Marimekko - Valuation still favorable

Strong domestic growth and a record EBIT

Marimekko’s Q3 result came in strong compared to our expectations. Net sales growth of 11% y/y was driven by strong wholesale sales in Finland (+25% y/y). Controls of grey exports and lower licensing revenue decreased international net sales by 10% y/y. Despite the increased fixed costs, the company delivered its record EBIT, totaling EUR 13.3m (31.3% margin). Profitability was boosted by improved gross margin and increased net sales.

Int’l sales to get back on a growth path

We see the decline in international sales to be temporal and expect the company to get back on a growth path in Q4’21. Although the int’l revenue declined, the brand sales increased by 40% y/y in Q3 which indicates that the popularity of the brand is still up and keeps growing. Marimekko has positioned well in its domestic market, but we also expect that new and ongoing brand collaborations are set to increase brand awareness abroad, which eventually grows the share of int’l business. Like most of companies, Marimekko is also facing some challenges in logistics and material availability. Cost inflation has woken up and is raising its head. Due to relatively large inventories, the cost inflation shows in figures with a lag. After considering above mentioned factors, we made only minor adjustments to our estimates, now expecting 21E net sales of EUR 145.7m and adj. EBIT of EUR 30.2m (20.7% margin). During 2022-23, we expect Marimekko to grow by 10.8% and 8.5% respectively as well as reach an adj. EBIT margin of 18.9% and 17.8% respectively.

BUY with a target price of EUR 84.0

In our view, Marimekko has room for an upside as it's valued with a 22E EV/EBIT multiple of 19.8x, reflecting a 20% discount to its luxury peers. We retain our BUY-rating and TP of EUR 84.0.