WOOD Flash - Aquila Part Prod Com: trading margin for market share in traditional trade

Last week (13 November) Aquila Part Prod Com (Aquila) reported its 3Q25 results, with a net profit of just RON 4.4m and EBITDA of RON 39.5m (-15% yoy), or an EBITDA margin of 4.4% (161bp below the 3Q24 level and 141bp below 1H25). This was a negative surprise as, in August, the company had guided for an EBITDA margin >6% in 2H25E. During the earnings conference call on 14 November, management noted that the 3Q25 gross margin came under pressure due to price adjustments, especially in the Traditional trade channel, due to a new and expanded product portfolio, and new suppliers. The comes in the face of volume pressure in the FMCG space, due to VAT hikes implemented in Romania from 1 August, and thus the need to take market share and build customer loyalty with the new brands. In 4Q25E, the company expects a partial recovery of gross margins, supported by optimisation of sales and logistics costs, and before a return to previous levels in 2026E.
While there was a negative surprise, we understand that the mid-course correction was warranted, once the full impact of higher VAT became apparent. We note that, among the channels, the 3Q25 sales growth in the Traditional trade was the most robust, at +29% yoy (vs. +16% yoy for distribution as a whole). As expected, opex began to normalise in 3Q25 (+21% yoy vs. +23% in 1H25) as the pace of the salesforce expansion slowed. The next two quarters should see robust sales growth, without the need for additional costs. This points to strong base for 2026E earnings. At this juncture, however, with the stock trading on a 2025E EV/EBITDA of 12.7x vs. 8.9x for its peers, the scope for near term stock price appreciation (already +23% ytd) is limited, in our view.