On Friday, Barclays initiated coverage on Dino Polska S.A. (DNP:WA) (OTC: DNOPY), a prominent grocery retailer, with an Overweight rating and a price target of PLN490. The new rating reflects the firm's positive outlook on the company's potential to continue its impressive growth trajectory and market share expansion.
Dino Polska's strong historical performance, characterized by a compound annual growth rate (CAGR) of 35% in EBITDA and an approximate 5 percentage point increase in market share from 2014 to 2023, has been noted. The company has also been recognized for its high returns on invested capital (ROIC), which have consistently exceeded 30%, and its ability to generate cash, with growth being largely self-financed and accompanied by rapid deleveraging.
The analyst highlighted Dino Polska's competitive customer offer, which includes convenient location, price competitiveness with discounters, a comprehensive assortment, and a focus on national brands. Additionally, the company's operating model was praised for its freehold real estate strategy, simplicity, and experienced management team.
Despite the challenges anticipated in 2024, such as deflation and cost pressures, Barclays believes that Dino Polska is relatively well positioned to navigate these issues. The firm's investment in infrastructure, which is expected to support around 4,500 stores by the end of the fiscal year 2025, an increase of more than 80% from the current number, is a key part of this positive outlook.
Barclays also pointed out that Dino Polska's stock is currently trading at a 20% discount compared to its historical price-to-earnings (PE) ratio.
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