This report is an updated version of the report published on 29^th April 2022 at 2:57 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 increased by 26.5% YoY, and EBITDA grew by 26.2% YoY in H1FY22, led by the benefits of recent acquisitions and momentum in the USA segment.
• The digital segment recorded H1FY22 revenue of $19.6 million. Flora & Fauna reported revenue growth of 3.4%, despite cycling strong sales growth in the pcp.
• 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

The company holds a robust balance sheet augmenting reinvestment for longer-term growth. It anticipates achieving solid underlying revenue and EBITDA growth in FY22 with performance weighted to H2FY22 in line with previous years. However, it maintains a close watch on the external COVID-impacted trading environment. 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 $1.76.

The stock has been valued using EV/Sales multiple based relative valuation (on an illustrative basis) and the target price so arrived reflects a potential rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the healthy underlying revenue growth in H1FY22, strong underlying revenue and EBITDA growth guidance for FY22 and solid balance sheet

Considering the aforementioned factors, and decent outlook, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.77 per share as of 29^th April 2022 (Time: 10:20 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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