Warsaw Stock Exchange - SFD: Growth in sales to be maintained

We upgrade our recommendation on SFD from HOLD to BUY and increase FV from PLN 2.94 to PLN 4.15 on higher EBITDA forecasts (upgraded by 22%/37% in 2023-24E, respectively). In 2022, the company reported an increase in revenues of 33% y/y to PLN 327m; however, pressure on operating forecasts (mainly thirdparty services and salaries) resulted in an increase in EBTIDA of 23% y/y, implying deterioration of EBITDA margin of 0.5pp y/y to 6.3%. After record-high sales in January (PLN 33m), we expect the top line growth rate to remain in double-digit territory in FY23E and forecast 2022-25E CAGR of revenues of 16% (below the company’s target of PLN 600m in 2025). Given a decrease in freight cost and stabilization of the cost of materials, we expect stabilization of gross margin, while operating leverage should allow for 2022-25E CAGR of EBITDA of 26%. Finally, we expect the company to maintain its dividend policy and assuming a dividend payout ratio at 40%, we forecast DPS of PLN 0.12 in FY23E (including a PLN 0.05/share advance dividend paid in January).
SFD reported sales of PLN 327m (+33% y/y) and record-high PLN 33m in January (+56% y/y). According to PMR, the value of pharma supplements amounted to PLN 7.7bn in 2022 (ca. +14% y/y, driven among others by price increases). PMR predicts further positive growth rates in 2023; however, pressure on the consumer’s purchasing power may negatively affect the pace of growth. As a result, we expect SFD (mainly based on development of e-commerce activity in Poland and on foreign markets) to increase its sales by ca. 16% y/y on average in 2022-25E.
FY22 results were negatively affected by higher costs of external services and an increase in cost of materials (deterioration of EBITDA margin of 0.5pp y/y to 6.3% in 2022). We assume the company will stabilize employment, while operating leverage should allow for profitability recovery. We increase our EBITDA forecast by 22% to PLN 26.8m in 2023E and by 37% y/y to PLN 36.4m in 2024E (EBITDA margin of 6.9% and 8.1%, respectively). Finally, we highlight that our forecasts are below the management’s targets (revenues of PLN 600m with low teens % EBITDA margin in 2025).
On our forecasts, the company trades at a P/E of 9.2x and EV/EBITDA of 6.8x in 2023E. In our forecasts, we expect the company to maintain its dividend policy and assume a 40% payout ratio, implying DPS of PLN 0.12/share in 2023E (including an advance dividend of PLN 0.05/share).
Analyst
Marek Szymanski
+ 48 22 236 94 12