Allegro: Still a market leader, with ambitions for more (upgraded to BUY)
We have upgraded our recommendation for Allegro to BUY, from Hold, with a lower price target (PT) of PLN 47.8/share (from PLN 93.0 before). The c.PLN 51/share drop in our DCF PT is driven by: i) a PLN 22/share impact from interest rates expansion (higher COE); ii) PLN 24/share in forecast changes (8-15% cuts to EBITDA and doubled capex); and iii) a PLN 4/share dilution from the Mall.cz acquisition. In line with our expectations, the pandemic encouraged an e-commerce market expansion that has proven sustainable, and Allegro has strengthened its position, despite the aggressive entry of Amazon and Shopee. In defending and leveraging its position, however, Allegro has begun to evolve from a very efficient, asset-light 3P marketplace towards a more capex intensive, less profitable ecosystem. This triggers our ROIC estimates cut by up to 4ppts. With its business model more aligned towards Amazon’s, we see Allegro’s 2022E P/E of 36x and EV/EBITDA of 17x (27% and 24% below its closest peer) as an attractive entry point. We base our 12-month PT on the average of our DCF 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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