Samarkand Group PLC's (AQSE:SMK) latest trading news "is very encouraging", according to analysts at VSA Capital, and supports their "positive view on the company’s return to profit".
The City broker noted that Samarkand sees the lifting of Covid-related restrictions, accumulated China consumer savings growth of 42% to US$4.8 trillion since the start of 2020, and pent-up consumer demand all pointing to a positive outlook for consumer demand for its brands.
Samarkand owns four brands - Probio7 (nutritional supplements), Zita West and Baba West (fertility supplements) and Napiers (natural health, beauty, and skincare products). The company said in today's market update that it has continued to trade well in the months since its interim (H1) results update in December 2022 and it expects full-year (FY) 2023 results to be in line with market expectations.
READ: Samarkand Group highlights improvement in near-term trading outlook in China, its key market
The company's H1 results to end-September 2022 saw the start of the business recovering from COVID-19 impact in China as revenues rose by 15% to £8.3mln (H1 2022: £7.2mln) and the adjusted EBITDA loss reduced to £1.3mln from £2.6mln on restructuring and cost reduction.
The VSA Capital analysts said their full-year forecasts are unchanged after the latest company update. For the full-year to the end of March 2023 (FY 2023), they estimate revenue of £17.0mln and an adjusted EBITDA loss of £3.1mln, down from £6.9mln a year earlier on restructuring and cost reduction and as the company starts to recover from the depths of lockdowns in China.
Samarkand also said today that its key trading period of November resulted in a profitable performance for the company at a net profit level and that it is continuing to make progress towards becoming profitable in FY 2024 through improving gross margin and a reduction in variable costs.
For FY 2024, the VSA Capital analysts forecast revenue of £22.5mln and an adjusted EBITDA of £0.2mln.
They commented: "Samarkand has faced exceptional market conditions outside its control, and the management team has responded quickly by reducing headcount, streamlining operations, keeping a tight focus on technology development, market channel expansion, and brand development. All this means SMK will be ready to capture recovery as logistics in China return to normal."
The VSA Capital analysts reiterated a 'Buy' recommendation and 200p target price on Samarkand shares, which in late morning trade on Monday were priced at 42.50p on the Aquis Exchange.