Toya: A Forward-Thinking Company Expands in China and Eyes Ukraine for Future Growth
Aa
Share
Toya – Forward all the time Toya is one of the leading companies selling hand tools and power tools in Poland and Central and Eastern Europe. The strength of the company is having a team of product managers who care about high quality and continuous development of the product offer. Toya has two subsidiaries in China, located close to the world's largest factories and transhipment ports. The strategy of the capital group assumes further geographical expansion - currently sales are conducted to over 100 countries. We see great potential to increase the scale of operations and improve results in the long term, we set the target price per share at PLN 10.1.
Launch of a new warehouse in China
After the launch of a new logistics and warehouse center in Baibu Town, China, in July last year, the total warehouse space of the Toya group increased to 73.5 thousand square meters. m2 . Such a size of warehouses, in our opinion, should allow for an increase in annual sales to PLN 1 billion, without the need to rent external warehouses. The new logistics center will enable the creation of buffer stocks in the event of disruptions in supply chains or a spike in demand. It is also to be a foothold to activate sales in Asia, Africa, America and Australia
Rebuilding Ukraine as an option for future revenue growth
The option for the company is to end the war in Ukraine - currently Toya directs 5% of its sales to that market. We assume that if Ukraine is rebuilt, the sales of tools and power tools will increase significantly. Toya, having maintained relations with customers from Ukraine for many years and having large inventories, may be one of the most important beneficiaries of the increase in sales in this region.
Solid results in the coming years
he financial results of the group are improving quite systematically. Over the last 14 years, only two years saw a decrease in revenues: during the global crisis in 2009 (-11% y/y) and during a significant economic slowdown in 2012 (-4% y/y). The Group is characterized by high collection of receivables - most of them are insured in reputable financial institutions. In 2023, we forecast a similar level of revenues as in 2022. We believe that the economic slowdown will last into 2024, but we assume that Toya will slightly increase sales (+4% y/y), e.g. thanks to having a new warehouse in China. In the following years, we forecast sales growth of approximately +8% y/y.
We estimated the value of Toya shares based on the DCF method at PLN 9.05 and the comparative method at PLN 11.37. We assigned 90% weight to the first method, 10% to the second. We set the 9-month target price at PLN 10.1, which gives a 62% upside potential for the share price.
