Omnichannel And Luxury Contract Weakness Will Test Patience Before Longer Term Brand Strength Emerges

Catalysts

About Dexelance

Dexelance operates a portfolio of high end furniture, lighting and kitchen brands across residential, soft contract and luxury contract channels, with a growing omnichannel go to market unit.

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

• Although the omnichannel unit generated roughly €53 million of revenue in 9M 2025, integrating this online and project driven model across the wider group could be slower than planned. This may limit any uplift in group revenue and EBITDA margin.
• While the group is expanding its presence in North America and Japan through developers, real estate projects and flagship spaces, long project lead times and weaker order intake in luxury contracts could delay conversion of these efforts into sales and keep net margins subdued.
• Although brand relaunches and new stores in China, Japan, the U.S. and Europe support long term demand for premium design, ongoing weakness in China and softer residential retail in several regions may cap revenue growth and restrict operating leverage.
• While lighting and kitchen recorded 9M year on year growth of 2% and 7%, respectively, the continued drag from residential furniture, which is down almost 13%, risks offsetting these more resilient categories and weighing on consolidated earnings.
• Although management is acting on cost efficiency, including store closures and more selective fair participation, a higher net financial position of roughly €152 million without IFRS 16 and potential covenant waivers point to pressure from interest and balance sheet constraints, which could limit future earnings growth.

Assumptions

This narrative explores a more pessimistic perspective on Dexelance compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Dexelance's revenue will grow by 5.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 1.4% today to 3.6% in 3 years time.
• The bearish analysts expect earnings to reach €13.4 million (and earnings per share of €0.33) by about January 2029, up from €4.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 21.3x on those 2029 earnings, down from 24.8x today. This future PE is greater than the current PE for the IT Consumer Durables industry at 16.7x.
• The bearish analysts expect the number of shares outstanding to decline by 0.8% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 17.92%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Luxury contract activity is already seeing a sharp 30% year on year decline in Q3 and management expects another weak quarter plus a soft start to 2026. If luxury clients keep cancelling or downsizing store openings rather than resuming projects, revenue from one of Dexelance's higher ticket channels could remain under pressure and weigh on net margins.
• Residential furniture is down almost 13% over 9 months and soft contract is down around 10% organically. There is still broad weakness in China, parts of Central and Northern Europe and residential retail generally. If these end markets do not improve or if weak demand persists longer than management expects, group revenue and earnings could stay subdued.
• The net financial position without IFRS 16 has risen to about €152 million. The company is seeking covenant waivers and acquisitions plus higher working capital are consuming cash. If cash generation does not improve or if refinancing costs increase, interest expense and balance sheet constraints could limit future earnings and restrict net margin expansion.
• Growth initiatives rely heavily on long lead time projects with developers and luxury real estate, including North American and Japanese projects that are expected to contribute later. If these projects are delayed, scaled back or fail to repeat at the same pace, the expected uplift from omnichannel and project driven channels could be smaller, limiting revenue and EBITDA improvement.

Valuation

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

• The assumed bearish price target for Dexelance is €6.7, which represents up to two standard deviations below the consensus price target of €9.75. This valuation is based on what can be assumed as the expectations of Dexelance's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €12.8, and the most bearish reporting a price target of just €6.7.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be €370.1 million, earnings will come to €13.4 million, and it would be trading on a PE ratio of 21.3x, assuming you use a discount rate of 17.9%.
  
• Given the current share price of €3.98, the analyst price target of €6.7 is 40.6% 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.