Unknown Thesis 2023-nº18: Finland's Newlat Food
Finnish food company growing at 23% sales.
Today's unknown thesis revolves around a food company very similar to Newlat Food, one of our main portfolio positions.
It is a company with a capitalization of €35m, i.e. even smaller than Newlat (€180M), which has grown by 23% this year, and has an average growth strategy of 25% per year until 2026.
Unlike Newlat, where its business focus is on retail sales to large distributors, especially pasta, the Finnish company's core business is in healthy pre-cooked food distributed mainly to healthcare companies. A very stable niche with high tailwinds in Finland.
On a valuation level, it has been heavily pressured this year by rising commodity prices, and supply chain issues caused by the war in Ukraine. The stock traded at a P/E ratio of 20x and Ev/EBITDA of 14x. Multiples that we believe are appropriate for this type of business. Investors came to pay a P/E of 42x in 2020, and currently in 2023 we have it at less than P/E 23x and 10x Ev/EBITDA.
However, the interesting thing would come in 2026, and if they fulfill the plan they have given we estimate that its value should be 4x more than the current one, trading at current prices at 5.2x PER in 2027. In the thesis we will go into more detail on this point.
Ingredients of the investment idea 17th:
Very stable sector such as food, growing at 23% in 2022.
Target 2026 more than doubling turnover and expanding margins.
Targets would imply compound annual growth of 23% in sales and 4,227% in EPS.
Current margins compressed, with a high probability of expansion this year and by 2026.
CEO with 26% of the shares.
Without further ado, we leave you with the new unknown idea, we hope you like it and that it encourages you to continue investigating it.
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