MAV Beauty Brands Inc. (TSX: MAV) is global personal care which offers premium quality hair care, body care and beauty products to consumers. The company has a diversified portfolio of four complimentary personal care brands – Marc Anthony, Renpure, Cake Beauty and The Mane Choice.

Key Updates:

• MAV has its own in-house teams, including brand leaders, research and development experts and creative designers, which helps to determine the changing needs of the consumers. Moreover, the company also has a wide distribution network and supportive logistics partners, which helps to enhance their in-store placement and also increase the amount of shelf space across the stores in order to gain the visibility of its brands.

• The company witnessed a demand recovery from its international segment and posted a revenue of USD 5.4 million in 9MFY21, reflecting a 20.2% y-o-y growth. Continuation of the above trend would likely to support the company’s overall performance.

Risks: The personal care segment is highly competitive in nature, and hence it might receive stiff competition from its peers, leading to decline in market share and sales volume.

Q3FY21 Financial Highlights:

• MAV declared its quarterly result, wherein the group reported revenue of USD 24.739 million, declined from USD 31.741 million in pcp. The decrease was primarily due to lower sales volumes from the Canada/US region.
• Gross profit stood lower at USD 10.349 million, as compared to USD 15.748 million in Q3FY20. The slide was primarily due to lower revenue, partially offset by a marginally lower cost of sales.
• The quarter witnessed a higher selling & administrative costs coupled with an inclusion of impairment of goodwill amounting USD 129.033 million.
• Adjusted EBITDA stood lower at USD 3.114 million, versus USD 8.700 million in pcp.
• The group a net loss of USD 103.146 million, as compared to a net profit of USD 3.559 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Valuation Methodology (Illustrative): Price to Earnings-based

Stock Recommendation:

The group is focusing to enhance its presence through the e-commerce segment, considering the growing consumer interests towards e-commerce marketing.  The above is a key positive and is likely to support the company’s upcoming sales volumes. We have valued the stock using the Price to Earnings based valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Gildan Activewear Inc, MTY Food Group Inc etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of MAV at the last traded price of CAD 1.24 on December 24, 2021. 

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary:

One-Year Technical Price Chart (as on December 24, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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