Issuance activity: Tomorrow, MinFin is scheduled to auction CZK1.0bn of 2043 floaters and EUR500mn of 161-day T-Bills. In April, MinFin plans to issue CZK23.0bn after CZK15.0bn in March, while Q2 overall issuance in primary auctions remains at CZK85.0bn. Overall, MinFin finds itself in a relatively comfortable position with CZK99.5bn issued in primary actions in 1Q25. Moreover, MinFin has sold an additional CZK9.7bn and EUR250.0mn of bonds in the secondary market ytd.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK1.0bn of 2043 floaters and EUR500mn of 161-day T-Bills. In April, MinFin plans to issue CZK23.0bn after CZK15.0bn in March, while Q2 overall issuance in primary auctions remains at CZK85.0bn. Overall, MinFin finds itself in a relatively comfortable position with CZK99.5bn issued in primary actions in 1Q25. Moreover, MinFin has sold an additional CZK9.7bn and EUR250.0mn of bonds in the secondary market ytd.

Market situation: As expected, the CNB made no changes to interest rates at its meeting last week. The tone remained hawkish with emphasis put on the upside risks to inflation (more here: https://bit.ly/3RvHxLL). Bonds rallied globally last week as risks for future economic growth are mounting, supporting the risk-off sentiment in the markets. On Friday, CZSO will publish March flash CPI inflation. We expect a moderation of headline inflation to 2.4% yoy, 0.2pp below the central bank’s forecast. The slowdown of yoy CPI growth should mainly reflect energy components, while we expect core inflation to ease only slightly from 2.5% to 2.4% yoy (full preview in SG’s Week Ahead in Economics: https://doc.sgmarkets.com/en/3/0/1052840/334064.html?sid=446aa58b713713f2a843fd013470db38).

Rates outlook: We expect the continued hawkish stance of the bank’s board combined with high global uncertainty on the one hand and inflation remaining within the CNB’s tolerance band on the other to result in cuts to the repo rate by 25bp per quarter, specifically at the May, August and November meetings, bringing the key repo rate to 3% by end-2025. However, given the Board’s continued hawkish tone, we see the risks to our forecast as skewed towards higher for longer CNB rates.

4Q24 results are slightly weaker than expected at the operating level. This is probably due to lower trading margins. The halving of the dividend does not look optimistic at first glance, but it is now accompanied by share buybacks of the same amount as the dividend.

Colt CZ reported 4Q24 EBITDA of CZK1.6bn (+42% yoy), only slightly (-2.5%) below the market consensus. This was on revenues of CZK7.4bn (+50% yoy), which were +7.0% ahead of estimates. The FY results were ahead of Colt's revenue guidance and closer to the top end of the company's EBITDA target. Colt is considering a dividend of CZK15, half of last year's CZK30. However, it is also planning SBB at the same amount as the proposed dividend. Forecasts for this year point to revenue and EBITDA growth of 12% and 20% respectively.

4Q24 results are slightly weaker than expected at the operating level. This is probably due to lower trading margins. The halving of the dividend does not look optimistic at first glance, but it is now accompanied by share buybacks of the same amount as the dividend.

Colt CZ reported 4Q24 EBITDA of CZK1.6bn (+42% yoy), only slightly (-2.5%) below the market consensus. This was on revenues of CZK7.4bn (+50% yoy), which were +7.0% ahead of estimates. The FY results were ahead of Colt's revenue guidance and closer to the top end of the company's EBITDA target. Colt is considering a dividend of CZK15, half of last year's CZK30. However, it is also planning SBB at the same amount as the proposed dividend. Forecasts for this year point to revenue and EBITDA growth of 12% and 20% respectively.

Colt CZ reported strong 4Q24 sales growth of +50% yoy to CZK7.4bn. This is +7% ahead of the market consensus. The high yoy growth is mainly due to the consolidation of Sellier & Bellot and the increase in M&LE sales. This is probably related to the +17% yoy increase in long guns sales (with higher margins). All three key markets, which together account for almost 90% of sales, showed significant yoy growth. Sales in the Czech Republic increased by +59% yoy due to deliveries to the Czech Army. Sales in the US, the company's most important market, were up +48% yoy and the market there seems to be recovering as expected. In Europe (excluding the Czech Republic), sales grew by a massive +295% yoy. This is mainly due to the consolidation of the Group's ammunition business (S&B). In Canada, however, revenues declined (-54% yoy) due to the absence of a contract for Ukraine, which will not be repeated in 2024. Adjusted EBITDA reached CZK1.6bn in 4Q24, up +42% yoy. EBITDA was adjusted for current items (e.g. stock option plan) as well as for the write-off of investments in the Czech Republic and the US. Net profit was up +13% yoy to CZK640m.

Leverage: The net debt/EBITDA ratio was 2.26x at the end of last year. In 9M24, it was 2.83x. The decline occurred after the issuance of new shares in October to settle the S&B acquisition.

Achieving 2024 targets: For the full year last year, Colt CZ reported revenues of CZK22.4bn and EBITDA of CZK4.6bn. Colt slightly exceeded its revenue target and is close to the top end of its full-year EBITDA guidance.

Dividend & SBB: Colt CZ is proposing that shareholders approve a dividend of CZK847m or CZK15 per share. This would be less than the CZK30 paid last year. However, Colt also plans to buy back its own shares for the same amount, i.e. CZK847m. The proposed dividend represents approximately 43.8% of net profit and implies a gross yield of +1.9%. Our expectations for the dividend were more optimistic at CZK32.20, but we did not include the share buyback.

Guidance 2025: The current year will be the first year of full consolidation of S&B (2024 from 16 May). Colt's financial performance should increase as a result. According to our forecast, Colt should achieve total revenues of CZK25.2bn and EBITDA of CZK5.6bn this year. Colt's full-year guidance is for revenues of CZK25bn (+/- 7%, range CZK23.25-26.75bn) and EBITDA of CZK5.5bn (+/- 7%, range CZK5.1-5.9bn). This represents yoy revenue growth of almost +12% and EBITDA growth of +20%.