EUR 200.00 For Business Accounts Only

Papoutsanis | Steady in the suds; efficiency flows through

Turning efficiency into growth; Buy – With its strategic priorities now firmly aligned around branded product growth, PAP is working to further improve profitability and reduce reliance on the more volatile 3 rd -party segment. Following a softer-than[1]expected top line in 2024, we have trimmed our 2025-27e sales by 3-4%, but still expect 2-digit revenue growth in 2025e, driven by branded momentum and an expanding 3- party client base. Margins continue to benefit from the recently completed investment phase, which has enhanced production efficiency and underpinned a structural uplift in profits. Despite near-term input cost pressures, we view the 2024 gross margin of 37.3% as a largely sustainable base, supported by favorable mix. At EBITDA level, we forecast low-teens growth over the next 3 years, with margins expanding 1.6pps by 2028e. With capex now normalised at €4.5–5m annually, we expect a return to positive EFCF from 2025e, supported by a healthy balance sheet (2025e net debt/EBITDA at 1.7x), which also leaves plenty of capital deployment flexibility (incl. M&A).

FY’24 recap: Softer than expected top line; 2-digit EBITDA growth on margin debasement – FY’24 ended with revenue of €66.2m, +6.3% yoy—slightly below our expectations but showing a clear recovery in H2 after a weak H1 (-7.2%). Growth was led by branded products (+17%) and soap noodles (+13.6%), while third-party/PL sales declined 2.8% and hotel amenities grew modestly (+3.5% yoy). Profitability improved significantly, as gross margins expanded by 320bps to 37.3%, a level we consider to be a new base, supported by the completed investment plan, improved product mix, and production cost efficiencies. EBITDA increased by 15% yoy to €10.6m, with the respective margin rising 1.2pps to 16%, despite higher marketing costs. Net profit rose by 29% yoy to €5.3m, also benefiting from tax exemptions.

2-digit growth in 2025; input cost uptick to weigh modestly on margins – Looking ahead, the business looks set for a return to a 2-digit top line growth in 2025e driven by market share gains, branded portfolio expansion into home care, and the rollout of new third-party agreements. Beyond 2025e we project mid-single digit growth on average through to 2028e. While rising input costs—particularly in oils & energy—may exert some pressure on gross margin, the impact should be contained through mitigating measures such as open-book pricing and the recently commissioned PV park. At the EBITDA level, we forecast low-teens growth over the next three years, supported by operating leverage and distribution cost dilution, with margins expanding by 160bps to c.17.6% by 2028e—broadly in line with EU HPC peer averages.

Valuation: trimming PT to €2.9, reiterate Buy – Following a volatile performance through 2024, Papoutsanis shares have rebounded somewhat from October lows, although they have been weighed down in recent days by the broad-based sell-off. We have revised our model to reflect slightly lower top-line assumptions, modest gross margin pressure in 2025e, and higher advertising costs, leading to a c€1m reduction in our EBITDA over 2025–26e. Rolling our valuation to April 2026, we derive a PT of €2.90, implying c.8.3x 2025e EV/EBITDA. With the stock currently at