LHV Institutional Baltic Insight, August 26th, 2020

* MADARA Cosmetics (‘MADARA’ or the ‘Company’), a leading Latvian producer of natural beauty products, is listed on Nasdaq Baltic First North and reports a full set of numbers semi-annually. MADARA succeeded to surprise us positively in terms of Q2 2020 revenues and overall profitability for the first half of this year, especially considering the coronavirus pandemic and temporary closures of several stores.
* When explaining its excellent results for H1 2020, the management refers to three main aspects, including a strong expansion of e-commerce channels, a growing network of resellers in Germany and France, as well as successful launch of some new products. Overall, H1 2020 total sales came in much stronger than anticipated, along with impressive profit figures, backed by improved gross margins and slower growth in selling expenses in comparison with the revenues.
* Overall, the Company’s H1 2020 figures are quite impressive, with many encouraging signs about its ability to avoid any setbacks related to the coronavirus pandemic and successfully continue its growth strategy with a strong focus on e-commerce. The management reiterated its 2020 revenue guidance of EUR 15m. Considering the recent developments, we believe the Company should have no serious issues to meet this guidance, and we are likely to upgrade our conservative projections for this year, but no significant adjustments to our fair value range for the stock should be expected at this stage. Please also refer to the tables in the attachment.