Verkkokauppa.com - No signs of market recovery yet
Verkkokauppa.com publishes its Q3 result on Thursday, 28th Oct. In addition to the consumer segment and contrary to its performance in H1, we expect the B2B segment to see some softness in H2. Due to no signs of market recovery yet, we adjusted our short-term estimates downwards ahead of Q3 result.
Volumes still in decline
During H1’22, the consumer electronics market fell by ~6% in terms of volumes (GfK, ETK, GoTech). However, during the same period, sales declined only by a percent, which can be explained by the price increases made. Based on monthly data, there are no signs of market recovery starting yet as electronics sales declined by 12% y/y in August (Stat.fi).
Weak demand burdens Q3 profitability
Verkkokauppa.com has suffered from weak consumer demand, which started with the soft consumer electronics market in Q4’21. We have adjusted our short-term estimates downwards driven by the lack of evidence of market recovery. While the B2B segment has shown strong growth during uncertain H1’22, we now expect the segment to experience some headwinds. In Q3, we expect net sales to decrease by 3.6% y/y to EUR 135.9m. Weakness is seen throughout product segments and sales channels. In total, we expect the full-year topline to amount to EUR 554.0m, reflecting a y/y decline of 3.6%. The company has continued its long-term investments according to its strategy despite the uncertain market environment. We estimate that these investments will be visible in increased fixed costs. With a narrow gross margin and lower net sales, Verkkokauppa.com’s profitability sees an extensive decline. Our Q3 EBIT estimate amounts to EUR 3.1m, while with 2022 adj. EBIT estimate of EUR 7.8m, we expect the company to fall short of its guidance slightly.
HOLD with a TP of EUR 3.5 (prev. 3.7)
Verkkokauppa.com currently trades with 23E P/E of 16x which is below its historical levels. However, we currently see no notable upside potential in valuation multiples given the company trading above the peer group’s median and a weakening economic outlook. We retain our HOLD-rating and lower TP to EUR 3.5 (prev. 3.7), mainly reflecting decreased expectations.
During H1’22, the consumer electronics market fell by ~6% in terms of volumes (GfK, ETK, GoTech). However, during the same period, sales declined only by a percent, which can be explained by the price increases made. Based on monthly data, there are no signs of market recovery starting yet as electronics sales declined by 12% y/y in August (Stat.fi).
Weak demand burdens Q3 profitability
Verkkokauppa.com has suffered from weak consumer demand, which started with the soft consumer electronics market in Q4’21. We have adjusted our short-term estimates downwards driven by the lack of evidence of market recovery. While the B2B segment has shown strong growth during uncertain H1’22, we now expect the segment to experience some headwinds. In Q3, we expect net sales to decrease by 3.6% y/y to EUR 135.9m. Weakness is seen throughout product segments and sales channels. In total, we expect the full-year topline to amount to EUR 554.0m, reflecting a y/y decline of 3.6%. The company has continued its long-term investments according to its strategy despite the uncertain market environment. We estimate that these investments will be visible in increased fixed costs. With a narrow gross margin and lower net sales, Verkkokauppa.com’s profitability sees an extensive decline. Our Q3 EBIT estimate amounts to EUR 3.1m, while with 2022 adj. EBIT estimate of EUR 7.8m, we expect the company to fall short of its guidance slightly.
HOLD with a TP of EUR 3.5 (prev. 3.7)
Verkkokauppa.com currently trades with 23E P/E of 16x which is below its historical levels. However, we currently see no notable upside potential in valuation multiples given the company trading above the peer group’s median and a weakening economic outlook. We retain our HOLD-rating and lower TP to EUR 3.5 (prev. 3.7), mainly reflecting decreased expectations.