Jumbo: discounter at a discount (stays BUY)

In light of the 2021 sales figure announcement and the recent EGM, we have finetuned our estimates for 2022-24E and reiterate our BUY rating on the stock, with a new 12M price target (PT) of EUR 18.5/share, offering 40% upside potential. Jumbo’s ability to weather the storm in 2021 indicates the group’s ability to defend its profitability against exposure to soaring freight rates, inflationary pressure and sharp increases in electricity costs, in our view. Nevertheless, we expect a lagged effect from the abovementioned challenges to weigh on the 2022-23E profitability, anticipating a gross profit margin decline of 170bps in 2022E, with a partial recovery in 2023E, which translates into a 4.1% EBITDA CAGR over 2021-24E. Despite the unfavourable cost environment, we believe the story remains undervalued, on the basis of its: 1) defensive sales performance; 2) strong balance sheet, with 2022E net cash/EBITDA 2.2x; 3) high free cash flow generation; and 4) supportive dividend distribution. On our numbers, the stock trades at 2022E 10.5x P/E and 4.8x EV/EBITDA, a double-digit discount on both multiples vs. its peers, as well as its five-year 1YF historic average.