Recognised player capturing an under-represented market
Recognised player capturing an under-represented market INITIATION COV. Established in 2013, Group SFIT is a French enterprise involved in designing and marketing entry-level (<€300) laptops. Additionally, the company also sells gaming laptops, tablets, peripherals, and accessories, but laptops make up for more than 95% of total sales. In FY21, the company generated sales of €63m, of which 17% came from exports. The entry-level market In 2020, the global computer hardware market stood at c. €260bn, with shares of laptops and tablets at c. €160bn. While 80% of this market is dominated by global players whose products range from €500 to €2,000, the remainder is largely not catered by these global players. Thus, this represents the entry-level market with laptops selling in a price band of c. €300. Group SFIT operates in this market and has created a strong reputation for its products. Well recognised Group SFIT sells its products under the name ‘Thomson Computing’ (licensed from Technicolor SA). The company has a 7% share in the overall French laptop market and distributes its products across all the country’s major distributors such as Leclerc, CDiscount, Auchan, etc. Moreover, the company has a broad product portfolio for its customers. Agile model with operational efficiency The company uses a ‘made-to-order’ approach which allows it to improve its offerings to customers as they get the freedom to customise the product they buy. This way the customers can get their hands on the latest hardware at an economical price. In addition, this approach allows the company to lower its fixed costs and sell its products with less marketing costs than that of global players. Future trajectory Going forward, the company aims to do the following: replicate its success in the French markets by entering into the overseas market. On this front, the company has already added distributors in North America and Scandinavia; offer premium ultrabooks that offers all the characteristics of an ultrabook at an affordable price; and target high-growth markets such as Africa and India, where the lower average selling price makes its products attractive. Valuation Based on our target price, we value the company at c. €92m (equity value). With estimated debt of €26m, the implied EV comes out to be €118m. Conclusion In summary, Group SFIT is a leading player in an under-served market with plans to expand its offering as well its geographical presence with a coherent strategy and a unique business model.
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