Sarantis | Scent of growth
We initiate coverage on Sarantis, one of the leading producers and distributors of mass market cosmetics/household products in South and Central Eastern Europe. The group is poised to enjoy 5-6% organic growth sales in the coming years underpinned by the balanced category exposure (both aspirational and functional) and its broad geographic footprint (Greece c36% of sales). On our estimates, this will be further bolstered by recent acquisitions (c6% boost in 2018e) and will translate to c14% annual EBIT CAGR over 2017-20e. Driving the mid-teens earnings growth will be positive operating leverage, scale benefits and acquisition-related synergies. In the long-term Sarantis is well-placed to benefit from the rising penetration of cosmetics/personal care products as disposable income in Eastern European countries edges higher. Our positive thesis is also underpinned by the healthy balance sheet (small net debt position envisaged in 2018e), the consistent cash generation (c60-65% of EBITDA converted to FCF) and the proven ability of accretive deals. Sarantis’s 49% stake in a JV with Estee Lauder is also a key pocket of value and should provide valuation support. With the stock trading at 25-30% discount vs. its EU HPC sector peers, we believe the current share price offers an attractive entry point. Our PT effectively places the stock at c12.9x 2019e EV/EBITDA, namely small discount vs. the current valuation of the closest peers.
Co. is a consumer goods manufacturer and distributor engaged in operations in Greece. Co. produces consumer goods such as cosmetics, pharmaceuticals, households, pet products, car's accessories and apparel. Co. produces its own brand name of cosmetic products such as Prosar, Str8, BU99, Clochard, Carroten, Tokalon and others. Co.'s product portfolio also includes a range of international brands such as Estee Lauder, Clinique, Aramis, Donna Karen, Orlane, Montana Versace and others.
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
Eurobank Equities S.A. offers a comprehensive suite of investment products—including equities, derivatives, bonds, and mutual funds—serving over 15,000 private, corporate, and institutional clients in Greece and internationally.
The firm maintains a dominant position in the Greek capital markets, consistently ranking among the top brokers in terms of market share and is repeatedly recognised in major institutional investor surveys as one of the leading brokers and top Equity Research Providers for Greece.
Its multi-awarded Research Division delivers timely insights and fundamental coverage on almost 40 listed companies—representing over 90% of the ATHEX’s market capitalisation and traded value.
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