The report was prepared by Dom Maklerski BDM at the request of the WSE as part of the Exchange's Analytical Coverage Support Programme
Last recommendation BDM: ACCUMULATE with target price 6,32 PLN/share (11.10.2022) LINK
• Q3'22 revenue was PLN 35.8m (+4% y/y), 2.5% below our forecasts. As anticipated, foreign exchange rates and product price increases had a positive impact on revenues.
• Sales on the Polish market fell 15.2% to PLN 7.9m, 23.5% below our assumptions. The Polish market share fell to 22%. By comparison, it was 27% in Q3'21 and 33% in Q2'22. The increase in domestic product prices was not sufficient to close the gap created by the negative sentiment in industry and domestic construction.
• Export sales increased by 11.2% y-o-y, above our expectations. Sales in Germany rose to PLN 15.3m (+ 25% y/y). This market now accounts for 43% of revenues (36% in Q3'21, 37% in Q2'22).
• Revenues from the Italian market increased by 52% y/y, q/q remains flat. Revenues from the Russian market fell to 0.
• The rest of the European market performed better than expected, with revenue growth of 52% y/y and 77% q/q.
• Gross profit margin declined sharply, well below our expectations. Cost pressures related to material prices, labour costs, third-party services and energy were higher than our expectations.
• Despite lower-than-expected general and administrative expenses as well as cost of sales, the EBITDA margin also fell sharply. The margin erosion is due to the high cost of sales.
• Operating cash flow amounted to PLN -2.5 million, the change in working capital amounted to PLN -3.8 million.
• CAPEX in the last quarter amounted to PLN 6.4 million, of which PLN 4.1 million was the acquisition of intangible assets. Working capital requirements increased. Receivables turnover increased from 86 days in Q2'22 to 97 days, inventory turnover increased from 91 to 100 days respectively.
• Net debt increased significantly (to PLN 15.2 million, from PLN 9.9 million in Q2'22). The net debt/EBITDA ratio currently stands at 1.1.
BDM Comment: We view Q3'22 results negatively. Although the company's revenues were close to our forecasts, cost pressures proved to be greater than we had anticipated. Domestic sales were hit hard by the low PMI and the slowdown in construction. Sales in Germany were close to our forecasts and rose in EUR terms. Sales in Europe excluding Italy and Germany were also a positive surprise. It was able to fill the gap left by the revenue generated in Russia. The company managed to reduce selling and general and administrative expenses, but cost of sales was too high to generate satisfactory profits. Accounts receivable and inventory turnover raised and consequently, working capital requirements increased.
Analyst: Kajetan Sroczyński Kajetan.sroczynski@bdm.pl tel.: (+48) 668 516 977
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