New Stores And Namron Developments Will Strengthen Future Market Position

Key Takeaways

• Strategic moves towards higher-margin B2C sales and operational efficiencies are expected to enhance net and gross margins.
  
• Positive developments in new locations and targeted campaigns suggest potential revenue growth in domestic and Swedish markets.
  
• Challenging solar market and cost pressures threaten revenue and profitability, while the Elbutik acquisition struggles to meet targets and B2B market remains tough.

Catalysts

Sells electrical installation products to private and professional customers in Norway.

• The opening of new stores, like those in Bergen and Skøyen, is expected to enhance market presence and increase overall revenue as these locations mature and attract more customers.
  
• An increase in the proportion of sales from higher-margin B2C revenue, as evidenced by the strategic shift towards B2C from B2B, is likely to improve net margins.
  
• The company’s effective pricing strategies and cost control measures, alongside ongoing product development for Namron electro materials and heating products, suggest potential growth in earnings through improved gross margins and operational efficiencies.
  
• The positive consumer response to campaigns and targeted product offerings in Sweden indicate potential for continued revenue growth in this market.
  
• The anticipated recovery in the solar market and the strategic reduction of solar inventory could position the company for future revenue growth once the market stabilizes, despite the current write-down.

Elektroimportøren Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Elektroimportøren's revenue will grow by 6.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.5% today to 4.2% in 3 years time.
• Analysts expect earnings to reach NOK 81.8 million (and earnings per share of NOK 1.56) by about January 2028, up from NOK 24.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.5x on those 2028 earnings, down from 27.1x today. This future PE is lower than the current PE for the NO Specialty Retail industry at 22.3x.
• Analysts expect the number of shares outstanding to grow by 1.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.82%, as per the Simply Wall St company report.

Elektroimportøren Future Earnings Per Share Growth

Risks

• The solar market is described as very challenging with an 80% drop in orders this quarter compared to last year, which could negatively impact revenue and contribute to inventory write-downs.
  
• The company has released a NOK 44 million earn-out related to the Elbutik acquisition, indicating potential difficulties in meeting financial targets, potentially affecting future net profits.
  
• The report mentions a tougher market and price pressure in the B2B segment, which might continue for several quarters and may negatively influence revenue growth and margins.
  
• Exchange rates and freight costs are placing pressure on margins, which could lead to reduced profitability if not managed effectively.
  
• Like-for-like sales are down by 1.1% year over year, and although absolute sales figures show growth, this decline suggests potential stagnation in revenue from existing stores.

Valuation

• The analysts have a consensus price target of NOK15.25 for Elektroimportøren based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be NOK1.9 billion, earnings will come to NOK81.8 million, and it would be trading on a PE ratio of 12.5x, assuming you use a discount rate of 8.8%.
• Given the current share price of NOK12.9, the analyst's price target of NOK15.25 is 15.4% 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.