Coca-Cola HBC AG 1Q26: Solid Delivery, Market Underpricing Volume Strength and CCBA Upside

Core Conclusion

Coca-Cola HBC AG reported 1Q26 organic sales growth (OSG) of +11.6%, slightly below company consensus (+11.8%) but well above VA consensus (+9.9%). More importantly, organic volume growth of +9.6% beat both company consensus (+8.6%) and VA consensus (+7.5%) by 100bps and 210bps respectively. Emerging markets OSG of +15.0% surprised to the upside by 140bps vs VA consensus, validating structural demand resilience. FY26 guidance was reaffirmed with a ~€20m increase in finance costs from CCBA bond issuance. The stock is priced at 17.7x CY26 P/E (EU Staples 16.8x) for an 8.3% EPS CAGR (2026-29E), a premium justified by consistent compounding. We maintain Overweight with a 4,600p target, seeing ~4% upside, with potential for 18-19x P/E if CCBA closes on schedule and emerging momentum persists.

What the Market May Be Underpricing

The market appears to over-penalise the 20bps OSG miss and the deceleration in revenue per case (+1.8% vs +3.1% consensus). However, the miss is largely explained by three temporary factors: (1) 4 extra trading days added 6ppt to volume but diluted per-case revenue mix; (2) an earlier Easter shifted premium channel sales into 1Q (benefiting volume but not per-case pricing); (3) easier comparables from 1Q25. Excluding trading day effects, underlying volume growth was still mid-single digit across all regions, with emerging markets showing +MSD% volume. The market also fails to price in the CCBA acquisition: four of six antitrust clearances already obtained, completion in 2H26 on track. The incremental €20m finance cost is already guided, meaning any synergy realisation from 2027 onward is incremental upside. Additionally, emerging markets OSG beat VA consensus by 140bps (15.0% vs 13.6%), with volume growth of 11.2% (consensus 8.8%) – this is the strongest volume beat from any region and signals accelerating consumer penetration.

Evidence Chain

1. Volume momentum is stronger than headline OSG implies.
1Q26 organic volume +9.6% vs VA consensus +7.5% and company consensus +8.6%. This follows 4Q25 volume of +5.5%, confirming an acceleration. Even stripping out the 6ppt calendar benefit, volumes grew mid-single-digit in established and developing markets, and MSD% in emerging. This indicates the consumer demand base is intact, not fading. Investment implication: top-line risk is skewed to the upside, as volume is the primary driver of operating leverage.

2. Emerging markets delivered a material beat on both volume and revenue per case.
OSG +15.0% (VA cons +13.6%), organic volume +11.2% (VA cons +8.8%), revenue per case +3.5% (VA cons +4.5%, but only 99bps miss vs 238bps beat on volume). Sparkling grew LDD% (Coke Zero, Sprite, Fanta) and Energy +DD%. This is not a one-off: the region has grown OSG in double-digits for four of the last five quarters. Investment implication: the structural mix shift toward higher-growth emerging markets supports a sustained mid-to-high single-digit OSG CAGR beyond FY26.

3. FY26 guidance is de-risked and conservatively framed.
OSG +6-7% and organic EBIT +7-10% were reaffirmed, with company-compiled consensus at +6.3% and +9.2% respectively. The only change was net finance costs raised from €25-45m to €45-65m, incorporating CCBA bond costs. This means the underlying operational guidance is unchanged, and the ~€20m headwind is explicitly guided, not a surprise. Investment implication: consensus EBIT estimates may see minor downward tweaks (c.1-2%) on higher finance costs, but organic EBIT trajectory remains intact. Any upside to OSG or volume directly flows to EBIT.

4. CCBA acquisition is proceeding to schedule and represents a mid-term value catalyst.
Approval received in four of six jurisdictions. Completion expected 2H26. The acquisition adds a high-growth African bottling territory with a similar margin profile (mid-teens EBIT margin). Even without detailed synergy targets, the scale effect and route-to-market optimisation should lift EPS by mid-single digits from 2027. Investment implication: the stock's current valuation does not reflect this accretion; a successful close would likely trigger a re-rating to 18-19x P/E.

Key Risks

• Emerging market FX depreciation or capital controls could compress reported earnings and reduce revenue per case growth, as seen historically with Nigerian naira and Egyptian pound. The group's translational headwind guidance of €0-30m already assumes moderate pressure, but a sharp move could exceed this.
• Consumer demand softening in Europe – established markets volume was "slight growth" ex trading days; if cost-of-living pressures re-emerge, volume could slip to negative.
• CCBA regulatory delays – even with four approvals, the remaining two jurisdictions (likely Nigeria and Kenya) could impose conditions or extend timelines beyond 2H26, deferring EPS accretion.
• Increased regulation on sugar/sweeteners or packaging taxes in key markets (e.g., UK, Ireland, Poland) could pressure margins or require reformulation costs.

Valuation or Trading Implications

At 4,428p, CCH trades at 17.7x CY26 P/E (EU Staples 16.8x) for an 8.3% EPS CAGR (2026-29E) vs EU Staples 7.5%. Historically, CCH has traded at a -2% discount to staples; the current +5% premium is modest given the consistent compounding record and the CCBA optionality. Our 4,600p target (18.2x NTM P/E) implies ~4% upside. However, if emerging market momentum continues and CCBA closes without delay, the P/E could expand to 18-19x (4,700-4,900p range). We recommend maintaining Overweight, using any post-result weakness to add. Key catalysts: 2Q26 volume acceleration (easier comps), CCBA completion announcement in H2, and FY27 guidance lift from acquisition synergies. Near-term risk of profit-taking is limited by the already narrow premium.

Appendix Data Summary