APM Expansion And UK Service Launches Will Fuel Future Success

Key Takeaways

• Strategic expansion and new services aim to drive volume growth, operational efficiency, and increased revenue through enhanced network density and market capture.
  
• Focus on sustainability and ESG goals enhances reputation and customer loyalty, with potential revenue gains and improved margins from operational efficiencies.
  
• Aggressive expansion and high operational targets face risks from increased competition, regulatory challenges, and economic uncertainties, potentially straining margins and profitability.

Catalysts

Operates as an out-of-home e-commerce enablement platform providing parcel locker services in Europe.

• InPost is heavily investing in expanding its APM network, with plans to deploy over 14,000 additional APMs in key markets in 2025. This expansion is expected to drive volume growth, enhance operational efficiency, and improve revenue due to increased network density and coverage.
  
• The company is launching to-door delivery services in France and enhancing offerings in the U.K. to capture a larger share of the e-commerce market, which should contribute to revenue growth and potentially increase market share in these regions.
  
• InPost's strategic focus on B2C merchant acquisition and loyalty programs is expected to drive higher checkout conversions and increase parcel volumes, positively impacting future revenue growth and enhancing net margins through increased customer retention and engagement.
  
• The rollout of new digital services like InPost Pay and an integrated cross-border service, particularly in the U.K., aims to strengthen consumer and merchant relationships, which could result in higher revenue per parcel through added convenience and increased transaction efficiency.
  
• Continued focus on environmental sustainability and ESG goals, such as reducing CO2 emissions and improving ESG ratings, could enhance the brand's reputation and customer loyalty, potentially leading to increased revenue opportunities and better net margins from operational efficiencies.

InPost Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming InPost's revenue will grow by 17.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.4% today to 13.1% in 3 years time.
• Analysts expect earnings to reach PLN 2.3 billion (and earnings per share of PLN 4.66) by about April 2028, up from PLN 1.2 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting PLN2.8 billion in earnings, and the most bearish expecting PLN2.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.2x on those 2028 earnings, down from 22.7x today. This future PE is lower than the current PE for the NL Logistics industry at 22.7x.
• Analysts expect the number of shares outstanding to decline by 0.38% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.72%, as per the Simply Wall St company report.

InPost Future Earnings Per Share Growth

Risks

• The investment of over PLN 1.4 billion in capital expenditures and the increase of 37% year-on-year could create financial strain, impacting net margins and cash flow if revenue growth does not keep pace with increased expenses.
  
• The significant focus on expanding international operations, especially in markets like the UK and France, carries execution risks, including possible regulatory challenges and market-specific competition, which could negatively affect revenue and profit margins.
  
• The declining consumer sentiment in key markets like Poland, driven by geopolitical tensions and economic uncertainties, might lead to slower e-commerce growth, potentially damping InPost's volume growth and impacting revenue predictions.
  
• The competitive landscape, with companies like Allegro and DHL expanding their networks, might dilute InPost’s market share in Poland, leading to pressure on pricing and potentially reducing revenue and margins.
  
• The pressure to maintain high APM utilization and the associated high growth targets may lead to inefficiencies and increased operational costs, which could negatively affect net margins and overall profitability.

Valuation

• The analysts have a consensus price target of PLN18.662 for InPost based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of PLN21.94, and the most bearish reporting a price target of just PLN13.49.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be PLN17.6 billion, earnings will come to PLN2.3 billion, and it would be trading on a PE ratio of 20.2x, assuming you use a discount rate of 5.7%.
• Given the current share price of PLN13.26, the analyst price target of PLN18.66 is 28.9% 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.