CIBC2022 Retail & Consumer Conference - March 22, 2022
Pet Valu Holdings Ltd. (PET-TSX) — Outperformer
Company Profile
Pet Valu is Canada’s largest pet specialty retailer of pet food,
treats, toys and accessories, with ~700 locations nationwide.
Investment Thesis
Pet Valu has delivered outsized growth over the last two years
and been a clear beneficiary of the pandemic pet boom. That
being said, even as industry growth normalizes to its historical
mid-single-digit run rate, we believe Pet Valu has multiple levers
to drive further share gains, including new store growth and its
growing loyalty program. Pet Valu also has further upside from
the modernization of its operations. The favourable mix shift to
franchise stores also supports strong profitability and cash flows.
The acquisition of Chico in Quebec brings new growth
opportunities.
Price Target (Base Case): C$42.00
Our price target is based on a P/E multiple of 30x on F2022E
EPS, which implies a 1.7x PEG.
Upside Scenario: C$51.00
In our upside scenario, we increase our estimate for same-store
sales growth by 150 bps, increase our EBITDA margin estimate
by 20 bps, and apply a higher P/E multiple of 35x.
Downside Scenario: C$26.00
In our downside scenario, we decrease our estimate for
same-store sales growth by 350 bps, decrease our EBITDA
margin estimate by 50 bps and apply a lower P/E multiple of 20x