One-stop shopping – a strategy to grow by

Markets expected to grow with a 3-7% CAGR 2018-2030

Fair valuation range of SEK 6-17 per share

Oboya offers a one-stop shop for its customers
Oboya is a global horticulture supplier that operates mainly in Europe and China. The company offers a one-stop shop solution for professional horticulture growers, wholesalers and retailers. It produces, markets and sells products such as pots, sleeves and substrates for the production of fruits, berries, vegetables, flowers, and plants. Roughly 90% of Oboya’s sales are attributable to professional growers. Oboya enables its customers to lower production costs, and to procure more flexibly.

Growing and fragmented market under consolidation
The horticulture market is highly fragmented. Instead of having one supplier for all the products they require, professional growers often use different suppliers. The underlying market (which is driven by the consumption of fruit, vegetables, flowers, and plants), is predicted to grow at a 3-7% CAGR until 2030. The drivers include increased consumption, sustainability thinking, and a growing middle class in Asia. The market also looks set to consolidate and industrialise, which is increasing the focus on costs – an area where Oboya’s offerings can play an important role. The company’s estimated market share is less than 1% of a market we estimate is worth SEK 163bn-250bn.

’18-’21e organic growth CAGR of 7% at ’21 EV/EBIT 11x
We expect Oboya to grow its organic sales at a ’18-’21e 7% CAGR, and to increase its adj. EBIT margin from 0.6% in 2018 to 5.0% in 2021e. Given our estimates, we expect a four-year EBIT CAGR of 37% from 2017 until 2021e. The company trades at an EV/EBIT of 16x for ’20e. Despite net debt/EBITDA being high in the short term, lower levels await as it goes from 6.6x in ’19e to 3.0x in ’21e. In our valuation scenario, we find a fair valuation range of SEK 6-17 per share.

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