Softline: Strong 3Q21, Accelerating M&A Expansion
smartmoney.oneWe reiterate our BUY recommendation and our 2022YE DCF based target price of $13.6/GDR (₽1,012/GDR) at WACC 13.5%, TGR 3.5% and fully diluted 200mn shares (subject to the execution of management options).Softline’s 3Q21 and 9M21 numbers: profitability growth Gross margin as % of turnover; EBITDA adj.margin as % of gross profitSource: Softline, ITI Capital...and 9M21:In 3Q21 the share of turnover attributable to Russia increased to 61% from 53% in 2Q21.The increase QoQ is due to shifts in timing of large international contracts and may also be related to billing seasonality in different countries.For 9M21, the share of turnover attributable to Russia was 54% compared to 63% in 9M20, while Russia’s share in 3Q20 was at 68% (also higher compared to 9M20).Turnover by productSource: Softline, ITI CapitalGiven the high growth rate of international business and the international focus of M&A activity, we expect Russia's share in overall turnover to continue to decline by year-end, offsetting Russia related risks.Turnover by regionSource: Softline, ITI CapitalSoftline refreshed its financial forecasts:Following the IPO, the company targets a new Development Stage 2.0, which includesAccelerating development... From our perspective, the company has moved into a expansion phase, accelerating since the company went public and raised $400 mn via its IPO.