|EUR mn (Calendar Year)||2018||2019||2020e||2021e||2022e|
|EBITDA reported (post IFRS 16)||232.2||259.2||200.0||231.5||272.8|
|Net profit – reported||159.2||177.6||134.2||156.6||186.1|
|EPS – adj.||1.17||1.31||0.99||1.15||1.37|
|Source: Company, Eurobank Equities Research|
A year to remember, (almost) as good as it gets – 2020 was indeed a year to remember (or to forget), with Jumbo having to navigate >4 months of lockdown in Greece, social distancing restrictions and supply chain challenges. The covid disruption was acute but Jumbo managed to contain the sales decline to just 18% in CY20, much better than we had initially feared. Tight cost monitoring, minimal rental costs during the shutdowns and a resilient gross margin in H2 are set to limit the yoy EBIT drop to <30% yoy on our estimates, quite resilient performance given the circumstances.
2021: reasons to be cheerful but uncertainties linger – 2021 is poised to be a bifurcated year. H1 will be weighed down by ongoing social distancing (we see sales densities c12-29% below “normal”) but the seasonally important H2 (c60% of annual sales) is primed for a strong rebound (sales densities at 2019 levels), assuming wide vaccine adoption that will allow gradual return to normalcy. On the cost side, the FX tailwind will mitigate the drag from higher freight rates, while self-help actions are likely to come from staff and advertising costs. Overall, our CY21 EBIT estimate stands c16% below its pre-COVID level while slightly exceeding 2019 levels in 2022.
Facing a reckoning – The COVID-induced lockdown helped validate the resilience of the product offering but also laid bare structural weaknesses such as the one- dimensional channel approach. This was evident during the 2nd lockdown in Greece, when Jumbo’s digital channel could not cope with an overwhelmingly high amount of orders or take advantage of the “click-away” format being offered to retailers during the Christmas holiday season. As a result, group top line run-rates deteriorated markedly in November (-35%) and particularly in the seasonally important December (-54%). In the long-run, although we believe that the wide assortment and the nature of the product offering render Jumbo relatively insulated from the e-commerce for the next few years, we posit that its competitive advantage will inevitably wane in a rapidly digitalizing world.
Valuation – Jumbo remains 30% below pre-COVID levels, lagging both its retail peers and Greek non-financials in recent months. The valuation has thus retreated to 6.5x EV/EBITDA, in sync with the 10-year average but >40% discount vs peers. That said, we believe that factors such as lower returns (due to high inventory and inefficient balance sheet), high dependence on the Chairman and suboptimal corporate governance are likely to keep the relative valuation gap rather wide, restraining our positivity on the stock. We have recalibrated our model to reflect the 2nd lockdown in Greece and somewhat more tepid trading in 2021 on continuing social distancing. Our PT (DCF-based at 9.4% WACC) effectively places Jumbo at 6.5x CY22e EV/EBITDA, c22% discount vs peers, in sync with the LT 2yr fwd discount.