Investing.com -- On Wednesday, May 21, 2025, Fitch Ratings raised the Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) of InPost S.A. to ’BB+’ from ’BB’. The National Long-Term Rating was also upgraded to ’BBB+(pol)’ from ’BBB(pol)’, with all ratings being on a stable outlook. Fitch also lifted InPost’s senior unsecured rating to ’BB+’ from ’BB’, while the Recovery Rating was reported as ’RR4’.

The upgrade results from InPost’s consistent EBITDA growth, high EBITDA margins compared to its counterparts, and positive free cash flow before acquisitions. These factors have resulted in leverage metrics that correspond with a ’BB+’ rating. The upgrade also acknowledges InPost’s growing diversification following acquisitions in the UK and organic growth in Europe. However, compared to larger, integrated peers, InPost’s scale and international presence are still smaller.

Fitch’s stable outlook mirrors expectations that EBITDA net leverage will balance within the rating sensitivities for a ’BB+’ rating, ranging from 1.5x to 2.3x. This stability will be supported by EBITDA growth, driven by increasing volumes and positive free cash flow generation.

In 2024, InPost saw a robust EBITDA growth of about 25% year on year to PLN2,389 million. This consistent growth allowed the company to more than double its revenue and EBITDA since 2021. The company recorded EBITDA growth in Poland, at Mondial Relay, and in the international segment (UK, Italy), which reported its first year of positive EBITDA.

InPost’s management strategy is focused on growth and market diversification. The company’s capital expenditure is expected to average PLN2.1 billion a year from 2025 to 2029, a significant increase from PLN1.4 billion in 2024, as the company expands its automated parcel machine (APM) network internationally and to a lesser extent in Poland.

In April this year, InPost acquired a 95.5% stake in Yodel Delivery Network (Yodel), a company focused on ’to-door’ parcel delivery in the UK. This acquisition will enable InPost to secure an 8% market share in Europe’s largest e-commerce market, setting a platform for further growth.

InPost is enhancing its geographic diversification, particularly through the expansion of its Mondial Relay division, and acquisitions in the UK and early development in Italy. However, most of its EBITDA is still generated in Poland, with other markets contributing about 20% in total in 2024, which is expected to increase to about 30% by 2028.

The company’s two largest customers, Allegro (WA: ALEP ) and Vinted, contribute 40% to total revenue. This concentration risk is offset by long-term contracts, including a seven-year contract with Allegro with minimum volumes, maturing in 2027, and a delivery agreement with Vinted signed in 2025 covering eight countries until the end of 2027.

Fitch’s key assumptions for the issuer include InPost’s parcel volumes continuing to grow, on average 14% a year from 2025 to 2029, contracts benefiting from an annual repricing mechanism, capex averaging at PLN2.1 billion annually over 2025-2029, and acquisitions totaling PLN2.1 billion in 2025-2029. No dividends are expected.

Factors that could lead to a negative rating action or downgrade include EBITDA net leverage above 2.3x on a sustained basis, EBITDA interest coverage below 4.5x, and negative FCF through the cycle due to lower operating margin, high dividend payouts, or major acquisitions. Positive rating action or upgrade could occur if EBITDA net leverage is below 1.5x on a sustained basis, supported by EBITDA growth, positive FCF in line with Fitch’s expectations, and a more conservative financial policy.

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