Marimekko - Valuation on par
Marimekko reports its Q4 result on Wednesday, 15th of Feb. We anticipate the growth pace to slow down and cost pressures to cut margins. We retain a TP of 10.0, but adjust the rating to HOLD (BUY), reflecting a neutral valuation.
Q4 result should contain no surprises
Marimekko expects its 2022 revenue to grow and adj. EBIT margin to land between 17-20%. The growth rate already saw some decelerating in Q3 and came in at 4.0%. In Q4, we expect the company to post a y/y growth of 2.7%, with revenue amounting to EUR 49.4m. The growth is driven by int’l sales while we expect revenue in Finland to decline due to a lack of extraordinary wholesale deliveries. With cost pressures arising from higher material costs and elevated fixed costs, our Q4 adj. EBIT estimate falls below that of the comparison period, to EUR 6.4m (13.0% adj. EBIT margin). With 22E EPS amounting to EUR 0.59, we expect the BoD to propose a DPS of EUR 0.38 (~60% payout rate). Overall, we foresee that Q4 should contain no large surprises.
Navigating through a tough market
We foresee the expected slowing economic growth and inflation to have an impact on fashion spending in 2023 with consumers fighting against a decline in purchasing power. Inflation has also risen in one of Marimekko’s core markets Japan. We expect Marimekko’s strong brand to protect the demand for the company, even during harder times. Although, we expect topline growth to significantly slow down from the levels seen during the past few years. For 2023, we estimate y/y growth of 6.9%, with revenue amounting to EUR 179.0m. The topline growth is largely supported by int’l sales while we expect sales in Finland to grow only by 4% in 2023. We anticipate profitability to remain at strong levels, 23E EBIT margin amounting to 18.2%. Furthermore, with its new strategy, the company aims to improve its scalability and aims for a 20% adj. EBIT margin.
HOLD with a target price of 10.0
We made no changes to our estimates ahead of the Q4 result. Since our last update, Marimekko’s share price has improved by some 10% which in our view has changed the valuation neutral. The company currently trades with 23-24E EV/EBIT and P/E multiples of 13-11x and 16-15.5x respectively. We adjust our rating to HOLD (BUY) and retain a TP of EUR 10.0.
Marimekko expects its 2022 revenue to grow and adj. EBIT margin to land between 17-20%. The growth rate already saw some decelerating in Q3 and came in at 4.0%. In Q4, we expect the company to post a y/y growth of 2.7%, with revenue amounting to EUR 49.4m. The growth is driven by int’l sales while we expect revenue in Finland to decline due to a lack of extraordinary wholesale deliveries. With cost pressures arising from higher material costs and elevated fixed costs, our Q4 adj. EBIT estimate falls below that of the comparison period, to EUR 6.4m (13.0% adj. EBIT margin). With 22E EPS amounting to EUR 0.59, we expect the BoD to propose a DPS of EUR 0.38 (~60% payout rate). Overall, we foresee that Q4 should contain no large surprises.
Navigating through a tough market
We foresee the expected slowing economic growth and inflation to have an impact on fashion spending in 2023 with consumers fighting against a decline in purchasing power. Inflation has also risen in one of Marimekko’s core markets Japan. We expect Marimekko’s strong brand to protect the demand for the company, even during harder times. Although, we expect topline growth to significantly slow down from the levels seen during the past few years. For 2023, we estimate y/y growth of 6.9%, with revenue amounting to EUR 179.0m. The topline growth is largely supported by int’l sales while we expect sales in Finland to grow only by 4% in 2023. We anticipate profitability to remain at strong levels, 23E EBIT margin amounting to 18.2%. Furthermore, with its new strategy, the company aims to improve its scalability and aims for a 20% adj. EBIT margin.
HOLD with a target price of 10.0
We made no changes to our estimates ahead of the Q4 result. Since our last update, Marimekko’s share price has improved by some 10% which in our view has changed the valuation neutral. The company currently trades with 23-24E EV/EBIT and P/E multiples of 13-11x and 16-15.5x respectively. We adjust our rating to HOLD (BUY) and retain a TP of EUR 10.0.