EUR 200.00 For Business Accounts Only

Sarantis | Firing on all cylinders, with margins shifting up a gear

Delivering on FY’24 targets… – Sarantis delivered a solid performance in FY’24, with sales up 24% to €600m and EBIT rising 30% to €61m. Organic EBIT growth reached 14.7%, driven by a better product mix and efficiency gains. International sales surged 31%, supported by the Stella Pack acquisition (+15% uplift), while Greece saw a 10% increase. Net profit grew 17% to €46m, slightly below expectations due to one-off financial costs. Importantly, Sarantis beat guidance on most metrics and demonstrated strong free cash flow, allowing it to reduce net debt to a mere €7m despite increased investment activity.

…and upgrading 2025 – Management upgraded its 2025 EBIT target by 3.6% to €70m, implying 15% yoy growth. The sales guidance remained unchanged at €628m (+5%), reflecting a cautious view amid volatile macro conditions. Nonetheless, this points to a higher margin improvement (+90bps yoy), triggered by solid operational execution in mix enhancement and synergies. Capex for 2025 was raised to €40m, mainly to support skin and sun care expansion and infrastructure upgrades. Despite higher investment plans, free cash flow is expected to increase to €68m, underlining operational efficiency and tight working capital control.

Trivial forecast changes; still eyeing double digit EBIT CAGR over 2024-28e – We have adjusted our projections following management’s upbeat guidance on the EBIT margin, while noting even more margin upside potential as the group increases in scale. Although we lower our revenue estimates by c1% (inputting relatively cautious volume assumptions), we raise our EBIT forecast marginally (10% EBIT CAGR by 2028e, bringing the 2028 EBIT margin to 12.6% (vs 13-15% cross cycle for EU HPC peers).

Balance sheet optionality – The group maintains a robust balance sheet with low leverage and rising return on invested capital (ROIC), which is set to exceed 20% in the coming years, on our estimates. Net debt/EBITDA has remained well below 1x, with the group set to switch to net cash territory this year, thanks to the strong free cash flow and the €21m inflow from the Estee Lauder JV stake sale. With no major M&A baked in our numbers, capital deployment flexibility is ample, with SAR looking well positioned to increase shareholder returns beyond our assumed >40% payout.

Valuation – We reiterate Sarantis in our top picks, thanks to the combination of a 2-digit growth outlook (at the high end among GR non financials) and the compelling valuation. On the latter, although the stock currently trades near its LTA of c9x 12-mth fwd EV/EBITDA, it remains at >25% discount vs EU HPC peers. Our DCF-based valuation yields a 12m PT of €15.5/share, which could place the stock at c10.6x 12-month forward EV/EBITDA—still c10% discount vs the HPC sector as the group’s superior growth counterbalances its smaller size.