E Commerce Expansion And Margin Improvement Are Expected To Support Long Term Earnings Stability

Catalysts

About Duell Oyj

Duell Oyj is a Nordic based powersports and bicycle parts wholesaler that distributes a broad, multi category portfolio to more than 8,500 dealers across Europe.

What are the underlying business or industry changes driving this perspective?

• Continued expansion in larger Central European markets, combined with a more balanced 50 50 regional split, is expected to gradually reduce Nordic weather dependence and support steady top line growth and earnings stability.
• Rising consumer use of e commerce channels and Duell's investments in a new B2B online platform position the company to capture a structurally higher share of digital aftermarket demand, which could lift revenue scalability and gross margins over time.
• Ongoing SKU rationalization, warehouse consolidation in the Nordics and a focused performance uplift program are intended to improve inventory turnover and logistics efficiency, supporting better net working capital, lower leverage and stronger net margins.
• Deeper penetration of own and premium partner brands such as Halvarssons and Schuberth across the growing European dealer base should enhance pricing power and mix, which may improve gross margin and EBITA in a challenging market backdrop.
• Structurally resilient ATV and utility product demand, together with higher value ATV implements and professional special orders, provides less seasonal, higher ticket revenue streams that can smooth earnings and support margin expansion.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Duell Oyj's revenue will grow by 3.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.8% today to 0.1% in 3 years time.
• Analysts expect earnings to reach €150.0 thousand (and earnings per share of €0.03) by about December 2028, up from €-1.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €2.3 million in earnings, and the most bearish expecting €-2.0 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 173.0x on those 2028 earnings, up from -14.7x today. This future PE is greater than the current PE for the FI Retail Distributors industry at 10.6x.
• Analysts expect the number of shares outstanding to grow by 0.65% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.83%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Consumer sentiment across key markets remains fragile and management expects a suppressed demand environment for at least the next 12 months. If macro uncertainty and political instability in regions like France persist for longer than anticipated, Duell could face structurally weaker volumes that cap revenue growth and limit operating leverage in the long term, weighing on earnings.
• The business model depends heavily on third party brands and a broad portfolio, and France has already shown that sudden changes in distribution relationships and brand transitions can create revenue gaps that are not quickly backfilled. If similar disruptions occur in other large markets, Duell could see sustained sales volatility, weaker pricing power and structurally lower gross margins.
• Inventory levels remain elevated after a weak snow season and a delayed motorcycle season, and although SKUs have been reduced by over 20%, softer demand has absorbed most of the benefit. If Duell fails to materially improve inventory turnover and net working capital efficiency, high stock levels, discounting and storage costs could compress net margins and constrain free cash flow, limiting the ability to deleverage and support earnings growth.
• Leverage has risen to 3.3 times net debt to adjusted EBITA and required renegotiation of financing terms, in a context of rising customer bankruptcies and bad debts of around EUR 0.8 million. If profitability does not improve or interest costs stay elevated, Duell could face tighter financial covenants, higher funding costs and reduced strategic flexibility, all of which would pressure net income and equity value.
• The long term shift toward larger e commerce and multistore customers increases Duell's dependence on a smaller number of high volume buyers with greater bargaining power. If these customers use their scale to negotiate lower prices or more favorable terms, the structurally higher online mix that currently supports growth could instead erode gross margin rate and leave overall earnings growth below expectations.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €3.8 for Duell Oyj based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €138.3 million, earnings will come to €150.0 thousand, and it would be trading on a PE ratio of 173.0x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of €2.99, the analyst price target of €3.8 is 21.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.