Original-Research: Westwing Group SE (von NuWays AG)

Classification of NuWays AG to Westwing Group SE

Company Name :	Westwing Group SE
ISIN:	DE000A2N4H07
Reason for the research:	Update
Recommendation:	Buy
from:	08.11.2024
Target price:	EUR 17.50
Target price on sight of:	12 months
Last rating change:
Analyst:	Henry Wendisch

Q3 review: benefitting change in mix; chg. est.

Topic: Westwing released solid Q3 results yesterday, which were slightly above our sales estimates, but in line at adj. EBITDA. Overall, the product and cost mix both showed improvements, positioning WEW well for the important Q4 ahead and beyond. In detail:

Q3 sales increased by 3% yoy to € 96m (eNuW: € 90m), driven by growth in active customers (+1% yoy to 1.28m) and a surging basket size (+16% yoy to € 206), which offset the trend of declining number of orders (-13% yoy). DACH grew 4%, implying continued market share gains amid ongoing challenges in the German online Home & Living market (-5% yoy in DACH; +9pp outperformance), whereas International (+2% yoy) was burdened by the switch in product assortment in the short-term.

Adj. EBITDA grew by 46% yoy to € 4m (eNuW: € 4.1m; 9M: € 13.7m, +15% yoy), thanks to an improved cost mix. Next to a rising gross margin (+0.7pp, thanks to the ongoing rise of the Westwing collection share by 10pp to 58%), the larger lever was a decrease in the fulfilment cost ratio by 2.7pp. In return, WEW spent 20% yoy more in brand marketing (especially in DACH), to prepare for the seasonally important Q4. Within the segments, DACH's adj. EBITDA of € 1.3m (2.4% margin) was burdened by the aforementioned marketing campaign, whereas International expanded EBITDA to € 2.4m (5.2% margin), mainly driven by the strong increase of the Westwing collection share.

FCF came in at € -6m in Q3 and was burdened by the seasonal inventory ramp up (€ +6m qoq WC effect in Q3). Per 9M, FCF thus stood at € -9m, containing already some € 5m of the € 10-12m one-off cash effective SaaS tech-platform restructuring. As management guides for FCF break even in FY'24e, this implies a positive FCF of € 9m (eNuW: € 10m; € 14-16m FCF excl. one-offs), on the back of positive WC reversals, but also due to a better cost mix.

The fact that WEW was able to show growth despite an ongoing market decline, ultimately increasing market share, while also turning to a leaner cost base, shows that management is on track to prepare the company for disproportionate growth and operating leverage should consumer sentiment pick up again. Moreover, the more than healthy balance sheet (net cash explains 45% of market cap) provides the basis for further country expansions. Therefore, we reiterate our BUY recommendation with an unchanged PT of € 17.50, based on DCF. - analyst change -

You can download the research here: http://www.more-ir.de/d/31235.pdf
For additional information visit our website: www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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