WOOD Flash – Aquila Part Prod Com: 1Q24 headwinds on VAT, but confidence on margins

Following the release of the preliminary earnings, last week (1 March), Aquila has presented the key drivers behind the numbers. Most importantly, we saw continuing growth in the target segments, particularly the proximity channels (fuel station and convenience stores) and in HoReCa, with 4Q23 yoy revenues growth of 15% and 17%, respectively (for FY23, 16% and 15%, respectively). Aquila’s own brands grew by 27% yoy in 4Q23, to RON 23.9m (in FY23, +31%, to RON 88.4m), driven by volumes sales from the La Masa label in the last quarter. Together, these channels and products are key for sustaining the gross margins in the business at the current levels. Recent deals to increase its exposure to key channels – e.g., fuel stations (Romtech) and HoReCa (Parmafood) – should, in the mid-term, be accretive for margins (and the achieved synergies should add upside to our numbers), in our view. Trading at our 2024E EBITDA of 7.3x and a PER of 12x, the stock is at nearly a 30% discount vs. our peer medians (10x and 16.6x, respectively), which appears attractive, given the strong macro backdrop for Romanian consumption in the next few years. We are BUYers of the stock.