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).
Target of further growth in scale of operations…
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.
…and improvement in profitability.
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).
Valuation and dividend policy.
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
marek.szymanski@ipopema.pl
+ 48 22 236 94 12
GPW’s Analytical Coverage Support Programme 3.0
