Dino cut to HOLD, TP PLN 225.0 - Turbo-growth seems priced in
After incorporating 2Q 20 results and tweaking our operating assumptions we increase our TP to PLN 225 (PLN 175) while downgrading our recommendation to HOLD from BUY. We have upped our lfl sales growth and long-term EBITDA margin estimates (in the TV by +10 bps to 9.7%). The compelling set of results in 2Q 20 showed no roadblocks from Covid-19 on the growth path. We were in particular impressed with the expansion of the gross margin by 94 bps yoy. Dino outperformed the market with its lfl sales growth of 7.8% vs. Biedronkas 4.8% and 1.1% of Delikatesy Centrum retail (Eurocash). However, following a 54.0% YTD appreciation of the share price (and a 77.4% appreciation since the Covid-19-related low point on March 12), and the rich valuation (PE 20e/21e of 39.0/31.0 and EV/EBITDA 20e/21e of 23.6/18.8), we consider the impressive success of Dinos growth story to be largely priced in. We note that Dino is trading at a 54% premium to JMT on a PE 21e basis. We set our one-year target price at our DCF fair value of PLN 225 per share implying a 1.4% upside.Dino Polska is engaged in the business of retail sale in non-specialized stores with food, beverages and tobacco. In addition, Co. conducts processing of meats and the resulting products are dedicated, in the form of culinary meat, to external recipients within Co.'s retail chain. As of December 31, 2016, Co. operated a network of 628 Dino stores.
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