Warsaw Stock Exchange Upgraded to Neutral by Citi After Share Price Decline

Citi Research has upgraded its rating on the Warsaw Stock Exchange (GPW) to “neutral/high risk” from “sell/high risk,” attributing the change to a significant drop in the company's valuation. Analysts said in a note Sunday that a 12% decline in GPW's share price over the past two months, during which it also underperformed Poland's WIG index by 18%, left insufficient downside to maintain a "sell" rating.

Valuation and Forecasts

Citi raised its 12-month price target for GPW to Zl88.80 from a previous Zl86.80, reflecting minor upward revisions to near-term earnings estimates. Based on a recent share price of Zl89.20, the bank projects a total return of 3.9%, which consists of an anticipated 0.4% price decline offset by a 4.4% dividend yield.

The bank adjusted its earnings per share (EPS) estimates, increasing them by 1% for 2026 and 4% for 2027 due to higher expected cash equity turnover. However, Citi trimmed its 2028 and 2029 EPS forecasts on lower projected revenue from commodity markets. The target price was derived from a discounted cash flow model.

Priced-In Catalysts and Potential Risks

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Analysts noted that several positive developments are likely already reflected in the stock's price. These include the upcoming launch of GPW's new WATS trading platform in October and the introduction of OKI individual investment schemes planned for January 2027. While the OKI accounts could add an incremental Zl30 million in cash equity revenue in 2027, Citi views this as a one-off effect.

A key headwind for the exchange is a proposed increase in Poland's corporate income tax rate for large companies to 22% from 19%. Citi estimates this change, if enacted, could reduce GPW's 2027-29 EPS and valuation by approximately 3%.

Capital Position

GPW maintains a strong balance sheet, holding Zl489 million in net cash at the end of the second quarter of 2026. Citi highlighted that the deployment of this capital for an accretive acquisition could represent a potential upside risk to its valuation, aligning with the company's stated interest in M&A activity. The exchange's dividend policy targets a payout ratio of 60-80%.