In an interview with Thomson (14 EUR, -3,48%) Financial News the CFO of LPP, Dariusz Pachla, stated that the consolidated revenues for 2007 could reach PLN 1.2-1.3b. At the same time, in his opinion obtaining a 9-10% net profit margin would be realistic in 2007. According to the CFO, LPP is looking at ways of entering the Bulgarian and Romanian markets. Once LPP’s position in the east further strengthens, the company may start western expansion.
Our view: We expect the news to have a positive trading impact. Although our forecasts for consolidated revenues are in line with the CFO’s statements, market’s expectations are far lower. We expect LPP to record revenues of PLN 1.3b in 2007, up 56.8% y/y, and net earnings at PLN 117.9m, up 187.3% y/y, for 2007, implying 9.2% net profit margin. Our reported net earnings forecasts are above consensus estimates by 24.1% for 2007, by 40.9% for 2008 and by 37.3% for 2009. We believe the western expansion is not yet priced into the current share price of LPP.