Out Of Home Delivery Shift Will Drive Long Term Locker Network Expansion

Catalysts

About InPost

InPost operates a leading out of home and to door e commerce logistics platform, centered on automated parcel machines and integrated last mile delivery across Europe.

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

• Rapid structural shift of e commerce volumes toward out of home delivery, supported by InPost’s nearly 90,000 points and market leading locker density in Poland, the Eurozone and the U.K., is cited as a factor that could sustain high volume growth and expand revenue relative to parcel market growth.
• Scaling international operations, with more than half of group revenue already outside Poland and volume expansion in the U.K. plus share gains in the Eurozone, increases the addressable base that can be used to leverage fixed costs and potentially lift group EBITDA and earnings.
• Growing consumer adoption of InPost’s mobile app, where active users order around 40 percent more parcels, deepens loyalty and increases order frequency, which in turn can drive higher like for like revenue per user and support resilient net margins.
• Ongoing conversion of PUDO volumes into higher efficiency lockers in France, Iberia, Italy and the U.K., together with automation and one network integration, is expected to reduce unit delivery costs and support EBITDA margin progression over time.
• Free cash flow generation in the Polish core operations, combined with leverage near 2 times EBITDA, is described as providing internal funding capacity for continued APM rollout and selective acquisitions, which may support ongoing revenue growth and earnings expansion.

Assumptions

This narrative explores a more optimistic perspective on InPost 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 InPost's revenue will grow by 24.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.6% today to 10.6% in 3 years time.
• The bullish analysts expect earnings to reach PLN 2.8 billion (and earnings per share of PLN 5.69) by about December 2028, up from PLN 894.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as PLN1.7 billion.
• 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 21.0x on those 2028 earnings, down from 24.2x today. This future PE is lower than the current PE for the NL Logistics industry at 22.3x.
• The bullish analysts expect the number of shares outstanding to grow by 0.88% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.67%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Execution risk around the Yodel one network integration in the U.K., including technical issues, underinvestment in automation and the need for ongoing manual resources, could prolong the phase of capping volumes and prioritizing quality over growth. This would weigh on U.K. segment EBITDA margins and delay the expected uplift in group earnings.
• The strategy of aggressive international APM rollout, high CapEx and reliance on Polish free cash flow to fund expansion, combined with rising lease liabilities and higher use of the revolving credit facility, could become harder to sustain if macro conditions soften or utilization falls. This would put pressure on free cash flow generation and increase net leverage, which could, in turn, limit future earnings growth.
• Intensifying competition and consolidation in core markets, such as DHL and local postal operators in Poland or large players like Amazon and IDS in the U.K., could erode pricing power or slow market share gains. This would constrain volume growth and top line expansion and may force price or service concessions that compress net margins.
• The business model depends heavily on continued consumer and merchant adoption of out of home lockers and the mobile app across multiple geographies. Any slowdown in e commerce growth, weaker uptake of APMs in newer markets or brand damage from service issues in the U.K. or Eurozone could weaken the flywheel effect and reduce like for like revenue growth, ultimately dampening EBITDA and earnings momentum.

Valuation

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

• The assumed bullish price target for InPost is €22.16, which represents up to two standard deviations above the consensus price target of €16.28. This valuation is based on what can be assumed as the expectations of InPost'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 €22.55, and the most bearish reporting a price target of just €12.09.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be PLN26.1 billion, earnings will come to PLN2.8 billion, and it would be trading on a PE ratio of 21.0x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of €10.26, the analyst price target of €22.16 is 53.7% 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.