Issuance activity: Tomorrow, MinFin is scheduled to auction CZK6.0bn of 2031 bonds, CZK3.0bn of 2035 bonds and CZK1.0bn of 2044 bonds. The November issuance calendar shows CZK20.5bn of CZGBs to be issued, i.e. CZK0.5bn less mom. However, given that MinFin has issued around 1/3 more than announced in the issuance calendars so far this year and 50%+ more in September and October combined, we believe that total of CZK50-60bn of CZGBs will be issued In the November and December together, after CZK33bn was sold in primary auctions in October.

Issuance activity: Tomorrow, MinFin is scheduled to auction CZK6.0bn of 2031 bonds, CZK3.0bn of 2035 bonds and CZK1.0bn of 2044 bonds. The November issuance calendar shows CZK20.5bn of CZGBs to be issued, i.e. CZK0.5bn less mom. However, given that MinFin has issued around 1/3 more than announced in the issuance calendars so far this year and 50%+ more in September and October combined, we believe that total of CZK50-60bn of CZGBs will be issued In the November and December together, after CZK33bn was sold in primary auctions in October.

Market situation: Since last week’s auction, CZGB yields have partially corrected their earlier rise, following core trends. On the data front, Czech inflation came in at 2.8% yoy in October, in line with consensus and the CNB's forecast (more here: https://bit.ly/CPI_Oct24_EN). Last week's 25 bps cut in the key rate to 4% was again accompanied by hawkish rhetoric from the CNB, not ruling out a pause in the rate-cutting process. Nevertheless, we believe that the weakness of the Czech economy should lead to further rate cuts by the CNB (more here: https://bit.ly/CNB_Nov24_EN).

Rates outlook: We expect the CNB to cut interest rates by 25bp at each monetary policy meeting until May next year, when the repo rate should reach its terminal level of 3%. However, given the continued hawkish comments from the central bank’s board and the potential for higher core inflation next year, the risks to our CNB rate forecast are skewed to the upside.

Colt CZ reported EBITDA of CZK1,040m. This represents significant yoy growth and beats the consensus by a respectable +5.3%. Most importantly, we consider the high growth in the key US market and the significant contribution from the acquired ammunition manufacturers, especially Sellier & Bellot. The leverage ratio has been reduced to an acceptable level after ABB. Colt reiterated its full-year targets.

Colt CZ reported EBITDA of CZK1,040m. This represents significant yoy growth and beats the consensus by a respectable +5.3%. Most importantly, we consider the high growth in the key US market and the significant contribution from the acquired ammunition manufacturers, especially Sellier & Bellot. The leverage ratio has been reduced to an acceptable level after ABB. Colt reiterated its full-year targets.

Colt CZ reported 3Q24 revenue growth of +73% yoy to CZK5,282m. This is +6% ahead of the market consensus. The yoy growth was driven by organic growth as well as the contribution of the acquired ammunition producers swissAA and especially Sellier & Bellot. We estimate that the firearms segment contributes about 60% of total revenues, with the remainder (40%) coming from ammunition sales. Of the individual markets, the USA has traditionally been the strongest, accounting for 41% of total sales. The high yoy growth in the USA of +58% (CZK2,155m) is due to a recovery in demand after a massive marketing campaign in 1Q24. In the Czech Republic, sales increased by 120% to CZK755m. High yoy growth was also achieved in the rest of Europe, where sales reached CZK1,682m (+203% yoy). In both cases, especially in the rest of Europe, a significant contribution was made by ammunition sales. Sales decreased in Canada (-34% yoy) and Africa (-13% yoy). In Canada, this was due to a one-time shipment to Ukraine in 3Q23, which was not repeated. In Africa, it is the absence of shipments to M&LE. Asia contributed +8.4% yoy. EBITDA grew by +121% yoy to CZK1,040m and was +5.3% above consensus. This was driven by higher sales and better margins, while we were pessimistic on items like personnel costs. 3Q24 net profit of CZK278m (-2.2% yoy) is almost unchanged yoy and is impacted by high D&A. The bottom line was below consensus (-21%). Interest expenses increased after the acquisition of S&B.

Leverage (net debt/EBITDA) of 2.8x is roughly the same as at the beginning of the year. However, following the accelerated bookbuilding (ABB) in October, it has fallen to 2.4x.

Guidance: Colt reiterated its full-year guidance. Total revenues are expected to reach CZK20-22bn and EBITDA CZK4.3-4.7bn. The YTD (9M24) figures represent 71% of the revenue and 67% of the EBITDA targets. This shows that the fourth quarter, which is usually the strongest in terms of seasonality, will significantly exceed last year's results. In addition, the consolidation of S&B (since mid-May) will have a positive impact.