Verkkokauppa.com - Competition expected to remain tight in ‘19E

Verkkokauppa.com will report its Q1 earnings on May 10th. As before, our interest is on how competition has developed in the beginning of the year. We have kept our estimates for 2019E intact and retain our rating “BUY” with TP of EUR 4.7 ahead Q1.

Guidance for 2019E wide

Verkkokauppa.com updated its guidance in February. The guidance seems quite wide; with 10-20% annual revenue growth, operating profit between EUR 11-17m and 2.5-4.5% EBIT margin. Our revenue estimate for 2019E is EUR 519m which lands on the lower half of the range of EUR 500-550m, guided by the company. We expect Q1 revenue of EUR 114m/116m cons. with adj. EBIT of EUR 2.5m/3.0m cons.

Launch of a new product category

In March, Verkkokauppa.com launched a new product category: sporting equipment for more than ten ball games, such as football, floorball and golf. The new range added some 1300 new products to the company’s product range. Verkkokauppa.com aims to lower the prices of the sporting equipment and accessories and be one of the market leaders within the category in the next 3-5 years. Based on Finnish Commerce Federation, Finnish online shopping 2019E growth is expected to be ~9%. Price competition is expected to remain tight and challenging throughout 2019E.

We keep rating “BUY” with TP of EUR 4.7

Verkkokauppa.com published its IFRS 16 updated figures for 2017-2018 earlier in Q1 and our estimates reflect the changes. We have kept our estimates intact. On our estimates, Verkkokauppa.com is trading at 2019-‘20E EV/EBIT multiples of 11.3x and 8.9x, which translate into 70% and 49% discount compared to the peer group. We keep our rating “BUY” with target price of EUR 4.7 ahead Q1.

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