Among the top picks of Eurobank Equities is Jumbo – Target price at 33.40 euros

Eurobank Equities’ top picks include Jumbo’s share with a target price of 33.40 euros and a “buy” recommendation.

According to analysts, Jumbo posted EBIT growth of 20% in 2023 on the back of 14% higher sales, resilient gross margins (-15 bp y-o-y, though more than 3 percentage points higher than 2019 levels ) and the opex savings (opex just +6% on an annual basis).

Jumbo increased its net profit by a whopping 22%, beating the +20% built into analysts’ estimates a year ago. Management proposed another generous dividend of €1 following the €0.6 paid in March, adding a yield of up to 6% through July. 2024 guidance (8-10% growth) appears to be supported by the current environment despite challenges on the supply side and volume-driven revenue.

Furthermore, even though the Jumbo’s stock has somewhat narrowed the valuation gap compared to other retail companies, the valuation remains highly attractive not only on a relative basis (with the stock trading at a 20-30% discount to best-in-class peers) but also on an absolute basis discounting a rather pessimistic setup. Indicatively, at the current price the shares incorporate value destruction going forward, as current EV appears to be lower than the value derived from current operating earnings, incorporating <2.5% incremental ROIC over the long term. With the risk-reward trending positively, analysts keep Jumbo in their top picks in Greece.

“While shareholder remuneration policy is somewhat volatile, in our view a clear trend has emerged, namely that management appears to be more willing to direct capital growth towards shareholder returns during periods when expansion opportunities are rare or do not meet the internal barriers,” reports Eurobank Equities.