Allegro: better than you might think (stays BUY)
We reiterate our BUY recommendation for Allegro, trimming our price target (PT) to PLN 31.3/share (from PLN 47.8). As the largest online retailer in Poland, with the widest offering, Allegro is well-positioned for the increased focus of customers on value-for-money offerings and price transparency, in our view. We also highlight its low operating leverage, related to a business model based on a 3P marketplace. Still, we find Allegro to be a victim of the success of Smart!, which is boosting not only GMV and customer loyalty, but also costs of delivery. According to our estimates, to fully neutralise the dilutive impact of Smart! on the EBITDA margin for a single customer, Allegro should increase its take rate above 14%, from 11% in 2Q22. We find a 70bp increase sufficient to prevent its margins from further erosion due to delivery cost inflation, once the contract with InPost is repriced after 2 November. We see Allegro’s 2022E EV/EBITDA of 13.3x (21% below Amazon) as an attractive entry point. We base our 12-month PT 75%/25% on the average of our DCF analysis and Amazon’s multiples.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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