Tokmanni: Positive surprise with Q2 sales – Evli Research

Q2 sales increased by 19.1% y/y

Tokmanni published its Q2 sales beforehand (Q2 result will be published on 29th of July) as its April-June sales increased by 19.1% y/y (EUR 286m). The exceptional jump in sales came as a surprise as the company withdrew its guidance in March, due to the coronavirus situation and the consensus expectation indicated decrease in sales. According to the company, the customer numbers decreased towards the end of March but have since recovered. LFL growth was 17.4% y/y and online sales accounted for 1.4% of sales. Our previous Q2E sales expectation was EUR 191m. Tokmanni expects comparable gross margin in Q2E to decrease by ~1ppt y/y, resulting from the active measures to increase sales and the structure of sales.

Restrictions impacting positively on consumer behavior

Due to the movement restrictions caused by the COVID-19, Finns have spent more time at home and at their summer cottages and domestic tourism has become more popular. Therefore, the demand of leisure, gardening and home improvement products has strongly increased. Also, the demand of food products has been strong during Q2. On the other hand, clothing sales decreased y/y. We don’t expect a significant increase in customer numbers during the quarter but rather in the average basket size. We expect that Tokmanni’s cost base has remained stable despite of the increase in sales, resulting in improved profitability. We expect Q2’20E adj. gross margin of 34.1% and adj. EBIT of EUR 30.9m.

“BUY” with TP or EUR 16.4 (13.5)

As result of the latest information, we return back to our view prior the COVID-19 and expect Tokmanni to reach sales of over EUR 1bn in 20E. We expect 20E sales of EUR 1026m and adj. EBIT of EUR 90m. As the significant increase in Q2’20 revenue was exceptional, we expect normalized sales during H2’20E and sales to remain in the same level also in 21E. Our view of Tokmanni’s 21E-22E hasn’t changed. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 13.0x and 13.1x, which translates into 25-31% discount compared to the international discount peers. We keep our rating “BUY” with TP of EUR 16.4 (13.5).