EUR 300.00 For Business Accounts Only

JUMBO | No flash, all substance

Impressive execution continues unfettered – Following 14% sales growth and 12% EBIT growth in 2022 (coupled with another beat in FY22 results), momentum seems to continue unfettered in Q1’23 with sales +33% yoy. Although COVID-related restrictions ought to have provided a significant boost in Q1 by creating an easy base-effect, we believe underlying growth is still quite robust (in the mid to high teens), which bodes well for our assumption for 16% top line growth in the full year. Our numbers effectively imply sales up c13% in the remaining 9 months of 2023, more than feasible in our view.

Gross margin erosion indicated by guidance requires abrupt end to the price-rising cycle; we doubt this will be the case – Mgt indicated that 2022 sales growth was primarily price-driven, cautioning that this situation is set to reverse in 2023 as it intends to pass through the benefits of cost normalization to consumers. In our view, the price-rising cycle that started in previous quarters is not likely to end so fast, as the key catalyst for a reversal will be either the exhaustion of cash hoarding post the pandemic (which continues, with households having amassed €23bn deposits since Feb’20) or a deterioration of conditions in the labour market (which does not seem to be the case as unemployment remains on a downward trajectory). With these in mind, we believe Jumbo is well placed to enjoy the benefit of the carry-over effect from last year’s pricing while growing volumes as it benefits from potential trading down dynamics in 2023. As such, we feel that our 2023e sales estimate of +16% entails upside – rather than downside – risk. We therefore do not read much in Jumbo retaining its net profit guidance of €270-275m (9-11% yoy growth) unchanged after the Q1’23 trading update and expect key metrics to be beaten by a comfortable margin.

Raising net profit 5-6% for 2023-24e – We have raised our operating estimates c1-3% for 2023-24 and land c8% above consensus at EBITDA level. Our net profit forecasts increase a bit more, reflecting lower financial costs due to the prepayment of the €200m bond loan, and stand c8% above the upper end of mgt’s guidance. We are labouring under the assumption of gross margins staying above 55% in 2023-24e and opex/sales falling below 20% as inflationary pressures abate and as Jumbo manages personnel (c56% of opex) more efficiently. On our new numbers, Jumbo will deliver c17% EBITDA growth this year followed by 8% in 2024e.

Valuation still muted; top pick – Filtering through the estimate upgrades, we have raised our PT to €26.4 (DCF-based at 9.9% WACC), placing Jumbo at an undemanding 20% EV/EBITDA discount vs retail peers) is discounting a pessimistic setup, while implicitly assuming value destruction in the future. As such, we feel the stock is sufficiently de-risked, especially given the visible earnings growth in the near term and the improved cash return profile relative to previous years.