Last week, Marley Spoon Group ("MSG") released a mixed 2024 guidance. Sales are expected to grow by a single-digit percentage versus the prior year (eNuW new: +9% yoy; eNuW old: +17% yoy), largely driven by two separate developments owing to MSG's structure, which consists of the core meal-kit business Marley Spoon SE (>95% ownership) and the newly acquired bistroMD, operating in the ready-to-eat business:

1) While consumer demand has stabilized throughout 2023, the company cited cautious consumer behavior in the meal-kit market as the main culprit for the muted outlook and now expects a single-digit percentage decline for FY24e (eNuW new: -3% yoy; eNuW old: +5% yoy). In our view, this should be explained by a continued normalization in the number of active subscribers from Covid highs (eNuW: -3% yoy), the effect of which is likely more pronounced for Europe and Australia than for the US.

2) The guidance implies, however, that on a group level its recent acquisition of bistroMD shows a noticable impact on the overall topline development (FY24e revenue of € 39m, +10% yoy; eNuW), demonstrating the attractiveness and resilience of the ready-to-eat market. Besides bistroMD's leading doctor-designed RTE meal plans playing on relevant consumer trends like health, convenience, and weight-loss, this acquisition likely offers MSG an opportunity to use its own data and technology platform to generate synergies over time.

Though MSG expects its contribution margin to remain flat (FY23: ~31.7%), operating EBITDA is seen to grow to a positive mid-single-digit figure for the full year (eNuW: € 2m), despite the fact that bistroMD should operate on a lower contribution margin (eNuW: ~30%) and negative EBIT due to lack of scale. The positive margin outlook is seen to be carried by (1) a rectified voucher strategy, likely increasing marketing efficiency and early cohort retention rates in H2'23 and Q1'24 and (2) a more streamlined G&A setup (-11% yoy to c. € 69m, excluding one-off costs) as cost-reduction measures from automation, centralization, and the closure of underutilized operations begin to kick in.

While it looks like 2024 will be another challenging year for the meal kit market, we like both the strategic outlook and the operational progress MSG has made over the past quarters towards group profitability, leading us to reiterate our BUY rating with a changed PT of € 7.00 (old: € 8.00) based on DCF.