After a year in which Greek equities have broadly performed in line with those of the EU region, 2025 looks somewhat more challenging, given international headwinds (e.g. tariffs, geopolitics), according to a report by Eurobank Equities.

Monetary policy easing is certainly positive in the sense that it could justify higher valuations, but the main driver of the revaluation would be the resolution of the crisis caused by the war in Ukraine, which is also relevant for the whole of Europe.

THE OPPORTUNITIES

Eurobank Equities' bottom-up valuation shows an upside of more than 20% for HA, due to a mix of re-rating and earnings growth (>10% median earnings per share-EPS growth). "Given that Greek equities are not only closing the gap in terms of ROE against their EU peers, but are offering premium returns, we believe some re-rating is required," the brokerage writes.

Its target on the AA corresponds to an ERP of 5.7%, even higher than the current ERP embedded in EU equities (around 5%). In terms of allocation, it continues to skew its recommendation towards banks (i.e. higher than the 39%/31% weighting in the FTSE Large Cap/ASE index), where it believes there is the best risk-reward ratio, with Piraeus being the top choice (solid earnings performance, capital building, cheap valuation).

EBITDA ESTIMATES

Eurobank Equities expects to see around 9% median EBITDA growth for non-financial stocks and just 7% decline in net interest income (NII) in banks, compared to previous peaks. In its view, it will be the fundamentals that will be in focus in 2025, with the profitability trajectory being a constant pillar for returns. It expects average operating profit growth of 9% for non-financial institutions, supported by Greece's strong macro outlook (GDP growth >2%, which stands out among EU peers), it notes.

BANKS

More specifically on banks, its models for the three systemic banks forecast a 7% decline in 2025 NII from the record 2024 level, translating into 12% lower earnings per share (EPS) on an annualised basis, but only 5% lower compared to 2023 levels. Valuations have not changed materially over the past year, with Greece continuing to stand out in that most stocks remain at a significant discount to their historical performance, while trading at a discount of over 20% to European peers. The risk-reward ratio looks particularly attractive for banks.

THE TOP PICKS

Outside the banking sector, the brokerage focuses on Metlen (sustainable earnings recovery, growing exposure to renewables, LSE listing) and Titan (exposure to US infrastructure spending, cyclical recovery in construction activity in Greece, value crystallization from upcoming listing of its US subsidiary) as top picks. It also recommends Sarantis and Cenergy.