NuWays AG: Westwing Group SE | Rating: BUY

Classification of NuWays AG to Westwing Group SE

Company Name:	Westwing Group SE
ISIN:	DE000A2N4H07
Reason for the research:	Update
Recommendation:	BUY
from:	28.03.2025
Target price:	EUR 18.00
Target price on sight of:	12 months
Last rating change:
Analyst:	Henry Wendisch

Q4 review: Profitabilty gains + return to growth in FY’26e; PT up

WEW released solid FY’24 results achieving the guidance at the top-end and provided a FY’25 guidance with a flat top-line but margin improvements and a prospective return to growth in FY’26. In detail:

Q4 sales grew by 2% yoy to € 134m (eNuW: € 133m) driven by a mix of a surging average basket size (+24% yoy to € 195) but also burdened by slightly declining active customers (-3% yoy to 1.24m) and less orders (-16% yoy). This is the direct result of shifting the product assortment to a more global and premium mix, which results in the phasing out of certain customer groups, especially in the International segment (-3% yoy to € 55m Q4 sales). On the other hand, DACH remained strong, having grown sales by 7% yoy to € 79m (+ 6.6% in FY’24), thus outperforming the German online Home & Living market (+1.2% yoy in FY’24).

Improving profitability. The product assortment shift towards premium comes with higher gross margins (+1.4pp yoy in Q4; +1.1pp yoy in FY’24), both on third party and private label products (58% private label share, +1.1pp yoy). Furthermore, the more global assortment allows for fulfillment efficiency gains, visible in a declining fulfillment expense ratio (Q4: -2.2pp yoy; FY’24: -1.9pp yoy). All this led to a substantial increase in profitability with contribution profit up 15% yoy in Q4 (+14% yoy in FY’24) and adj. EBITDA expanding by 80% yoy to € 10.6m (+35% yoy in FY’24 to € 24m) with a 7.9% margin (5.4% in FY’24), thus achieving the top-end of the guidance. - see p. 2 for details

FY’25e guidance reflects strategic measures. The ongoing shift in product assortment (i.e. phase out of lower margin products and thus lower margin customers with the simultaneous addition of higher margin products) comes on top of a still muted consumer sentiment. Consequently, WEW guides for sales growth of -4% to +2% yoy but an adj. EBITDA margin expansion to 6-8% (FY’24: 5.4%), which is slightly below our old sales estimate, but way ahead of our old adj. EBITDA estimate.

FY’26 outlook sees return to profitable growth thanks to country expansions. Following recent country expansions to Denmark and Luxembourg in Q1’25, WEW plans to expand to 5-10 countries in FY’25 and more European countries in FY’26e. In the mid-term, all European countries should be covered by Westwing. This, coupled with a bottoming-out effect of the product assortment shift and an at least flat consumer sentiment, should show full-year effects starting in FY’26e. Therefore, sales could grow by “upper single to double-digit-%” rates in FY’26e, all the while margins should continue to improve thanks to the measures described above.

Against this backdrop, we raise our profitability estimates given better than expected margin visibility and therefore increase our DCF-based PT to € 18.00 (old: € 17.00).

Trading at only 3.9x FY’25e EV/EBITDA (2.5x FY’26e) and 18% FCFY’25e (28% FY’26e), shares seem extremely undervalued, in our view. The market seems to focus too much on top-line development and too little on the visible margin improvement. Therefore, the stock should experience a re-rating, once top-line growth returns as early as FY’26e (and then coupled with further margin improvements). Therefore, we recommend to BUY at the still muted and downside protected levels (€ 64m net cash, 26% of market cap).

You can download the research here: http://www.more-ir.de/d/32076.pdf
For additional information visit our website: https://www.nuways-ag.com/research-feed

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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