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Original-Research: Westwing Group SE - from NuWays AG

28.03.2025 / 09:00 CET/CEST
Dissemination of a Research, transmitted by EQS News - a service of EQS
Group.
The issuer is solely responsible for the content of this research. The
result of this research does not constitute investment advice or an
invitation to conclude certain stock exchange transactions.

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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 EUR 134m (eNuW: EUR 133m) driven by a mix of a
surging average basket size (+24% yoy to EUR 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 EUR 55m Q4 sales).
On the other hand, DACH remained strong, having grown sales by 7% yoy to EUR
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 EUR 10.6m (+35% yoy in FY'24 to EUR 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 EUR
18.00 (old: EUR 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 (EUR 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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Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss
bestimmter Börsengeschäfte.
Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben
analysierten Unternehmen befinden sich in der vollständigen Analyse.
++++++++++

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2108012 28.03.2025 CET/CEST

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