste characterized as "exceptionally profitable, following a stellar first quarter".

The company's total revenues increased by 42% compared to the first six months of last year, up to 571.5 million lei, while the operating profit rose by over 145%, to 181 million lei. The net profit amounted to 155 million lei, 153% higher than that of the first six months of last year, of 61 million lei.

"Based on recent results and the outlook for the end of the year, in a conservative scenario for our valuation, we still identify ample upside potential for the stock, so we maintain our "Buy" recommendation but raise the price target to 25.4 lei per title," the report states.

According to the document, the TTS results reinforce Erste's positive outlook on the company and create a new basis for projections. "We observed a marginal reduction in profitability in the second quarter of the year, compared to the stellar results of the previous quarter, an expected dynamic given the extraordinary circumstances that prevailed in the market in the first three months of the year".

It continues to proceed with cautious forecasts in terms of volumes and tariffs, given the uncertainties of the war in the region and the impossibility of anticipating the timing of the resolution of the conflict, according to the report.

"The volatility and risk perception generated by the war were positive for TTS in terms of rates and volumes. However, we are only considering a scenario where recent highs will not be reached, and in fact our valuation calculation assumes a softer environment for volumes and prices".

According to the report, management's efforts to streamline M&A (mergers and acquisitions) operations have yielded positive results, helping to increase the value of the company in the medium and long term, with moderate capital expenditures (CAPEX) and estimates of investment return rates (ROI) considerable. "The risk of the recommendation and the price target remain related to the difficulty of anticipating developments in the region," the report states.

For this year, Erste estimates that Transport Trade Services will achieve net sales revenues of 1.14 billion lei, 22% more than in 2022, while net profit will amount to 268.8 million lei, compared to of 179 million lei last year.

TTS shares debuted on the BSE on June 14, 2021, after a public offering through which the shareholders sold 50% of the company. The stock market valuation of the company amounts to approximately 1.25 billion lei.