Pan-European APM Deployment Will Boost E-commerce Position

Key Takeaways

• InPost's expansion of APM deployment across Europe meets rising out-of-home delivery demand, potentially driving revenue growth.
  
• Operational improvements and cost optimizations in international markets enhance net margins, suggesting increased profitability.
  
• Intensifying competition and economic uncertainties could pressure InPost's revenue and profitability, while expansion efforts may strain financial resources without matching growth.

Catalysts

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

• InPost's strategic goal to expand their Pan-European network, with a significant focus on accelerated APM deployment, is likely to drive revenue growth as it addresses the increasing demand for out-of-home delivery solutions across their European markets, including the U.K. and France.
  
• The increase in profitability and adjusted EBITDA margin improvement, especially in international markets, is attributed to a positive mix effect, cost optimizations in logistics, and operational improvements which suggest a potential uplift in net margins going forward.
  
• Growing international parcel volumes, particularly through the expansion of B2C offerings, is gaining traction, indicating potential future revenue growth and scale efficiencies that can enhance earnings.
  
• Investments in mobile app downloads and user engagement internationally, where app users place more orders, could drive additional volume over time, likely boosting InPost's revenue and earnings as user adoption continues to grow.
  
• The ongoing entry into international markets and the development of cross-border delivery services could further drive revenue growth opportunities, positioning InPost to capitalize on growing e-commerce demand across Europe.

InPost Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming InPost's revenue will grow by 20.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.8% today to 17.6% in 3 years time.
• Analysts expect earnings to reach PLN 3.1 billion (and earnings per share of PLN 6.25) by about February 2028, up from PLN 1.0 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.5x on those 2028 earnings, down from 33.7x today. This future PE is lower than the current PE for the NL Logistics industry at 31.3x.
• Analysts expect the number of shares outstanding to grow by 0.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.12%, as per the Simply Wall St company report.

InPost Future Earnings Per Share Growth

Risks

• The slowing market trends as seen with international market trends, which are slightly lower than expected, could impact anticipated revenue and volume growth, particularly in key international markets such as France and Italy.
  
• The geopolitical situation and broader economic uncertainties, which have been mentioned as factors keeping the outlook cautious, might influence overall earnings negatively if they result in reduced consumer spending or disrupted operations.
  
• Increasing wage inflation in Poland, noted to be higher than general inflation, could squeeze net margins if InPost cannot fully pass on these costs to customers through pricing strategies.
  
• The significant deployment of APMs and network expansion, while crucial for growth, may increase capital expenditures and impact free cash flow and financial flexibility if not adequately matched by revenue growth and volume utilization.
  
• Intensifying competition, especially in Poland and potential new entrants in other markets, could put pressure on pricing and market share, affecting both revenues and profitability.

Valuation

• The analysts have a consensus price target of PLN19.675 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 PLN23.38, and the most bearish reporting a price target of just PLN8.32.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be PLN17.7 billion, earnings will come to PLN3.1 billion, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 5.1%.
  
• Given the current share price of PLN16.1, the analyst price target of PLN19.67 is 18.2% 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.