Jerónimo Martins: Be aware of the stimulus and calendar
JMT’s Q1 results (April 26) should be significantly impacted by the later Easter, a stronger headwind from the Sunday trading ban in Poland and a -2% FX impact on sales. We forecast flat sales YoY, while EBITDA and net income should drop 4.5% YoY and 16% YoY, respectively. We think investors should look past this well-flagged soft start to the year and focus instead on the forecast upcoming pick up of Biedronka’s ex-calendar LfL, whose likelihood has been notably enhanced by the Pln39bn economic stimulus recently announced by Poland that we expect to boost Biedronka’s LfL by 100bp in ‘19e and 80bp in ‘20e. We have raised our estimates for Poland accordingly but this has been partly offset by higher costs in the corporate centre and thus we have kept our Eur16.7 FV unchanged. The latter offers 23% potential upside and, adjusting for Ara and Hebe losses, JMT trades at 15.1x P/E 19e and 7.8x EV/EBITDA 19e, which still seems too low for what is essentially the #1 grocer in Poland. We reiterate our Silver Bullet BUY rating.Jeronimo Martins S.G.P.S. is a holding company. Through its subsidiaries, Co. is engaged as a food distribution company with operations in Poland and Portugal. Co. operates in four segments: Portugal Retail, which comprises the business unit of JMR - Gestao de Empresas de Retalho, SGPS, S.A. (Pingo Doce supermarkets); Portugal Cash & Carry, which includes the wholesale business unit Recheio; Poland Retail, which includes the business unit with the brand Biedronka; and Others, which includes marketing services and representations, restaurants in Portugal, health and beauty retail in Poland, and its retail business in Colombia.
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