Equity research Zinzino Q2 2025: Subscribing to rapid growth

The operating margin was somewhat lagging in another quarter of breakneck growth (+57 per cent) as, for example, costs for opening new markets picked up. However, cash flow was robust, and the expansion in new and existing markets bodes well for improving profitability in the medium term through a growing base of subscriptions and other recurring revenue. While margins vary between individual quarters, Zinzino is executing well ahead of the curve.

Expansion costs hampered margins in a busy quarter

In line with the sales pre-announcement on 3 July, Zinzino reported revenue growth of 57% in Q2 2025. This was driven by solid sales momentum across most regions, including core markets such as Central Europe and North America, as well as Asia-Pacific. The CEO is hopeful for around 50% growth for 2025, well above the financial target of 20% growth on average. For H1 2025, growth was 58%, and a total revenue growth of 55% in July supports this view.

Margins in Q2 2025 were lower than our forecast, which was related to higher OPEX than we had assumed. Zinzino mentions increased costs associated with acquisitions and the opening of new markets, most recently China, New Zealand, and the Philippines. In addition, non-cash currency translation effects impacted EBITDA for the quarter by SEK -10.0 (-0.2) million. Hence, operating leverage was lower compared to the previous quarter. However, Zinzino has historically successfully turned “growth investments” into increased sales. The gross margin decreased by 3.2 percentage points to 31.2% vs our forecast of 31.5%. We believe this demonstrates that Zinzino has a reasonable balance between growth and earnings.

“Supplements as a Service” business supports a healthy outlook

Zinzino’s business model is based on generating a high share of recurring revenue, at least 60%, from subscriptions and returning customers. This is facilitated by orders being placed online. While churn is significant, the model generates a rising base of recurring revenue and strong cash flows even as the company grows. It also provides good visibility, generates important data and facilitates planning and efficiency. As a result, we see reason for the good growth to continue in 2026, further underpinned by M&A and Zinzino having entered new markets.

Strong growth and operating cash flow motivate a premium valuation

We adjust our estimates for slightly higher operating costs, better alignment with company guidance and other minor assumption updates. As a result, we lower our EBITDA expectations by about six per cent on average for 2025E-2027E.

Consequently, we lower the base case valuation. This corresponds to an EV/EBIT 2026E of 20-21x. Solid growth prospects and a high share of subscription-based revenue justify a premium versus peers.

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