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Papoutsanis | Bubbling Revenues, Softer Margins, Upside on Hold

Revenue gains offset by margins; stock fairly valued; Hold – Papoutsanis has stepped up its growth profile, with strategic priorities clearly anchored around branded portfolio expansion and deeper third-party partnerships. Following on from the H1’25 results, we have raised our 2025–27e revenue forecasts by c10–13%, reflecting the ramp-up of newly secured contracts, the scaling of existing ones, and deeper market penetration in branded products. However, this sales uplift is largely offset at the operating level by sustained input cost pressures, a slightly less favourable sales mix, and higher marketing to support branded portfolio expansion. As such, our EBITDA forecasts remain broadly unchanged—albeit still pointing to double-digit growth through to 2028e. Following a c30% YTD rally that has led the stock to multi-year highs, we see the near-term upside as largely priced-in and we therefore move to a Hold.

H1’25: Stronger sales, weaker operating leverage – PAP delivered robust revenue growth of 26.8% yoy in H1’25, with sales reaching €40.2m, driven by strong performances in Own Brands (+35.8% yoy, boosted by more than twofold growth in Home Care) and PL/3rd-party manufacturing (+43.5% yoy), which together accounted for >70% of revenues. The Q2 run-rate accelerated to 31.5%, following +21% in Q1. The increased contribution from 3rd-party sales—the least profitable category at the gross level—combined with elevated input costs, led to a 1.1pps yoy dilution in gross margins to 37.0%. Higher operating expenses (+€2.3m yoy), primarily reflecting increased marketing spend for branded product launches, further weighed on operating leverage, with EBITDA up €0.7m yoy to €5.7m and the respective margin down 1.7pps yoy to 14.2%. Net profit rose 38.3% yoy to €3.2m, also benefiting from tax exemptions.

Double-digit growth and FCF inflection ahead – For 2025e, we model revenues up 22% yoy to €80.6m, gross margin easing to 36.5% (from 37.3% in 2024) and EBITDA up 10% yoy to €11.7m on 1.5pps lower margins (14.5% vs 16.0% in 2024). The c€1m increase in operating profitability coupled with lower capex (given the completion of the company’s recent investment cycle) is set to allow FCF to turn positive in 2025e (€2.1m) while rising to €6.1m by 2027e. The accelerating FCF generation coupled with an already healthy balance sheet (2025e net debt/EBITDA at 1.9x) will underpin a c30% dividend payout – as per our assumption – while leaving room for selective bolt-ons. Risks remain from input cost inflation and potential working capital swings.

Valuation: lifting our PT to €3.2, lowering rating to Hold – After a muted 2024, Papoutsanis shares have rebounded strongly in 2025, gaining c30% ytd and outperforming both EU HPC peers and Greek non-financials. We have revised our model to reflect c10% higher top-line assumptions vs our prior estimates but leave operating profit forecasts largely unchanged due to higher opex. Rolling our valuation to Sep 2026, we derive a PT of €3.20, placing the stock at c9.3x 2025e EV/EBITDA, namely c20% discount vs international peers, which we believe is warranted by the stock’s smaller size and liquidity. With the current share price very close to our PT, we move to a Hold rating.