Verkkokauppa: Growth is expected to continue - Evli

Verkkokauppa.com reports its Q3 results on Fri, the 22nd of Oct. Preliminary figures show a solid third quarter and our attention will concentrate on the comments regarding end of the year as crucial campaign season arrives and temporary supply chain problems still exist.

Q2 figures topped estimates

Verkkokauppa.com’s strong Q2 result topped estimates. Top line grew by 6% y/y to EUR 131m, driven by strong B2B sales and online transition. Growth in consumer sales was moderate and export sales decreased due to COVID-19 restrictions. The pandemic restrictions still strengthened online sales share, not to mention the positive effects of consumer purchase behavior. Profitability was boosted by increased gross margin through strong sales in higher margin evolving categories like Sports, Home & Lighting, and BBQ & Cooking. EBIT eventually amounted to EUR 5.1m (EBIT margin of 3.9%).

Waiting for further evidence on strategy execution

The company guides EUR 570-620m revenue and EUR 20-26m adj. EBIT for FY ‘21. We expect Q3 net sales to grow by 8% y/y to EUR 139.7m (EUR 138.6m cons.) and an adj. EBIT margin of 4.8% (4.5% cons.). Our FY ‘21 net sales estimate is approx. at the midpoint of the company’s guidance, at EUR 599m (EUR 592m cons.), and adj. EBIT estimate at the upper bound of the guidance, at EUR 24.8m (EUR 23.5m cons.). Verkkokauppa.com’s CMD elaborated on its strategy execution. The execution plans sound reasonable on paper, but further evidence is needed before we raise our estimates nearer the company’s long-term targets.

Current valuation leaves long-term upside potential

Verkkokauppa.com’s absolute valuation has slightly increased since our last update, but the company is still valued at a discount compared to its Nordic and European online-focused peers. On our FY ‘22 estimates the company trades at an EV/EBIT of 12.6x (12% discount to online-focused Nordic and European peers). We retain our TP of EUR 10.80 and BUY-rating.