Dino - 2Q19 results’ forecasts
Dino’s is the fastest growing proximity supermarket retail chain in Poland as regards both: the number of opened stores and the revenues growth dynamics. The Company’s business model combines advantages of: (i) proximity format (i.e. medium sized stores in the locations convenient to customers, most often close to the place of residence or high traffic) with (ii) the ability to quickly open new stores and (iii) an attractive assortment of products, mainly branded and fresh products at competitive prices.
Dino’s performance in new shops openings has been successful so far – each year for the last 9 years the Company has been increasing the number of opened stores. Given Dino’s recent track record we expect that the Company’s aim assuming 1,200 shops (opened and operational) till 2020 should be easily achievable already in 2019 allowing the Company to almost double its retail chain during only 3 years. For the last three years the Company has successively managed to improve its profitability. Dino’s gross profit margin on sales increased to 24.2% in 2018 from 22.0% in 2014. In our opinion this trend should continue in the next years, mainly driven by improving purchase conditions from the suppliers on the back of a growing scale of operations, additionally supported by an improving sales mix.
Given the forecasted robust top line growth combined with the improving business profitability, we forecast Dino’s adjusted EBITDA to increase by 34% and 28% yoy in 2019E and 2020E, respectively. With the robust expansion expected to continue in the next years we forecast a 2018-21E adjusted EBITDA CAGR at 29%. Nevertheless, despite the appealing equity story due to recent strong share market price outperformance resulting in a fundamental downside towards our 12M EFV, we changed our LT fundamental rating for the Company’s equities from Hold to Sell. Moreover, expecting outstanding financial results in the following quarters not to constitute a surprise for the investment community in our view, we downgrade our ST market-relative stance towards Dino’s equities from Overweight to Neutral.
Dino Polska is engaged in the business of retail sale in non-specialized stores with food, beverages and tobacco. In addition, Co. conducts processing of meats and the resulting products are dedicated, in the form of culinary meat, to external recipients within Co.'s retail chain. As of December 31, 2016, Co. operated a network of 628 Dino stores.
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