Research Paper- LABEL VIE H1 2020 Results

RESILIENT OPERATING ACHIEVEMENTS…, AS EXPECTED

An expected deceleration in activity …, after an exceptional Q1-20

The Q2-20 was marked by a deceleration in Label Vie’s revenue, i.e. +4.0% in comparison to +26,3% in Q1-20 (Cf. Label Vie: A double-digit growth over the medium term). This growth deceleration was expected due to the massive households storage in preparation for the lockdown period, starting from March 20th 2020.
In more details, the supermarket segment, which represents 38% of total revenue, experienced the strongest jump, i.e. +16%. The hypermarket and hyper cash grew by +4% and +3% respectively. At the opposite, the filling stations activity recorded a decline of -39% given the health crisis and population lockdown.
Thanks to a resilient Q2-20, Label Vie’s revenue in H1-20 recorded an increase of +15% to MAD 5,381 Mn, above our expectations of 12.3%.

Towards a double digit growth of the recurring profit in 2020E

Taking into account the mid-term achievements and the future dynamic of the Moroccan retail sector, we maintain our initial forecasts for the FY 2020E :

• An increase of +9.4% in revenue to settle at MAD 11,370 Mn with a scenario of 7 stores openings during this year;
• The EBITDA would jump by +6.6% in 2020 to MAD 842 Mn, i.e. an EBITDA margin of 7.4%;
• The recurring NIGS would rise by +15.0% to settle at MAD 359 Mn, excluding the contribution to the Covid-19 fund (MAD 50 Mn).

A stock offering an upside potential of 27%

Label Vie's H1-20 achievements confirm the resilience of its business model’s (Cf. Covid-19: Glimmers of Hope at the end of the tunnel). It is reassuring to note that the operator's growth in Q2-20 does not take into account the network extension effect in view of the Covid-19 crisis' repercussions on the real estate activities. Nevertheless, starting from Q4-20, Label Vie would return to a more sustained pace of store openings, thereby supporting its growth pace.
Following these elements, we maintain our recommendation of BUYING the stock with a target price of MAD 3,847, offering an upside potential of 27% (Cf. Book Afrique).

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