Marimekko - The undervaluation has narrowed
Marimekko releases its Q2 result on Wednesday. The company delivered strong Q1 result, and we expect the trend to continue also in Q2. The demand for lifestyle products has been favorable in H1, but strong comparison figures, low consumer trust, and an inflationary environment might affect the magnitude of H2 growth.
Demand still strong, inflation kicks in during H2 and 2023
The demand for fashion and lifestyle products has been strong in H1. We see the trend especially in fashion, bags, and accessories where the consumers have been renewing their wardrobe collections after COVID-19 lockdowns. In addition, Marimekko has consistently grown its brand awareness abroad which can be seen in a strong international growth. However, we see the inflation starting to kick in during H2 and 2023, and with the combination of low consumer trust and strong comparison figures, we see the growth slowing down in H2.
Q2 is driven by both domestic and international growth
We made no changes to our estimates ahead of the Q2 result. In Q2, with the favorable market environment, we expect revenue to amount to EUR 37.0m driven by domestic growth of 12% and international growth of 15%. We expect all markets, except North America, to see double-digit growth in Q2. We expect adj. EBIT to improve y/y to EUR 5.3m, but adj. EBIT margin of 14.3% to fall below the comparison period driven by softer gross margin and increased fixed costs. Our 2022 topline estimate is EUR 167.7m (+10% y/y) and EBIT is EUR 32.5m (19.4% margin). The company expects its 2022 revenue to be higher that of the comparison period and its EBIT margin to land within the range of 17-20%.
HOLD (BUY) with a target price of EUR 14.5
Marimekko is valued with 22-23E EV/EBIT multiples of 16-14.5x and 22-23E P/E multiples of 21-20x. The current valuation is quite neutral, but most of the undervaluation has shrunk since our last update. In our view, the visibility of H2 is somewhat uncertain and with inflation starting to kick in, we see that consumer demand could be diluted or skewing towards lower price point lifestyle goods. We downgrade our rating to HOLD (prev. BUY) and retain TP of EUR 14.5.
The demand for fashion and lifestyle products has been strong in H1. We see the trend especially in fashion, bags, and accessories where the consumers have been renewing their wardrobe collections after COVID-19 lockdowns. In addition, Marimekko has consistently grown its brand awareness abroad which can be seen in a strong international growth. However, we see the inflation starting to kick in during H2 and 2023, and with the combination of low consumer trust and strong comparison figures, we see the growth slowing down in H2.
Q2 is driven by both domestic and international growth
We made no changes to our estimates ahead of the Q2 result. In Q2, with the favorable market environment, we expect revenue to amount to EUR 37.0m driven by domestic growth of 12% and international growth of 15%. We expect all markets, except North America, to see double-digit growth in Q2. We expect adj. EBIT to improve y/y to EUR 5.3m, but adj. EBIT margin of 14.3% to fall below the comparison period driven by softer gross margin and increased fixed costs. Our 2022 topline estimate is EUR 167.7m (+10% y/y) and EBIT is EUR 32.5m (19.4% margin). The company expects its 2022 revenue to be higher that of the comparison period and its EBIT margin to land within the range of 17-20%.
HOLD (BUY) with a target price of EUR 14.5
Marimekko is valued with 22-23E EV/EBIT multiples of 16-14.5x and 22-23E P/E multiples of 21-20x. The current valuation is quite neutral, but most of the undervaluation has shrunk since our last update. In our view, the visibility of H2 is somewhat uncertain and with inflation starting to kick in, we see that consumer demand could be diluted or skewing towards lower price point lifestyle goods. We downgrade our rating to HOLD (prev. BUY) and retain TP of EUR 14.5.