Optimistic Outlook and Strong Valuation: Agora's Buy Recommendation with Enhanced Target Price Reflects Confidence in TMT Leadership
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VALUATION AND SUMMARY
Our recommendation for Agora remains Buy, and we have increased our target price to PLN 14.5/share, which is 39% higher than the current market price. For the second year in a row, Agora remains the best investment proposition in the TMT area among entities listed on the Polish stock market. We consider Agora to be an 'absolute top pick' for 2023 and maintain this statement for 2024. Our valuation is based on DCF and multiples analysis. The DCF method resulted in a value of PLN 14.64 per share. Our assumed EV/EBITDA multiple (5.5x) for the years 2023-2025 results in a price of PLN 14.33/share. The final valuation of PLN 14.5/share is the arithmetic average of the two methods used.
We would like to express our sincere appreciation for the leadership provided by Agora's Board of Directors, and in particular its CEO, over the past several challenging years. We believe that Agora now has a qualitatively different perspective on its operations. Having demonstrated resilience in exceptionally difficult conditions, we believe the company is well-positioned to secure a strong position as one of Poland's leading and fastest-growing media/entertainment companies.
Compared to our forecasts in the last report (dated September 13, 2023), we have raised our assumptions for 2023 adj. EBITDA from PLN213.3m to PLN228.7m (we expect strong results for the fourth quarter of 2023 and in our simulation we assume that adj. EBITDA could reach PLN86.8m). The main impact of the 2023 revision comes from the film and book segment, which will benefit from very strong cinema attendance in Q3 and Q4 2023. In the medium-term horizon, i.e. 2024-2026, our outlook in the current report is also more optimistic than the assumptions made in 2023-09-13. For 2024, the adjusted EBITDA forecast is now 11% higher, while for 2025-2026, the upward revision is 9% and 8%, respectively.
It should be noted that the valuation model we are presenting may exceed the targets set in the material 'Agora Group's Strategic Directions for 2023-2026' adopted by the company's Board of Directors in April 2023 at several points. Therefore, our approach may carry a significant risk of error. As a reminder, the company's strategy aims to achieve a minimum target of PLN 200 million EBITDA (excluding IFRS 16) by 2026. Our current model assumes that the company will generate EBITDA (excluding IFRS 16) of PLN 204.7 million and PLN 250.9 million in 2025-2026, respectively. These figures have been revised from PLN 180 million and PLN 226 million, respectively, in our previous model.
We also note that in 2023 Agora was awarded the title of "Climate Aware Company 2023" in the CCA (Climate Crisis Awareness) survey. The company scored 8.67 points in the last edition, 8.17 points in the previous edition and only 0.83 points in 2021, which is quite an improvement in the last 2 years. In the present survey, Agora was in the TOP15 of all companies and in the TOP3 of sWIG80 index companies highlighted in the ranking.
