Verkkokauppa.com - Expecting softness to continue in Q2
The consumer demand for durable goods in the Nordic markets has continued softly in Q2 and hence we have made no changes to our estimates. We expect Q2 revenue to decline and profitability to weaken. We retain our HOLD-rating and TP of EUR 4.3 ahead of Q2’22.
Late start of summer season has delayed sales somewhat
In our view, the demand for durable goods in Finland hasn’t taken notable positive steps ahead and hence we expect the company’s Q2 result to be soft. Market estimates imply the Finnish consumer electronics market not to see growth in 2022 which partly supports our Verkkokauppa.com expectations. In addition, the summer started relatively late in Finland which has in our view had a negative impact on Verkkokauppa.com’s sales from April to June.
Estimates intact, H2 defines full-year performance
Meanwhile, we expect the B2B segment to continue its ongoing trend with double-digit growth in Q2, on our estimates, the consumer segment sees a decline y/y. In our view, the trend of the consumer demand for H2 can be observed during August-September at the earliest, after the summer holidays are over, which eventually defines the company's full-year performance. Consequently, we expect Verkkokauppa.com’s revenue to decline also in Q3 while our Q4 estimates include some optimistic y/y growth. In Q2, we expect topline to decrease by ~5% y/y to EUR 123.7m, driven by low demand for consumer electronics and the late start of the summer in Finland. Our view is that the evolving categories might also have performed somewhat softer due to delayed season sales (grills and bicycles etc.). Due to lower revenue, softer gross margin, and increased fixed costs we expect EBIT to fall significantly to EUR 2.4m, implying an EBIT margin of 2%.
HOLD with a target price of EUR 4.3
The company’s 22E valuation is quite elevated compared to peers which is mostly explained by the company’s poor performance in 2022. However, on our 2023 estimates, the company’s EV/EBIT multiple falls below its peers with Verkkokauppa.com’s expected profitability improvement. We retain our HOLD-rating and TP of EUR 4.3 ahead of the Q2 result.
In our view, the demand for durable goods in Finland hasn’t taken notable positive steps ahead and hence we expect the company’s Q2 result to be soft. Market estimates imply the Finnish consumer electronics market not to see growth in 2022 which partly supports our Verkkokauppa.com expectations. In addition, the summer started relatively late in Finland which has in our view had a negative impact on Verkkokauppa.com’s sales from April to June.
Estimates intact, H2 defines full-year performance
Meanwhile, we expect the B2B segment to continue its ongoing trend with double-digit growth in Q2, on our estimates, the consumer segment sees a decline y/y. In our view, the trend of the consumer demand for H2 can be observed during August-September at the earliest, after the summer holidays are over, which eventually defines the company's full-year performance. Consequently, we expect Verkkokauppa.com’s revenue to decline also in Q3 while our Q4 estimates include some optimistic y/y growth. In Q2, we expect topline to decrease by ~5% y/y to EUR 123.7m, driven by low demand for consumer electronics and the late start of the summer in Finland. Our view is that the evolving categories might also have performed somewhat softer due to delayed season sales (grills and bicycles etc.). Due to lower revenue, softer gross margin, and increased fixed costs we expect EBIT to fall significantly to EUR 2.4m, implying an EBIT margin of 2%.
HOLD with a target price of EUR 4.3
The company’s 22E valuation is quite elevated compared to peers which is mostly explained by the company’s poor performance in 2022. However, on our 2023 estimates, the company’s EV/EBIT multiple falls below its peers with Verkkokauppa.com’s expected profitability improvement. We retain our HOLD-rating and TP of EUR 4.3 ahead of the Q2 result.