Pricer
Pricer - Strongest gross margin since 2012 (ABG Sundal Collier)
2019-07-19 17:06
Large sales and EBIT beat vs. ABGSCe
Raised ’19e-’21e EBIT by 21-31%
12x EV/EBIT ‘19e, 9.1% FCF yield
Q2 LFL growth: sales and EBIT +22% & +70%, resp.Last week, Pricer pre-released its Q2’19 key figures as a reflection of the strong performance during the quarter. The sales and EBIT beat vs. ABGSCe was 9% and 105%, respectively. As we have now been provided with all of Q2’s financials, we note that the primary earnings driver came from the gross margin, amounting to 33.2% (+4.2pp vs. ABGSCe). We know that the gross margin can be lumpy between quarters, as it is sensitive to FX, product mix, and other inputs, like the electronical component shortage that occurred in 2018. Even so, this was a strong gross margin. Furthermore, the 22% y-o-y sales growth (6% FX) was driven by a broad set of customers, which we think indicates a high demand for Pricer’s products. This metric also aligns with market estimates for electronic shelf label (ESL) solutions.
Substantial ’19e EBIT raise on higher GM assumptions
Having two quarters with strong gross margins in the bag, we now extrapolate the metric in our forecasts, as we think it shows that Pricer is not searching for growth if it means having lower prices, despite the fierce competition on the market. Furthermore, our impression is that the market currently has an overcapacity in terms of e-paper components, relating to a reduced demand from some large market actors, which E Ink (a large e-paper display supplier) recently stated in its report. In total, our ‘19e EBIT is up 31%, while sales are cut by 1-2% in the light of an order intake that was 6% below ABGSCe.
Tough sales comps in H2’19e, but stronger GM mitigates
Pricer is up against tough comps in the coming two quarters, for which we expect H2’19e sales to decrease by 36% vs. H2’18. However, because we forecast higher gross margins, the corresponding EBIT is only down by 4%. On our revised forecasts, Pricer trades at 12x ‘19e EV/EBIT in tandem with >9% FCF yield.
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