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JUMBO | Buy on all counts

Another beat in H1’23; heading for mid-teens sales growth in FY23e – Jumbo delivered 27% EBITDA growth in H1 as a result of 20% sales growth, a relatively mild 1.7pps gross margin compression (in the context of last year’s unsustainably high 57% gross margin) and tight opex control. Coupled with net financial income given the debt-free balance sheet, Jumbo grew net profits by a whopping 36%, eclipsing the +21% anticipated by consensus. Mgt lifted the FY23 net profit guidance by c4% despite a c3% reduction in the FY23e expected sales growth (at 12%), with the latter being the result of the squeeze in disposable income given ongoing inflationary pressures and the impact from recent rainstorms. We have recalibrated our numbers lowering just slightly our sales estimates mainly due to changes in the phasing-in of extra capacity, but still landing above mgt guidance envisaging c13% growth this year.

Gross margins holding up well, opex under control, EBITDA margins expanding – Besides the lower-than-expected gross margin erosion, another key highlight from H1 was the opex control, with net opex per store just slightly higher yoy (and down yoy excluding personnel), thus leading to EBITDA margins expanding 1.8pps. These trends more than offset the impact of a more tepid top line outlook (as envisaged by mgt), leading Jumbo to lift the FY23 net profit growth guidance to +15% in FY23e from up to +11% seen before. Given our slightly higher revenue estimate and, presumably higher gross margin assumption, our recalibrated 2023e net profit numbers land c3% higher than mgt estimates corresponding to 19% growth yoy. Looking further out, we expect Jumbo to deliver EBITDA growth of 9.6% in 2024e followed by 3-4% thereafter, with similar bottom line performance as gross margins trend down to more normal levels (53-54%). Our 2023-24e are 4-6% above consensus at EPS level.

Emerging as a dividend play – The main surprise from H1 was the announcement of a hefty €1.47 per share special dividend (5.8% yield, ex div on 23rd November). This is on top of the €1.155 paid in March and the €0.322 paid in August, adding up to a whopping >11.5% total yield in the calendar year, rendering Jumbo the highest yielding stock in our coverage along with OPAP. Although the shareholder return policy is somewhat erratic, a clear trend has emerged in our view, namely that mgt seems to be more keen to tilt capital deployment towards shareholder returns in periods during which expansion opportunities are scarce or do not meet internal hurdle rates. Our model envisages c60% payout in the coming years.

Valuation still muted; top pick – Although the shares have narrowed somewhat the valuation gap vis-à-vis other retailers, the valuation is still quite compelling as the current price continues to discount a pessimistic setup. We have recalibrated our model making modest changes to our numbers, while lowering our WACC to 8.9% (from 9.9% before) as we believe key person risk is captured by our very conservative medium-term estimates. Our PT (DCF-based, lifted to €30.1) places Jumbo at an undemanding c9x 1yr fwd EV/EBITDA, close to the valuation of best-in-class EU retailers. We reiterate Jumbo as one of our top picks in Greece.