PLAISIO | “Built to last” - Issuer Sponsored Research

Sure-footed in a competitive market – Plaisio is one of Greece’s largest retailers of PC, digital technology and office products. It operates 24 stores in Greece and another 1 in Bulgaria. Besides being a retailer, Plaisio is also a product assembler importing technology equipment parts from China and assembling those in its facilities under its own brand. Main pillars of differentiation vis-à-vis competitors in a highly commoditized industry are the logistics infrastructure, the route-to-market capabilities, the private-label offering, the in-house call center and the after-sales support. We believe these are distinguishing factors in the long-term, and, on that basis we see Plaisio as among the winners in the marketplace. We expect future market share gains to come at the expense of sub-scale competitors.

Covid-19: new normal, manageable impact – Quite remarkably, Plaisio suffered just a 20% sales drop during the 2-month lockdown thanks to the advanced e-commerce platform and logistics/distribution network. Furthermore, pent-up demand and category shifts underpinned strong run rates post the opening, as electronics appear to be main beneficiaries of shifting spending patterns, thereby leading to H1 sales growth of 8%. Against this background, the impact from COVID-19 looks manageable at the current juncture (we estimate 2020 EBIT flat yoy), although the extent of the headwind clearly hinges on whether there will be another lockdown in the light of the developing second wave of the viral outbreak. Longer-term, we expect Plaisio to be a beneficiary of virus-induced structural changes, namely the increasing focus on speed of delivery and the switching of spending from leisure towards other segments, such as electronics (work-at-home).

Earnings reset since 2015; Plaisio well positioned to capitalize on past investments – Since 2015, the earnings bar has been reset. The group recalibrated the product mix, tilting it back to 3rd party products, while also embarking on several investments aimed at bolstering its online capabilities and improving the in-store experience. All these weighed on margins, especially in a period of intense competition as the Greek economy emerged from a multi-year recession. Although the earnings momentum is poised to remain subdued in 2020 in the aftermath of COVID-19, we do not envision much downside risk from these levels, subject to normalization in 2021. As the cyclical drag fades, we expect that mid-single digit top line growth post 2021 is feasible and can translate into c24% EBIT CAGR, with EBIT margins trending back above the 3% mark by 2024 as the pendulum of operating leverage turns positive.

Valuation – From a valuation perspective, historically Plaisio has traded within a wide range, reflecting the fact that it belongs to a cyclical sector. With the stock now at c6x 2021e EV/EBITDA, namely >20% below the historic average on near trough earnings, the price seems to discount a rather negative setup. Our indicative DCF yields a valuation range between €83m and €95m, with our baseline indicative scenario pointing to a 12m intrinsic value of c€88m, translating to €4.0/ share.