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 Group AG.
The issuer is solely responsible for the content of this research. The result of this research does not constitute investment advice or an invitation to conclude certain stock exchange transactions.

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: [e-mail]
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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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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Die Westwing Aktie wird zum Zeitpunkt der Veröffentlichung der Nachricht mit einem Plus von +4,64 % und einem Kurs von 7,66EUR auf Tradegate (08. August 2024, 22:26 Uhr) gehandelt.

Rating: BUY
Analyst: