JERONIMO MARTINS (JMT.LS)

A family-owned and run Portuguese retailer that owns Biedronka and Hebe in Poland. It's trading at a 17.4x P/E, 11.6x EV/EBIT and 50% below the intrinsic value.

1. Key Facts

Description: Jeronimo Martins is a Portuguese retail holding company operating various retail chain stores across Europe and South America. Its biggest chain which also accounts for roughly 70% of its sales is Biedronka, the largest and most dominant Polish retail chain specialising in groceries and other FMCGs. It also owns Pingo Doce (retail) and Recheio (cash & carry wholesale) in Portugal, Ara retail chain in Colombia, a new and fast-growing chemist’s chain in Poland (Hebe), and an agribusiness serving as a vertical integration. It was founded in 1792 so it’s almost as old as the US and is a family business owned and operated by the Dos Santos family. 

Track record: Over the last 10 years Jeronimo Martins compounded revenue at a 10.3% CAGR (13.2% over the last 5). It has also grown its NOPAT from 346 million EUR in 2014 to 938.7 million EUR in 2023. Its ROIC oscillates in the 11% and 19% range. Notably, Biedronka (on which this analysis will focus) has had its revenue 10-year CAGR at 11% and the 5-year at 14.2% whilst the 10-year average LFL was 7.9% and the 5-year average was 11.4%.

Market cap: As of the 19th of November 2024, its market cap is 11.1 billion EUR (~$11.7 billion). It has declined slightly since January 1, 2024, from 26.85 to 24.3 PLN per share. It is also ~35% up from its 52-week low.

2. Business Overview

Jeronimo Martins (JMT) is a Portuguese-based company engaged in food distribution and specialised retail in Portugal, Colombia, and, most importantly for us, Poland. Its original Portuguese business is Pingo Doce, which is a classic European mid-tier retailer comparable to the French Auchan or Delhaize in Belgium. It sells groceries, household items, care products, and ready meals on top of having a dine-in restaurant section like Asda in the UK. Recheio is JMT’s Cash & Carry business and the largest C&C in Portugal selling mostly to small and medium-sized businesses like restaurants, cafes, and retail stores. The company also entered the coffee shop and chocolate store businesses in Portugal with Jeronymo and Hussel, but these remain relatively small for now.

JMT also operates an agribusiness (food distribution) that serves as a vertical integration and supplies JMT companies with dairy, livestock, and fish. They make strategic equity investments in various food suppliers in Europe. 

In 2013, JMT launched a new Colombian grocery retail chain, Ara, from ground up in its expansion to Latin America. Ara operates a proximity model comparable to that of Dino in Poland with fairly small stores in towns and villages catering the product range to the specific local needs.

Biedronka is the largest supermarket chain in Poland with a 60%+ market share known for its low prices, especially in groceries. Jeronimo Martins acquired it back in 1997 only 2 years after its founding and has owned and operated it since then. Hebe is a fast-growing low-end cosmetics, care, and beauty products retailer in Poland, selling everything from deodorants and toothpaste to nail polish and face masks. It’s especially popular with women.

Revenue Split

(In millions of EUR)

As you can see Biedronka is a hugely dominant part of Jeronimo Martins and by buying Jeroonimo you’re buying Biedronka with extras. The goal is not to buy JMT per se, but Biedronka with Hebe while hoping that the other companies aren’t value-destructive. The same Biedronka concentration is evident in the segment EBITDA numbers.

Biedronka is not just 70% of the group’s revenue but also ~80% of its profitability as defined by EBITDA (of which I’m not a big fan but if that’s what they give us we need to consider it). Thereby this analysis will focus on Biedronka and Hebe.

Biedronka