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- Verkkokauppa.com - Upgraded to “Buy”
Verkkokauppa.com - Upgraded to “Buy”
Q4: strong growth via market share take, but not for free
Verkkokauppa.com’s Q4 revenue growth (+22%) remained solid from Q3 (+11%). Some part of the 22% growth was due to increased wholesale/B2B deliveries as we expected, but most of the growth was attributed to clearly increased market shares in the B2C market. Strong growth in a flattish market (+0.7% in Q4 according to GfK) did not come for free, however: the gross margin declined to 14.7% from 15.8% y/y, while OPEX grew by 22%, due to increased marketing and the Raisio store.
Guidance for 2019E EBIT is wide, reflecting uncertainties
Verkkokauppa.com guides 5-15% revenue growth and 11-17m EBIT for 2019E. EBIT was EUR 13.3m in 2018A. Vague guidance appears to reflect uncertainties related to potentially softening demand and competition. While visibility into how competition evolves remains short, we expect OPEX growth to normalize in 2019E as Raisio’s ramp-up costs will be reflected in comps.
Apuraha financing should grow further, supporting margins
Apuraha financing grew in 2018: company-financed Apuraha income was reported at EUR 3.1m in 2018 vs. EUR 1.5m in 2017. We understand the company will continue to increase Apuraha financing, which would support margins.
Upgraded to “Buy” (“Hold”), ex-div TP of EUR 4.7 (4.2)
We have converted our model to IFRS (16) reporting from 2017 onwards. Additionally, we no longer assume a 5th store opening in our 2020E estimates. On our estimates the shares trade 11.4x and 9.0x EV/EBIT in 2019-2020E. While growth will most likely not come for free in 2019E either, normalizing OPEX growth and increasing margin support from Apuraha should support an earnings improvement after two years of flattish development, even if price pressure tightens further. We upgrade to “Buy”.