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Sarantis | Margins climb, re-rating awaits

Double digit H1’25 profitability growth… – Sarantis group grew H1’25 EBIT by 18% yoy to €38m, despite the soft +1% top line growth (€304m), as a result of the strong mix improvement and the cost initiatives. Net profit increased by 20% to €29m. Importantly, the group’s export activity grew significantly in H1’25, with sales from exports rising to c€18m (+52% yoy) and exports’ EBIT more than doubling to c€7m, mainly reflecting the strong rollout of the group’s suncare products in the U.S market.

…confirms 2025e EBIT target, albeit on slightly lower sales guidance – In the light of the tepid top line growth in H1, Sarantis mgt trimmed its full year sales target by 2.5% to €612m (anticipating c2% revenue growth), accounting for sustained challenges across some key international markets on top of the SKU rationalization initiatives. However, as Sarantis delivered strong operational execution from mix enhancement and synergies, the 2025e EBIT guidance remained unchanged at €70m, indicating a very robust +15% growth yoy and c130bps margin expansion (to 11.4%).

Forecasts recalibrated marginally; double-digit EBIT CAGR intact – We have adjusted our projections to account for the slower sales growth across some international markets, which counterbalance the better than anticipated growth in Greece/exports. As such we trim our revenue estimates by c3%. Nonetheless, we keep our FY25 EBIT projection unchanged at €70m (+14% yoy), as better cost efficiencies and mix improvements kick in. Looking ahead, we also retain our >10% EBIT CAGR by 2028e, forecasting 12.8% EBIT margin by 2028e, expanding >2pps in the 4-yr period, a trajectory broadly converging towards EU HPC peer benchmarks (13-15% cross cycle).

Balance sheet strength sustains capital flexibility – The group maintains a robust balance sheet with low leverage (net debt/EBITDA has remained well below 1x), set to switch to net cash territory by the end of the year, thanks to the strong free cash flow and the €21m inflow from the Estee Lauder JV stake sale. Capex for 2025 has been reduced to c€35m (with part of the Oinofita distribution center investment pushed back to 2026), with investment focus on scaling skin and sun care capacity, digitisation, supply chain upgrades and Stella Pack’s regranulation line. H1 figures indicate some €15m remaining capex by year end. With no major M&A, capital deployment flexibility is ample, with SAR looking well positioned to increase shareholder returns beyond our assumed 40% payout.

Valuation – We value Sarantis with a DCF-based valuation, predicated on a slightly lower WACC (8.6% from 9.1% before), reflecting the narrowing of 10-yr yields and improved stock liquidity. Our PT rises to €16.5 (from €15.5), also reflecting minor earnings changes and the roll-forward to Sep 2026, and places Sarantis at c10x 2026e EV/EBITDA, still c18% discount vs. its HPC peers, as the group’s superior growth vs the peer group counterbalances its smaller size. Even after a 27% YtD rally, the stock trades near its LTA but remains at c30% discount to the sector, which we view as excessive given SAR’s earnings delivery, cash flow momentum and margin trajectory. We thus reiterate our Buy rating.