This report is an updated version of the report published on 23 May 2022 at 2:35 PM (GMT +10)

BWX Limited

BWX Details

BWX Limited (ASX: BWX) is a leading beauty and wellness business emphasising the natural segment of the beauty and personal care market. The company’s six market-leading brands cover six personal care categories.

Financial Results for the First Half Ended 31 December 2021 – H1FY22

• The revenue grew by 26.5% YoY, and EBITDA increased by 26.2% YoY in H1FY22, driven by the benefits of recent acquisitions and momentum in the USA segment.
• Points of distribution internationally in line with projection at 1.6 million at H1FY22 (up 21% YoY) and on track to reach 2+ million target by end FY22.
• The digital segment revenue stood at $19.6 million versus $13.4 million in H1FY21. Flora & Fauna reported revenue growth of 3.4%, despite cycling strong sales growth in H1FY21.
• EBITDA increased 26.2% YoY to $14.3 million in H1FY22.
• The core brand margin increased to 58.5%, up by 334 basis points versus the corresponding period, which lifted the group gross margin to 55.7%.

Source: Company Reports, Analysis by Kalkine Group

Outlook

On 5 May 2022, the company released its FY22 forecast, where it anticipates revenue to be in the ambit of $233-$243 million and underlying revenue is expected to be in the range of $240-$250 million (FY21: $194.3 million), primarily driven by the strong performance of Sukin and Mineral Fusion. Sukin surged has outperformed the combined category value for skin, hair, and body. Further, EBITDA is anticipated to be in the ambit of $27-$30 million, and underlying EBITDA is expected to be $34-$37 million (FY21: $34.5 million). Business-wide operating cost saving would be ~$5 million for FY23. The company anticipates the growth potential to be led by an expanded brand portfolio and delivery of omnichannel distribution gains in key regions. Additionally, the Clayton Facility will deliver a step-change in financial and operational performance owing to its reinvestment of cost savings towards brands building for long-term growth.

Key Risks

The company is exposed to the risk of unexpected movements in foreign exchange markets or commodity prices that may challenge the business's profitability. It is also susceptible to operational risks as its manufacturing and supply chain is concentrated at key points. Moreover, the company is prone to compliance and legislative risks as it operates and sells its products in multiple countries.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The stock is trading lower than the average of the 52-week high price of $5.63 and the 52-week low price of $1.94.

The stock has been valued using EV/Sales multiple based relative valuation (on an illustrative basis). The target price so arrived reflects a potential rise of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering continued acceleration in customer acquisition costs that have doubled YoY for digital sales and elevated inventory levels.

Considering the aforementioned factors, and decent outlook, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.35 per share as of 23 May 2022 (Time: 10:32 AM (GMT+10), Sydney, Australia).

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BWX Limited (BWX) is a part of Kalkine’s Global Primary Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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