Baltic Review
23rd Aug 2022
MDARA: H1 2022 Results Review
Company Profile Listing Market:
Resilience under pressure
The gross profit amounted to EUR 6.66m (-1.7% y-o-y) reaching a gross margin of 65.2% (-3.1pp y-o-y). The gross margin, in line with our expectations, has been pressured mostly by inflationary pressures on salary costs and the reduction of direct ecommerce channel proportion in total sales. As COVID-19 restrictions on physical retail stores have been lifted in Latvia and the rest of the EU, physical retail store sales are recovering, substituting a part of online sales which is not necessarily a bad thing, but physical retail stores possess lower margins. Also, the impact of the Selfnamed gross loss is very minor, i.e. EUR 0.045m. The gross profitability has been supported by MADARA having raw materials inventory estimated to be enough for this year which will also reduce the inflationarypressure in the coming quarters. Also, a positive impact could come from the expansion of direct distribution markets. MADARA reported an EBITDA of EUR 1.79m (-33.6% y-o-y), with an EBITDA margin of 17.5% (-9.7pp y-o-y), 2018
2019
2020
2021
2022E*
2023E*
9.5
11.5
16.1
19.4
22.3
27.0
Sales growth (%)
28.7
21.2
39.2
20.5
15.0
21.2
Net profit (EURm)
1.5
1.6
3.4
3.7
3.4
4.9
EPS (EUR)
0.4
0.4
0.9
1.0
0.9
1.3
19.6
18.8
21.7
28.4
23.6
16.4
0.1
0.1
0.1
0.4
0.5
0.5
Payout yield (%)
1.1
1.5
0.8
1.4
2.3
2.1
P/B (x)
3.5
3.1
6.0
7.1
5.0
4.2
EV/Sales (x)
2.7
2.3
4.3
5.0
4.4
3.6
Sales (EURm)
P/E (x) Payout per share (EUR)#
EV/EBITDA (x)
13.1
12.1
16.2
20.7
20.1
14.7
EV/EBIT (x)
17.7
17.9
19.5
24.2
24.9
18.0
ROE (%)
19.3
17.4
31.4
27.2
22.4
27.8
INSTITUTIONAL MARKETS
TARTU MNT 2, 10145 TALLINN, ESTONIA
LV0000101624
Industry (Bloomberg):
Consumer Discretionary
Sector (Bloomberg):
Consumer Products and Services
Website:
www.madaracosmetics. com
Share Data, as of 22nd Aug 2022 Current Share Price (EUR): Fair Value Range (FVR), EUR:
21.50 19.50-21.60
Downside, % (to mid-point of FVR): 52-week High/Low (EUR):
4.42 29.00/19.00
3m Avg. Daily Volume (th):
0.01
Market Cap (EURm):
81.08
Ordinary Shares (m):
3.77
Key Shareholders, as of 9th Feb 2022 Uldis Iltners
23.92%
Lote Tisenkopfa-Iltnere
23.76%
Oy Transmeri Group AB
22.93%
Liene Drāzniece
6.79%
Zane Tamane
6.35%
12-Month Price Performance 30 26 22 18
LHV Fair Value Range: EUR 19.5. -21.6* DCF EV/EBITDA P/E 14 16 18 20 22 24 26 28 * As of 10th June 2022
Source: MDARA, LHV *2022E-2023E multiples are based on the share price (22nd Aug 2022) of EUR 21.50 per share. #Payout per share include dividends and share capital reduction.
1
MDARA LR
ISIN:
EUR
MADARA Cosmetics (‘MADARA’ or the ‘Company’) reported its H1 2022 financial results on 22nd August, missing our expectations. Overall, sales numbers show that the negative impact on growth from the geopolitical and economic implications in Q2 has been even more extensive than in Q1. Although we were not expecting such a reduction in overall growth, the slowdown in growth was anticipated with difficult geopolitical and economic situations negatively impacting the EU market and the COVID-19 pandemic negatively impacting Asian markets. The Company mentioned that the switch in consumers’ full attention to geopolitical crisis hindered the launch of meaningful sales campaigns in Q1 and although some have been relaunched in Q2, those campaigns were not quite effective. The product prices have not been adjusted to inflation due to contract constraints with third-party wholesalers. The Company reported H1 sales of EUR 10.21m (+3% yo-y) with EUR 6.84m (+6.2% y-o-y) from the EU (excluding Latvia), EUR 2.64m (+5.7% y-o-y) from Latvia, and EUR 0.66m (-23.8% y-o-y) outside of EU market, but other sales reduced by 97.8% y-o-y reaching EUR 0.002m. In Q1, MADARA reported that sales in the EU (excluding Latvia) have increased by 14% y-o-y, but in Latvia and outside the EU reduced by 2% and 4% y-o-y, respectively. Consequently, while sales growth in Q2 has somewhat recovered in Latvia, EU (excluding Latvia) and outside EU sales have struggled. Surprisingly, sales in Finland, MADARA´s largest market outside Latvia, grew by 52% y-o-y in H1. This increase is attributed to the abolishment of pandemic-related restrictions on physical retail stores which are preferred by consumers in Finland. Furthermore, the sales growth impact from Selfnamed at this point is very minor with Selfnamed recording sales of EUR 0.036m in H1. Direct e-commerce channels formed 33% of sales in H1 (-7pp y-o-y), which is a result of increased competition in the e-commerce space and the recovery of physical store sales after the revocation of pandemic-related restrictions. Importantly, given the H1 results, MADARA has downgraded its sales targets for 2023 from EUR 27m to EUR 22m (-18.5%) implying a 2-year CAGR of 6.58%. We believe that this target has been set with much caution, considering the highly uncertain economic environment in the short term.
Key Numbers (EURm)
First North Baltic Share List
Bloomberg Ticker:
LHV.EE