Pilulka Lekarny: blowing with the e-commerce wind (HOLD - initiation of coverage)
We initiate coverage of Pilulka Lekarny (Pilulka), with a HOLD rating and a 12M price target (PT) of CZK 1,120/share, implying 6.6% upside. Pilulka is an e-pharmacy company, operating in Czechia, Slovakia, and Romania. The online channel is limited to consumer healthcare (CHC) and personal care products, with prescription (Rx) sales made via its smaller bricks & mortar retail footprint. Pilulka benefited greatly from the pandemic(2019-21 revenues CAGR of 39%), but we anticipate a slowdown in top-line growth to 17% yoy for 2022E, in line with the revised management guidance, due to the deceleration of the local e-commerce market. The online segment should still benefit from rising e-commerce penetration in the medium-to-long term: our sales CAGRs of 17.8% (2021-25E) and 14.2% (2025-29E) reflect the normalised mid-teens growth expectations of the online retail market. While we appreciate Pilulka’s long-term potential, at this juncture we rate it a HOLD, as it is clear that growth should decelerate sharply, and we are sceptical about its ability to exceed expectations in the current climate. It trades on a par with DACH-based e-pharmacy peers Zur Rose and Shop Apotheke (on 2022-24E EV/sales), but lacks the trigger of online Rx in Germany in the near future.
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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