Алтерко

The producer of smart home devices Allterco reported 50% revenue growth for the first nine months of the year as sales boomed and the company managed to overcome the supply chain hurdles. Revenues jumped to BGN 57.88mn. However, this came with the cost of substantially higher working capital and higher labor costs and costs for external services. Allterco expanded substantially its inventories to address the rising production on one hand and to ensure cushion against supply issues /i.e. chips/. Gross margin decreased due to the higher production costs for devices, which expanded from 46.6% /9M’21/ to 48.8% /9M’22/. The net profit gained 16.9% to BGN 11.747mn as the company added BGN 2mn in FX gains.

Allterco managed to beat its expectations for the period and is in line to exceed BGN 100mn of sales as the company is expecting to perform well during the discounting sales periods in Q4. Reaching the targets will support the EBIT margin that were under pressure from the 90% increase of salaries and the substantially bigger sales team. However, EBIT margin won’t improve in Q4 as the company will position its products more aggressively during the discount sales campaigns.

The overall impression from the report and the earnings call is positive. However, Allterco’s P/E ratio might not improve in Q4 and the company should continue to grow fast in 2023 to provide further boost to the stock price.