Temple & Webster Group Ltd: Growth/profitability shift

研报英文原文证据摘录

Temple & Webster Group Ltd: Growth/profitability shift

IdeaM

Price Target Changes

We lower our 12-month TPW price target to A$8.00/share (was A$24.00).

As set out above our bullish view on Temple & Webster was ultimately too anchored to

the structural e-commerce growth story and optionality and not sufficiently grounded in

near term earnings valuation discipline or the cyclicality of discretionary retail. We

underestimated how sharply higher interest rates and cost-of-living pressures would

compress demand for big-ticket homewares, even for the lowest cost, structurally

advantaged online leader. At the peak, the market was pricing TPW as a long-duration

compounder with multiple sources of optionality - Home improvement, Trade &

Commercial & NZ. However growth normalised materially as the consumer slowed and

operating leverage reversed. In hindsight, the stock’s >80% decline reflects both a growth

reset and a severe de-rating from > 1 s.d. above the average to >1 s.d. below as set out in

Exhibit 3 .

Methodology: We previously only used a DCF methodology. We now incorporate a

forward P/FCF multiple as well in a blended 50:50 valuation. The reason is that given the

current trading conditions, the market has shifted from focusing on long-term growth and

near-term earnings now come more sharply into focus. We use an average of our two

methodologies to arrive at our price target.

P/FCF multiple A$5.62 15x FY27e FCF: In selecting which multiple was appropriate, we

have chosen P/FCF to most accurately represent TPW's asset-light, negative working

capital business model.

In arriving at our 15x P/FCF multiple, we considered: 1) The growth deceleration against a

tougher trading environment; 2) The trading multiple of peers NCK at 11.3x and HVN at

12.5x.