Verkkokauppa: Capitalizing on strengths - Evli Research

Earnings a small positive surprise, retains FY ’21 guidance

Verkkokauppa.com’s Q2 revenue increased by 6% y/y to EUR 131m, compared to the EUR 130m/130m Evli/cons. estimates. Growth was driven by wide positive development as traditional product categories like computers and cameras sold well but evolving categories such as sports and home & lighting were also popular. Online sales grew at a 15% y/y pace while B2B sales were up by 38% and thus made up 22% of total revenue. Overall top line, excluding export sales, advanced some 160bps faster than the market and in our view highlights the strength of the Verkkokauppa.com brand. The 17.2% gross margin topped our 16.8% estimate, and the resulting EUR 0.6m difference in gross profit helped the EUR 5.1m Q2 adj. EBIT beat our EUR 4.6m estimate (same as the consensus) and reach a record high.

We believe strong positioning will deliver further results

Verkkokauppa.com has performed strong and steady for a while. Export sales have been the only soft area, due to the pandemic, and according to the company will probably not bounce back sharp this year. The company has recently built inventories to buffer up for the busy autumn season and important Q4. Verkkokauppa.com retains a strong position in the Finnish B2C channel but has also gained traction in B2B, where volumes stem from many SME customers. The EUR 4m small-item logistics investment is relatively small and will only have a negligible operative impact in H2’21 when inventories have to be moved to accommodate the Jätkäsaari construction phase. We make small revisions to our estimates and expect Verkkokauppa.com to achieve 8% growth and 4.1% EBIT margin this year. We also make some upward revisions to our long-term estimates.

Overall valuation picture is still attractive

In our opinion Verkkokauppa.com’s valuation remains attractive considering the steady performance and long-term potential. We see solid high single-digit CAGR performance for the coming years and potential for positive surprises. We continue to view current valuation picture overall very reasonable against this backdrop. We retain our EUR 10.8 TP and BUY rating.

https://pankki.evli.com/hubfs/ERP/Raportit/Verkkokauppa.com/Verkkokauppa%20210719%20Company%20update.pdf