Lyko Group (Buy, TP: SEK390.00) - Strong growth but weak margin
We expect Q1 sales to increase by 29.7% YOY on strong growth in the online and retail segments, but an EBIT margin of 1.6%, driven by higher investments in new markets, as announced in connection with the Q4 results (especially marketing and personnel costs), with the company seeing good potential to expand and gain share in European markets. We reiterate our BUY, but have lowered our target price to SEK380 (390) given the lower margin expectations for Q1 and weaker consumer sentiment. With the stock trading at a 2022e EV/sales of 1.1x, we see scope for a re-rating.Lyko Group AB (publ) is a Sweden-based care and beauty company. It offers a range of hair care and beauty products through websites Lyko.se and Lyko.no, as well as through store chain in Sweden and Norway. The Company operates within segments Lyko Online, which comprises e-commerce activities, and Lyko Retail, which includes sales through physical stores. The product range primarily comprises shampoos, styling and makeup products of such brands as Aesop, Maria Akerberg, Peter Thomas Roth, Bumble & Bumble, Oribe, Mason Pearson, Elizabeth Arden Pro and Image, among others. Also, the Company conducts salon activities in its stores as well as under the brand Lyko Concept. The Company's main shareholders comprise Lyko family, as well as Fidelio Capital.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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