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Verkkokauppa.com - Strategy implementation going well

Verkkokauppa.com’s Q1 result was as expected. Strategy implementation has started well, and the outlook remains bright. We have made only small adjustments to our estimates and keep our rating “BUY” with TP of EUR 10.80 (10.5).

Q1 result in line with expectations

Verkkokauppa.com delivered a solid Q1 result which was in line with expectations. Q1 revenue increased by 7% y/y to EUR 134m (vs. EUR 135m/134m Evli/cons.). Growth was good especially in major domestic appliances, small domestic appliances, office & supplies, gaming & entertainment and sports. Online sales (excl. export) increased by 33%, representing 64% of total sales. Further, sales to B2B customers increased by 12%. Export continued to be in a lower level due to the travel restrictions (6% of sales). Gross profit totaled EUR 21.7m (16.2% margin) vs. our EUR 21.4m (15.9% margin). Gross margin was driven by increased share of higher margin categories in total sales. Adj. EBIT amounted EUR 5.2m (3.9% margin) vs. our EUR 5.0m (3.7% margin) and consensus of EUR 4.8m (3.6% margin).

Everything is right on track

The market has continued to be favorable for Verkkokauppa.com as the COVID-19 situation has prolonged and consumer behavior is changing (shift to online). In early 2021, the company published its refined, rather ambitious strategy for 2021-2025. The company targets a giant leap in revenue while improving profitability. As a part of the strategy, the company will invest in the logistics automation of the warehouse located in Jätkäsaari. The first stage of the investment is to build a fully automated small item warehouse and the building process will start this summer and is expected to be completed in early 2022. The total investment is expected to be completed by the end of 2022 and the estimated capex is approx. EUR 4m.

“BUY” with TP of EUR 10.80 (10.5)

Verkkokauppa.com reiterated its guidance and expects revenue of EUR 570m-620m and adj. EBIT of EUR 20m-26m in 2021. We have made only minor adjustments to our estimates after the result and expect 21E revenue of EUR 594m and adj. EBIT of EUR 24.0m (4% margin). Implementation of the strategy has started well, and the outlook remains positive. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 16.8x and 15.8x which is 15% discount compared to the Nordic & European online peers in 21E and 16% premium in 22E. We keep “BUY” with TP of EUR 10.80 (10.5).

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