Verkkokauppa.com - Expecting sales boost from campaigns

Expecting sales growth of 7% in Oct-Dec
Year 2020 has so far been an excellent year for Verkkokauppa.com and it has benefited from the changed environment and customer behavior (rapid shift into online). The final quarter is normally the most important one for Verkkokauppa.com in terms of both, sales and profitability and we expect the company to reach strong figures in Oct-Dec, driven by campaigns and Christmas. We have increased our Q4E sales expectation by ~1% and our adj. EBIT expectation by ~6%. We expect Q4E sales of EUR 171m (+7% y/y) and adj. EBIT of EUR 6.6m (+47% y/y). We expect 20E dividend of EUR 0.23.

Well positioned for the future
Last year was eventful not only due to the COVID-19 and its impacts on the consumer behavior but also due to Amazon which launched its operations in Sweden at the latter half of the year. In our view, the impacts of the launch on Finland were negligible but it is clear that the presence of the online giant will increase in Finland in the long run. Online sales have grown significantly which has benefited Verkkokauppa.com but the company has also taken right actions towards better profitability which reinforces our view that the company is able reach profitable growth even after the pandemic.

“BUY” with TP of EUR 8.3 (6.5)
We expect 20E sales of EUR 549m (+9% y/y) and adj. EBIT of EUR 20.8m (3.8% margin). Thus, our expectations are at the higher end of the given guidance (sales of EUR 525-550m and adj. EBIT of EUR 17-21m). On our estimates, the company trades with 20E-21E EV/EBIT multiple of 14.5x and 15.2x which translates into 40-50% discount compared to the peers. We keep our rating “BUY” with TP of EUR 8.3 (6.5).