RBC Capital starts W7 owner Warpaint at ‘outperform’

RBC Capital Markets initiated coverage of Warpaint on Friday with an ‘outperform’ rating and 685p price target.

It said Warpaint presents a strong value proposition to customers by leveraging its dupe strategy to drive sales across its own-brand cosmetics lines, W7 and Technic.

"With many households facing tighter budget constraints, the popularity of quality dupe brands has been on the rise, supporting Warpaint's rapid sales growth of 20% CAGR to 2023," it said.

RBC noted that Warpaint has grown 17% more than the weighted mass colour cosmetics market since 2014.

"With strong retail partners on board in the UK/US/EU, we believe it can continue growing at circa 13% compound annual growth rate through 2026E, ahead of the market at circa 6% CAGR," RBC said.

"As a debt-free, cashflow positive business with superior operating margins (more than 20%), we initiate at outperform with a 685p price target, which reflects around 17x 2025E EV/EBITDA."