Puuilo Q1'24 preview: Overperformance continues in the market

Translation: Original comment published in Finnish on 06/10/2024 at 7:33 am EEST

Puuilo will publish its Q1 result on Wednesday June 12th at around 8:30 am EEST. We forecast that revenue has grown clearly from the comparison period as a result of the larger store network and the conversion of two Hurrikaani stores. We do not expect significant changes in the cost structure, which means that revenue growth will flow effectively to the earnings lines. The guidance is likely to be repeated at this stage of the year, and the main interest in the report is comments on the market environment and competitive situation.

Solid growth continues

We forecast Puuilo's revenue to increase by 10% to 72 MEUR (consensus 75 MEUR). Growth in a challenging market comes from the opening of new stores during the financial year 2023 and the conversion of stores after the Hurrikaani business acquisition (Q1 two stores and Q2 one store). The growth in size may be negatively affected by Finland’s delayed spring, as some of Puuilo’s Q1 sales are directed to, e.g., yard and garden product groups. However, in the big picture, Q1 is the smallest quarter, so temporary seasonality does not significantly affect the accumulation of the full financial year.

Q1 is seasonally the smallest quarter

We forecast EBITA profitability to be 8.1 MEUR (consensus ~8.4 MEUR) representing 11.3% of revenue. We expect Puuilo's relative gross margin to be at the level of the comparison period, meaning that the around 10% EBITA growth we expect is generated through a fatter topline. In other words, we expect the relative cost structure to remain roughly unchanged compared to the comparison period. Q1 only accounts for good 10% of the company’s financial year result, so the potential negative impact of the late spring does not materially affect the company’s earnings potential. In the bottom lines of the income statement, net financial costs are raised by the increased interest component of IFRS16 entries due to the expanded store network but this effect is softened by the decreasing financial debt costs as a result of the reduced debt. Therefore, we expect Puuilo to report an EPS of EUR 0.07 (consensus EUR 0.07).

Guidance will probably be repeated

We expect Puuilo to reaffirm its guidance of 380-410 MEUR for revenue and 60-70 MEUR for EBIT. Our forecasts that were revised in connection with the strategy update are in the middle of the guidance range or slightly below it. The main interest in the report is the management’s comments on the market environment in the past quarter and the outlook, as Puuilo’s target market was quite soft in Q4.