BKGR has recently revised its stance on Label Vie, recommending investors accumulate the stock with a target price of 4,873 Dh, representing a 13% potential increase from the July 11, 2024, price.
Ambitious development plan
This optimistic recommendation stems from Label Vie’s accelerated development plan, which aims to significantly boost consolidated revenues to 27.9 billion dirhams by 2028, up from 13.7 billion dirhams. The growth is expected to be driven mainly by the ATACADAO (41%), CRF HYPER (17%), CRF MARKET (26%), SUPECO (7%), and CRF EXPRESS (9%) brands.
Improving profitability and reducing debt
Alongside this revenue growth, Label Vie forecasts an improvement in EBITDA to 2.6 billion dirhams by 2028, with an EBITDA margin of 9.3%. This progress is attributed to economies of scale and enhanced operational efficiency.
To finance its investments, Label Vie plans to spend 7 billion dirhams over the next five years, with 80% of this covered by self-financing and real estate cash flows. This strategy aims to reduce the debt ratio from 53.1% in 2023 to 44.4%, significantly improving financial results.
Positive outlook for 2024
For 2024, BKGR anticipates an 8% increase in consolidated revenue to 17.1 billion dirhams and a 7.8% rise in net profit attributable to the group (RNPG) to 547.3 million dirhams. This growth is expected to be driven by the full-year impact of stores opened in 2023 and the expansion of the e-commerce channel “BRINGO” to other Moroccan cities.
Competitive challenges
However, BKGR analysts warn of increased competition from other discount retailers, particularly the Turkish chain BIM and new entrant KAZYON, which could pressure Label Vie’s margins. Although economies of scale and operational excellence may partly offset this pressure, a slight margin decline is anticipated.
Buy recommendation despite competition
Despite these challenges, BKGR remains optimistic about Label Vie’s prospects. Analysts believe the company’s ambitious growth, improved profitability, and debt reduction strategy outweigh the risks associated with competition. Therefore, BKGR recommends accumulating Label Vie stock in portfolios, with a target price of 4,873 Dh.
