(News Bulletin 247) – The specialist in the reconditioning of electronic products is celebrating on the Paris Stock Exchange while TP ICAP Midcap indicates that it has started its purchase coverage with a target price of 3.2 euros. For the design office, Largo is positioned in a buoyant segment, which should help it return to double-digit growth from the second half of 2023.

Making something new with something old is the credo of Largo, a young company from Nantes created in 2016 and specializing in the reconditioning of electronic products. Originally, the company rushed into the mobile phone reconditioning market before extending its field of action to tablets, computers and other connected accessories (watches, headphones, etc.).

“In the years 2015, smartphones did not evolve much, users sold their phones, the second-hand market developed. We tried to structure it in virgin territory, this is how the product was born. refurbished”, explains to West FranceChristophe Brunot, its co-founder.

Largo offers a global offer and is present in all links of the reconditioning chain. The company collects, repackages and distributes processed products. Largo is for example referenced in a large network of partners such as Fnac, CDiscount or Système U.

The rise of refurbished

This player in the circular economy is benefiting from the sustained demand for refurbished appliances. In 2022, 17% of smartphones sold in France are refurbished phones, i.e. almost 1 in 5 phones sold for around 3 million units”, according to Recommerce, a company specializing in the refurbishment of electronic products.

And this craze for second-hand electronic products is not ready to stop for questions of purchasing power and/or ecological awareness. Products sold by Largo are 30 to 50% cheaper than their new counterparts. In 2022, nearly 100,000 products passed through the expert hands of Largo technicians, after 83,000 parts in 2021. That year, the group posted strong growth of 71% over one year, after an increase in its sales by 11% in 2020. The Covid years have greatly accelerated the consumption of second-hand products.

It was also in 2021 that the Nantes group quite naturally turned to the stock market to finance its rise in power in this rapidly developing market. In April 2021, Largo went public with the ambition of achieving a turnover of 70 million euros in 2025, and an EBITDA (gross operating surplus) margin of 7%. To date, it is the only French listed company to operate in this reconditioning sector.

However, the 2022 results did not meet the expectations of the market and Largo. The Nantes group reported a turnover up 20% to 21 million euros over the past financial year, less than the 30 million euros expected by the company. The group explains that it has contained its growth to improve its profitability.

Largo was also forced to revise downwards its objectives for 2023, a year described as a “pivotal” for the company as well as the 2025 forecasts as announced during the IPO. This lowering of Largo’s ambitions was sanctioned by the market, the file had plunged by 30% on January 19, 2023.

A new stock market history to rewrite

However, for TP ICAP Midcap, stock market history could be rewritten this year, with the first fallout from the new strategy deployed by management since the end of 2022.

The company favors the supply of its products in a short circuit, whereas some time ago, the company was still sourcing abroad. “Until last year, we bought them in the United States. You should know that Americans do not own their phones, which are leased. With each new release, users replace them. An American broker sells large volumes. It allowed us to start”, indicated to Ouest France, Christophe Brunot.

Largo is also banking on its new phone collection program, called Largo Collect. This device is based on a computer program intended for distributors to encourage the collection of old dormant telephones in private drawers.

” Largo Collect comes out, in September [2023], a great tool for our partners and distributors that will allow them to collect old phones. Our ambition is to restore purchasing power to the French by encouraging them to resell their old phones, to buy recycled phones and to reduce the carbon footprint. It’s a virtuous circle. We adhere to the circular economy,” explains Christophe Brunot.

“Thanks to the deployment of new Business Intelligence tools, particularly in terms of pricing, and the tools of the Largo Collect offer deployed with third parties, the group is ultimately aiming to add a recovery functionality for old terminals to its own Largo.fr website by 2024 and thus become a collector of mobile terminals”, adds TP ICAP Midcap.

All of these actions will contribute to a “recovery of margins”, underlines Claire Deray, the analyst in charge of Largo coverage. For 2023, management is targeting at least 10% growth for 2023, including a rebound in activity which is expected in the second half.

Indeed, TP ICAP Midcap expects activity under pressure in the second quarter, but once the publication of the turnover of the first half scheduled for July 20, the research office suggests that investors should be ” reassured” by the publication of the half-year results (and third-quarter sales) on October 19. This publication should “reflect the first beneficial effects of the new controlled growth strategy in favor of margins”, adds TP ICAP Midcap.

The scenario established by the design office thus highlights “an average annual growth of nearly 13% by 2025, and the achievement of profitability by this horizon, certainly below the objectives set at the start of 2021 (+47% per year targeted and balance for 2023), but which nevertheless constitutes good prospects”. In 2022, the group was still in losses of 5 million euros.

“With a drop of almost 90% of the title compared to the introductory price” fixed at 13.35 euros, Claire Deray, therefore judges “this excessive correction”. “The market capitalization is indeed 5 million euros for a net cash position of nearly 1.7 million euros at the end of 2022, i.e. an enterprise value of around 3 million euros, which, in our opinion, constitutes a low point”, abounds the analyst.

For TP ICAP Midcap, Largo is on the edge of a stock market page with a title that “could start its rebound”, leading the research department to initiate coverage of the title with a buy opinion, and an objective of 3.2 euros. The target assigned by Claire Deray reveals an upside potential of 70.6% even taking into account the increase of the day, of 37.4% on the Paris Stock Exchange.