Verkkokauppa: Plenty of upside potential remains - Evli Research

Verkkokauppa.com reports Q2 results on Fri, Jul 16. We leave our estimates unchanged ahead of the report and continue to view current valuation levels attractive.

Q1 met expectations, FY ‘21 growth seen around 7-8%

Verkkokauppa.com had a strong Q1. Top line grew by 7% y/y, in line with estimates, and was driven by many product categories. Online sales grew by 33% while B2B sales advanced by 12%. Gross margin amounted to a strong 16.2% (a bit above our 15.9% estimate), driven by good contribution from higher margin categories. The company thus achieved a small profitability beat with its EUR 5.2m adj. EBIT (3.9% margin), compared to the EUR 5.0m/4.8m Evli/cons. estimates. We made only minor revisions to our Q2 estimates following the Q1 report and we leave our estimates unchanged for now. We expect Verkkokauppa.com to post EUR 130m in Q2 revenue (5.5% y/y growth) and EUR 4.6m in EBIT (3.6% margin).

Strategy is ambitious, but initial moves have been laid out

Verkkokauppa.com reiterated its FY ’21 guidance in connection with the Q1 report. The company guides EUR 570-620m top line and EUR 20-26m adj. EBIT. Our EUR 594m revenue estimate touches the midpoint and thus we see the company reaching above 7% growth this year. Our EUR 24m EBIT estimate (4% margin) is a bit above the respective midpoint. The company has also announced a EUR 4m investment in fully automated small item warehouse in Jätkäsaari, Helsinki. In our opinion the plan seems a relatively low risk and efficient way to help organic expansion. We expect Verkkokauppa.com will continue to grow at a high single-digit rate for years to come, however the company’s own very ambitious target is to achieve EUR 1bn top line and 5% EBIT margin by ’25.

12-15x EV/EBIT for FY ’21-23 isn’t high given the potential

Verkkokauppa.com trades ca. 15x EV/EBIT on our FY ’21 estimates. This level represents a 25% discount compared to the Nordic & European online peer group. The 14x EV/EBIT level on our FY ’22 estimates however turns into a 10% peer premium and reflects the fact that we have taken a conservative approach to our long-term estimates. We view the overall valuation picture undemanding given the company’s growth potential. We retain our EUR 10.8 TP and BUY rating.

https://pankki.evli.com/hubfs/ERP/Raportit/Verkkokauppa.com/Verkkokauppa%20210713%20Preview.pdf