Luxembourg-based ecommerce and fulfilment services platform InPost (INPST:AMS) is one of Europe’s fastest-growing companies, yet it is flying under the radar of most retail and institutional investors.
Analysts at Jefferies estimate the business can deliver EBITDA (earnings before interest, tax, depreciation, and amortisation) growth of 20% a year over the next five years while expanding its margins.
Yet the shares trade at an undemanding 7.8 times EV (enterprise value) to EBITDA, based on Jefferies’ forecasts for the year to December 2025.
If that were not enough to get the pulse racing, Jefferies believes that at the current price investors are getting the international business for free, which one day could be worth a multiple of the company’s domestic operations in Poland.
In short, the shares look deeply mispriced, perhaps because the business is considered part of emerging Europe, bordering Ukraine, and the fact they only listed on the stock market in January 2021.
We believe positive network effects from increasing customer usage of InPost’s app and the scale benefits from increased density of its postal lockers provide sustainable competitive strengths which can drive many years of profitable growth.
Recent first-quarter results demonstrate this with parcel volumes growing 20% to 322 million and EBITDA margins expanding by 2.4% to 34.2%, ahead of consensus expectations.
As Jefferies highlights, the most interesting part of the story is the speed at which the UK and France have reached profitability. From barely breakeven two years ago, both countries recorded EBITDA margins up 4.7% and 15.9% respectively, to 17.3% and 18.9% of sales.
As recently as 2021, InPost’s Polish business was seven times the size of its international operations in revenue terms, whereas today they are of similar size.
Importantly, the total addressable market for the UK and France is three times that of Poland. InPost is dominant in its home market with a market share of around 70%, which delivers highly profitable 47% EBITDA margins. This implies scope for margins to expand as international markets scale.
Roughly half of the UK market is peer-to-peer selling and the other half is returns.
WHAT IS DRIVING GROWTH?
Refreshingly, growth is not related to AI, data centres or military spending, but due to a transformation of the economics and consumer convenience in the high-touch, costly, ecommerce last-mile market.
InPost is revolutionising the way people send and receive parcels, making it more convenient and cheaper than using the post office. In the UK, automated postal lockers are springing up all over the place and can be seen on petrol station forecourts, at supermarkets, railway stations and even the local pub.
By simply scanning a QR or numeric code, items can be collected or dropped off rather than being left outside the front door and presenting a temptation for opportunist thieves.
Retail Economics estimates 75% of Gen Z shoppers (those under 25 years of age) have used a postal locker compared with only around a third of baby boomers (those born in the two decades after the second world war).
Britain is the company’s fastest growing market, where it expects to increase the number of lockers by 50% this year alone. InPost’s International chief executive Michael Rouse believes scale is key to long-term success which means having lockers within a seven-minute walk of home in urban areas.
In 2024, InPost completed its acquisition of Menzies, giving it full ownership of the entire logistics process in the UK.
The company is making similar inroads across France, Italy and Spain which began with the takeover of Mondial Relay in July 2021.
VINTED UNICORN
Jefferies believes a lot of the growth in the UK and France is coming from privately-owned peer-to-peer clothing marketplace Vinted. In a secondary share sale in October 2024, the company was valued at an implied $5 billion.
‘We recently hosted Vinted chief executive Thomas Plantenga for an investor call and investors were left in no doubt of (the company’s) ability to monetise the booming “ReCommerce” market,’ writes Jefferies.
WHAT ARE THE RISKS?
Competition is never far away in a fast-growing market and investors constantly fret about the threat from Amazon (AMZN:NASDAQ).
InPost’s Rouse believes the company has a big advantage over both Amazon and the Royal Mail based on not having a legacy delivery business to cannibalise.
‘I’m not eating my own profit pool, I’m eating theirs,’ explains Rouse. This may be the reason Amazon has pared back locker expansion in the UK, for fear it may deter people from paying for Prime delivery.
In Poland, InPost’s largest customer is the dominant online retailer Allegro which represents 20% of group sales and 40% of domestic sales.
While Allegro has built its own postal lockers in the past, the recent appointment of veteran ecommerce executive Marcin Kusmierz as chief executive suggests the company is unlikely to go back to that strategy, says Jefferies.
Despite these risks, we believe InPost’s growth drivers and the flywheel effect it has built provide a great buying opportunity for long-term investors.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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