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

Warsaw Stock Exchange - SFD: Growth in sales to be maintained | FXMAG.COM
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Table of contents

  1. Target of further growth in scale of operations…
    1. …and improvement in profitability.
      1. Valuation and dividend policy.

        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).

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        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).

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        Analyst

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        Marek Szymanski

        marek.szymanski@ipopema.pl

        + 48 22 236 94 12

        GPW’s Analytical Coverage Support Programme 3.0


        GPW’s Analytical Coverage Support Programme 3.0

        GPW’s Analytical Coverage Support Programme 3.0

        The Warsaw Stock Exchange's (GPW's) Analytical Coverage Support Programme 3.0 supports investment firms in drafting analytical reports which are financed by GPW. The objective of the Programme is to improve the availability of research covering less liquid companies, facilitating investors' informed investment decisions based on a reliable independent source of issuer information. Eligible to participate in the Programme are companies listed on the GPW Main Market (other than WIG20 participants) and on NewConnect. The Programme covers up to 50 issuers.

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