Dufry: Strong Sales Trajectory Continues as Shares Remain Cheap; Dividend Reinstated

We are maintaining our fair value estimate for narrow-moat Dufry DUFN as the company reported continued solid revenue growth in the third quarter. We expect to adjust our 2023 revenue forecasts slightly downward to reflect currency headwinds, but it will not result in a change to our fair value estimate. We see shares as undervalued, trading in 5-star territory, with almost 80% upside to our fair value estimate.

All regions displayed double-digit growth in the third quarter, with organic growth for the company of 16% (24.8% in the first nine months). Strong growth confirms our assumptions for robust travel spending recovery postpandemic, despite a more challenging macroeconomic situation, as spending is redirected from goods (that showed strong traction during the pandemic) to services, of which travel is an important part. Sales in EMEA were up 12.3% organically in the quarter, sales in North America up 11%, sales in Latin America up 27.8%, and sales in Asia Pacific outperformed, on lower comparison base with 44.8% growth. Profitability also remained resilient as positive operating leverage, synergies, and productivity improvement mostly offset cost inflation with 11% core EBITDA margin, which is calculated after amortization related to concession fees, down only 20 basis points from 2022.

Sales in October continued a solid trajectory, up 14.6% against 2022 and outstripping 2019 levels by 7.9% organically. The company also resumed shareholder payouts with an improving financial position, announcing a dividend of 0.7 CHF per share, around 2% yield on current valuation. Dufry had suspended dividends since the start of the pandemic.