elumeo SE
Original-Research: elumeo SE (von NuWays AG): Halten

Original-Research: elumeo SE – from NuWays AG

Classification of NuWays AG to elumeo SE

Company Name: elumeo SE
ISIN: DE000A11Q059

Reason for the research: Update
Recommendation: Halten
from: 06.05.2024
Target price: EUR 2.70
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Mark Schüssler

Mixed Q4 // Weaker-than-expected guidance; est. & PT chg.

elumeo published mixed Q4’23 that continue to be affected by a lingering
macroeconomic slowdown.
Here are our key takeaways:

The company’s FY sales were slightly better than feared, but still burdened
by muted consumer sentiment in the eurozone. Sales for FY came in flat at €
45.4m (-1% yoy; eNuW: € 44.7m), bolstered by increased spending in S&M and
healthy return to customer growth (+9.3% yoy to 83k). While, the company
saw another sharp decline in its average sales price, which declined to €
73 (-10% yoy) as customers postponed big ticket item purchases, items sold
partially offset this downward movement and recovered to 623k (+10% yoy).

Having said that, the company’s EBIT declined sharply and came in negative
at € -2.9m or -6.3% of sales (-3.2ppts; eNuW: € -1.2m). According to
management, operating losses worsened as a result of increased investments
in TV web sales channels and inflation-related decline in the gross profit
margin. We note that the decline in the gross profit margin is concerning
as it also suggests limited pricing power and increasing competition and
have adjusted our estimates for FY24e and beyond accordingly. During the
earnings call, management addressed ongoing margin issues by introducing a
more restrictive return policy, increasing airtime for higher-margin
products and utilizing AI in customer support. In our view, margin
improvements will likely come at the cost of lower top-line growth,
reflected in our slashed sales estimates.

As flagged in our last update, while jooli demonstrates a positive
development, we currently do not expect any material top or bottom line
contributions from in the foreseeable future. The company’s video-shopping
platform exhibited a GMV of c. € 4,558 (eNuW: € 16,110) in March 2024, with
the number of orders totalling 1,353. Moreover, management set the take
rate (referral fee) at 7.50% of GMV. In our view, the slower-than-expected
growth of jooli makes substantial revenue and margin contributions unlikely
during the foreseeable future.

The company’s long-term outlook is mixed, reflected in its issued FY24
guidance. While sales are expected to grow 4-8% yoy (eNuW: 4.2%), the gross
margin is seen to come in at 49-51% (eNuW new: 50.5%; eNuW old: 54%), thus
significantly below our expectations. Long-term, we see elumeo growing its
sales moderately by 4.6% p.a. to € 54.3m due to (1) favorable performance
in the company’s webshop (2) the continued and promising development of an
interactive mobile jewellery shopping app and (3) AI translated automated
shopping shows which should likely boost video shopping content globally.
However, we note that this growth likely comes at the expenses of
lower-than-expected EBIT profitability due to continued inflationary
pressures and the need for continued investments in marketing.

Considering the above-mentioned challenges the company is beset with, we
adjust our rating to HOLD
under the present circumstances with a new PT of € 2.70 (old: € 5.00) based
on DCF.

You can download the research here:
http://www.more-ir.de/d/29595.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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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.
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