- BUY Entry – 43.5 Target – 50.0 Stop Loss – 40.0
- Prada SpA is an Italy-based company engaged in the fashion industry. The Company is a parent of the Prada Group. The Company, along with its subsidiaries, is engaged in the design, production and distribution of leather goods, handbags, clothing, eyewear, fragrances, footwear and accessories. Prada SpA manufactures jackets, trousers, skirts, dresses, sweaters, blouses, as well as perfumes and watches, among others. The Company trades its products through several brands, such as Prada, Miu Miu, The Church and The Car Shoe. Prada SpA operates in approximately 70 countries through directly operated stores, franchise operated stores, a network of selected multi-brand stores and department stores. Prada Spa operates through numerous subsidiaries, including Artisans Shoes Srl, Angelo Marchesi Srl, Prada Far East BV, Tannerie Megisserie Hervy SAS and Prada SA, among others.
- Strong US business buffered the downturn in Russia and China. According to the previous comments from the CEO in mid-April, the company’s US business offset the impact of suspending operations in Russia and covid lockdowns in China. Russia accounts for 2% of group sales and 50% of shops in China closed in the first half of April.
- FY21 results review. Net revenues jumped by 38.9% YoY to EUR3.37bn (EUR3.22bn in FY19). Gross profit jumped by 75.7% YoY to EUR2.55bn (EUR2.32bn in FY19). Net income jumped grew by 8.9% YoY to EUR299.25mn (EUR255.79mn in FY19). The growth was due mainly to the recovery in the Asia Pacific and the US markets.
- Liquidity spill-over positively boosts consumption of luxury goods. The Covid-19 pandemic triggered flooded liquidity. Not only did prices of traditional asset classes such as equities and properties soar, but also prices of virtual assets such cryptocurrencies and non-fungible tokens skyrocketed. The demand for luxury goods saw a strong V-shape rebound. According to Bain & Co, the market grew by 29% at current exchange rates to hit EUR283bn, increasing the size of the market by 1% versus 2019 levels. It is expected to reach EUR360 to 380bn by 2025 with a sustained growth of 6-8% annually.
- Updated market consensus of the EPS growth in FY22/23 are 38.6%/27.2% YoY respectively, which translates to 34.1x/26.7x forward PE. Current PER is 47.3x. Bloomberg consensus average 12-month target price is HK$57.19.
(Source: Bloomberg)