Verkkokauppa.com - E-commerce taking market share

Verkkokauppa.com is a growth story with good fundamentals and solid business model. The company continues focusing on growth and enhancing consumer experience. We see Verkkokauppa.com’s mid-term outlook remaining favorable, despite of the tightened competition.

Growth company with strong focus on consumer experience

Verkkokauppa.com’s revenue CAGR in 2010-2018 was 13.5%, which has been mainly supported by competitive pricing, strong online positioning, new product categories as well as the new Raisio store. The competition has continued fierce and price-driven, forcing the market to consolidate and smaller competitors exit the market. With a small physical footprint, the company has an efficient and scalable cost base enabling competitive pricing and strong reliance against competition. The company has strong net cash position which enables investments in growth. Verkkokauppa.com has made extensive investments in marketing from Q4’18 onwards and focuses on improving consumer experience. These investments should support further growth but will hamper EBIT improvement this year.

Growth expected to continue despite of tight competition

We see Verkkokauppa.com’s outlook for mid-term favorable and expect the company to continue growing in FY19-21E with annual growth of ~9%. We see that if consumer migration to online shopping continues strong, the company’s scalable cost base will support improvements in profitability. We expect EBIT to be flat at EUR 13m in 2019E but to improve in 2020E-2021E. The biggest concerns are related to the Finnish GDP growth which is expected to slow down in 2019-2020 and to fierce competition in the market.

“Buy” with TP of EUR 4.7

We have not made changes to our estimates. On our estimates, Verkkokauppa.com is trading ~45% EV/EBIT discount vs. peer group in 2019E-2020E. We value Verkkokauppa.com’s base case at EV/EBIT multiple of 11x. Our recommendation remains BUY with TP of EUR 4.7

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