Dr. Martens PLC

Dr. Martens PLC (LON: DOCS) is an FTSE 250 listed UK-based leading footwear brand. The Company has a diverse range of product categories such as Originals, Fusion, Kids, Casual, and Accessories.        

Investment Rationale for Valuation – Buy at GBX 198.50

• Trading Update: As per the trading update on 27 January 2022, there was an increase in Direct-to-Consumer revenues by 33% during the period, compared to the prior corresponding period, and made a contribution of 64% to the revenue mix.
• Decent Channel Performance: The e-commerce revenue performance was resilient during Q3FY22, delivering revenue growth of 16% on a comparative prior period. There was an acceleration in Q3 retail revenues from the prior quarters, owing to an improvement in footfall and strong in-store conversion.
• Robust Fundamentals: The Group clocked revenue of £369.9 million in H1FY22, reflecting an increase of 16% on H1FY21. Profit after tax jumped by 65% to £48.6 million in H1FY22, compared to £29.5 million in H1FY21.
• Technical Indicator: The price of the stock is hovering between the lower and middle Bollinger band with 14-day RSI level of ~40.31.  

Key Risks

• COVID-19 Risk: The company has been impacted by the emergence of COVID, with APAC region being impacted the most in Q3FY22. The threat of the pandemic persists and can impact the Group’s business.
• Inflation Risk: The high inflation levels and rising interest rates might deter consumers towards discretionary spending in the near term, thus impacting the company’s business.  

Financial Highlights (for the quarter ended 31 December 2021, as of 27 January 2022)

(Source: Company Website)

• Revenue: The company reported a Group revenue of £307.0 million in Q3FY22, reflecting an increase of 11% y-o-y.
• Region-Wise Performance: EMEA posted decent growth during the quarter, along with Americas reporting solid Q3 on the back of solid DTC performance.   

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E)

*Peers: Mulberry Group PLC, Joules Group PLC, and JD Sports Fashion PLC.

*All selected peers are LSE-listed Companies from the Consumer Discretionary sector. 

Conclusion 

The company witnessed decent DTC peak trading period during Q3FY22 and remains optimistic in achieving the market objectives in FY22.    

Based on the growth in sales, decent fundamentals, good channel performance and support from the valuation as done using the above method, we have given a “Buy” recommendation on Dr. Martens PLC at the current market price of GBX 198.50 (as of 17 May 2022, at 08:10 AM GMT+1) with lower double-digit upside potential based on 12.32x Price/NTM Earnings (approx.) on FY23E earnings per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

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 unfavorable movement in the stock prices.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.