Original-Research: Westwing Group SE (von NuWays AG): BUY

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Original-Research: Westwing Group SE - from NuWays AG

09.08.2024 / 09:01 CET/CEST

Dissemination of a Research, transmitted by EQS News - a service of EQS

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Classification of NuWays AG to Westwing Group SE

Company Name: Westwing Group SE

ISIN: DE000A2N4H07

Reason for the research: Update

Recommendation: BUY

from: 09.08.2024

Target price: EUR 17.50

Last rating change:

Analyst: Mark Schüssler

Solid Q2'24 results // FY'24 guidance confirmed; chg.

Westwing released solid Q2 results and was able to continue the trend of yoy

GMV growth witnessed in the recent quarters (+5% yoy to EUR 114m in Q2). Q2

sales were slightly higher than expected and increased by 4.1% yoy to EUR 106m

(eNuW: EUR 104m), driven by healthy growth in active customers (+2% yoy to

1.28m) and a surging basket size (+11% yoy to EUR 198). DACH grew 4.5%, while

International remained flat yoy, implying continued market share gains amid

a flat German online Home & Living market yoy.

At the same time, adj. EBITDA was below estimates at EUR 3.9m in Q2 (eNuW: EUR

5.7m), representing a margin of 3.7% (-0.7ppts yoy), as a result of elevated

investments in brand awareness, which - although flagged in our last update

- came in higher than expected. Having said that, Westwing's higher

marketing ratio should be regarded as a net positive since it allows the

company to increase share of mind with the consumer which eventually can be

translated into a higher share of customer wallet once the macroeconomic

picture improves.

Nonetheless, Westwing demonstrated a contribution margin expansion of

+1.8ppts yoy to 30.6%, thanks to a favorable product mix (i.e. significantly

higher private label share, +7ppts yoy to 53% of GMV in Q2), and reduced

fulfilment expenses (-1.4ppts yoy) as a result of cost savings through

consolidation in logistics. Working capital increased by EUR 7.7m but was once

again negative at EUR -11m (Q1: EUR -19m) due to payment-related timing effects

in Q1 as well as the seasonal build-up of inventory, leading to Q2 FCF of EUR

-7.3m (Q2'23 FCF: EUR 0.2m).

The company confirmed its FY24 guidance with sales growth seen at 3% to 4%

yoy to EUR 415-445m (eNuW new: EUR 435; eNuW old: EUR 442m). Management continues

to expect H2'24 sales to be weighed down by complexity reductions and

strategic adjustments of the product offering in Spain and Italy (now

completed) as well as Czech Republic, Poland, and Slovakia (to be

implemented in H2), and the ongoing challenges in the general home & living

market.

The adj. EBITDA outlook was reiterated at EUR 14m to EUR 24m, implying a 3-6%

margin (eNuW new: EUR 18.5m; eNuW old: EUR 23.7m). Considering EUR 10.2m adj.

EBITDA in H1, the bottom-line guidance looks achievable, in our view, while

FCF for the full year should likely be close to break-even (eNuW: EUR 0.3m)

due to one-off restructuring costs (i.e. complexity reduction, SaaS

transition) and normalizing inventory patterns.

All in all, the company impresses with (1) a clear vision and action plan

for reviving and continuing its growth story, (2) management's longterm

focus over short-term considerations, and (3) its cost-conscious and

sensible capital allocation to the benefit of the brand. Considering the

currently very undemanding valuation, we continue to like the stock and

reiterate our BUY rating with a changed PT of EUR 17.50 (old: EUR 18.00), based

on DCF.

You can download the research here: http://www.more-ir.de/d/30413.pdf

For additional information visit our website: www.nuways-ag.com/research

Contact for questions:

NuWays AG - Equity Research

Web: www.nuways-ag.com

Email: research@nuways-ag.com

LinkedIn: https://www.linkedin.com/company/nuwaysag

Adresse: Mittelweg 16-17, 20148 Hamburg, Germany

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Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss

bestimmter Börsengeschäfte.

Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben

analysierten Unternehmen befinden sich in der vollständigen Analyse.

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1964457 09.08.2024 CET/CEST

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