Luxury Contract Partnerships And Omnichannel Expansion Will Drive A Stronger Future Trajectory

Catalysts

About Dexelance

Dexelance designs, manufactures and distributes high end furniture, lighting and bespoke contract solutions across global luxury and residential markets.

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

• Expansion of omnichannel and design project capabilities through the newly consolidated business area, including a proprietary e commerce platform and directly operated stores, is expected to structurally lift group revenue growth and improve earnings quality as a higher share of sales comes from controlled channels and repeat project clients.
• Growing partnerships with global luxury real estate developers and hospitality projects in key cities such as New York, Paris, Athens and other premium destinations should deepen Dexelance positioning in high ticket, repeatable contract work, supporting sustained revenue growth and progressively higher net margins as start up costs are absorbed.
• Brand relaunches and store rollouts in strategically important markets like China, Japan and North America, combined with stronger local commercial teams, position Dexelance to capture future demand when luxury and residential spending normalizes, driving an inflection in organic revenue and operating leverage on fixed costs.
• Shift toward higher growth product categories such as lighting, kitchens and outdoor solutions, which are already showing positive growth despite a weak cycle, should increase mix towards structurally higher margin businesses, supporting group EBITDA margin expansion and stronger earnings resilience.
• Completion of the current investment cycle in people, marketing and industrial capacity, together with targeted cost rationalization in underperforming stores and events, is expected to convert existing scale into margin recovery, supporting a step up in EBITDA and net income as revenue stabilizes around and above current levels.

Assumptions

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

• The bullish analysts are assuming Dexelance's revenue will grow by 10.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 1.4% today to 4.0% in 3 years time.
• The bullish analysts expect earnings to reach €16.9 million (and earnings per share of €0.99) by about December 2028, 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 bullish analyst cohort, the company would need to trade at a PE ratio of 32.2x on those 2028 earnings, down from 34.8x today. This future PE is greater than the current PE for the IT Consumer Durables industry at 16.3x.
• The bullish 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?

• A prolonged luxury market slowdown combined with clients canceling or structurally reducing store opening plans could keep luxury contract sales stuck around EUR 70 million beyond 2026, limiting pricing power and scale benefits, which would cap revenue growth and constrain EBITDA margin expansion, ultimately weighing on earnings.
• High customer concentration in luxury contracts, where one key client has already cut around EUR 20 million of orders, increases the risk that any further downsizing or strategic shift by major partners will not be fully offset by new customers. This could depress utilization of fixed cost structures and pressure net margins and earnings.
• Weakness in residential furniture, which is already down roughly 13% year-on-year and exposed to soft contract and fragile retail demand in core regions like China and parts of Europe, could represent a more persistent structural drag than expected. This would limit the ability of higher growth categories such as lighting and kitchens to offset declines and thereby constrain group revenue and EBITDA margin recovery.
• Elevated leverage from acquisitions and working capital, with net bank debt rising to around EUR 152 million and covenant waivers required, leaves the company vulnerable if EBITDA does not rebound as planned or if luxury and residential markets deteriorate further. This could force deeper cost cuts or reduced strategic investment and negatively affect net income.
• The strategy of heavy upfront spending on brand relaunches, flagship stores, fairs and real estate partnerships may deliver slower or weaker payback than anticipated in a muted macro and luxury environment, particularly if planned store closures and marketing fine tuning fail to fully offset these costs. This could delay operating leverage and limit improvement in EBITDA margin and earnings.

Valuation

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

• The assumed bullish price target for Dexelance is €12.8, which represents up to two standard deviations above the consensus price target of €9.17. 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 bullish 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 bullish analyst cohort, you'd need to believe that by 2028, revenues will be €420.6 million, earnings will come to €16.9 million, and it would be trading on a PE ratio of 32.2x, assuming you use a discount rate of 17.9%.
  
• Given the current share price of €5.58, the analyst price target of €12.8 is 56.4% 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.