LHV Institutional 'MADARA Cosmetics (MDARA LR) Annual Review, July 27th, 2021'

* MADARA Cosmetics AS, based in Latvia, is a leading, fast-growing producer of organic cosmetics and skincare products. It was founded in 2006 and has already established a firm position in the Baltic and Finnish markets, with an increasing presence in other countries. MADARA is on track to become a leading European brand in natural and organic cosmetics.
* Given MADARA’s dedicated ESG approach, we would highlight the Company as an ESG investment, being one of the first companies in the Baltic region that is recognised as both eco-friendly and ESG compliant. While the Company is relatively small compared to its peers, it presents an interesting opportunity considering its purely organic credentials – a sector that is growing strongly worldwide. From a financial perspective, the Company’s development has been relatively flawless so far. It has consistently improved its revenues and profits over the past five years, a trend that is likely to continue. As we argue in this report, the Company possesses the products, market presence, and financial and operational capacity to expand for years to come.
* In valuing the shares of MADARA, we are following two main valuation methods: 1) an income approach, based on the Discounted Cash Flow (‘DCF’) calculations and 2) a market approach, based on valuation multiples of a peer group of comparable listed companies. We have used the weighted average of values derived from the DCF and peer valuation, applying different weights to each method. Overall, based on our current projections for MADARA and other assumptions, we decided to increase our fair value range (‘FVR’) for the stock from the previous EUR 8.60-9.40 to EUR 23.80-26.30 per share. This report contains a full set of financial forecasts and is useful for gaining an initial insight into the company. Please also refer to the tables and charts in the attachment.