Today's Edenred bears little resemblance to the company it was before the health crisis, at a time when regulation and competitive pressure had no negative impact on the group's business. At that time, the stock was trading at valuation multiples that were double or even triple those of today.
For the past two years, Edenred has been facing challenges in almost every market where it operates. In France, its primary market, the reform of meal vouchers, which was intended to modernize and expand their use, is likely to be postponed again due to political uncertainty and the disrupted parliamentary calendar. However, this reform is crucial as it provides for the complete dematerialization of vouchers by 2027, their extended use for long-life food products, and their availability on certain additional days, notably Sundays. All these measures are welcomed by users and retailers and fuel the group's growth prospects in a market worth over €10bn. Competitive pressure is also a factor. The sector is almost entirely dominated by just four players: Edenred, Pluxee, Up Coop, and Swile. The government wants to introduce more transparency and competition. In this regard, Edenred was already sanctioned by the Competition Authority in 2023.
In Turkey, the local antitrust authority has launched an investigation into suspected collusion in the meal voucher market. A similar case from 2010 is still unresolved. However, the Turkish market remains fairly marginal in the company's accounts.
Edenred also has a lot at stake in Brazil. The country accounts for nearly 20% of its revenue and generates above-average profitability for the group. Since 2022, the country has been seeking to reform the meal voucher system in order to reduce costs and modernize the system to combat inflation. The stated aim is to enable employers to pay meal allowances directly to their employees via Pix, an instant payment system that is universally accepted by banks and already widely used in the country. This would reduce management costs and therefore the final bill for consumers, as Pix's commissions are much lower than those of Edenred or Pluxee. At this stage, the decision seems unlikely to succeed, but it adds to the risks to be taken into account in the valuation.
The threat does not come only from regulators. The press is reporting a possible acquisition of Alelo, a Brazilian player specializing in cards and payment solutions for employee benefits, by iFood, the local leader in meal delivery. The transaction would place the new entity ahead of Edenred and Pluxee with approximately 35% of the market. Pressure on prices and distribution would increase.
Added to this are the negative effects of the European macroeconomic environment (inflation, high interest rates, and modest growth), which could well be felt in upcoming earnings reports.
Edenred is thus valued as if the Brazilian contribution were to disappear almost entirely. Fortunately, the financial situation remains solid, with debt levels in line with previous years and operating activity holding up fairly well. However, the accumulation of risks automatically increases the premium demanded by investors. It therefore seems unlikely in the short term that there will be a reversal of the trend without a lull in regulation or competition. The same conclusion applies to Pluxee (formerly a subsidiary of Sodexo), which has had a particularly difficult time since its IPO early last year and whose valuation multiples are now fairly close to those of Edenred.
