20210311-招银国际-普拉达-01913.HK-Surging_brand_popularity_shall_lift_margins_9页_1mb

Prada (1913 HK) Company Update Summary

Core Content

Prada, a luxury goods company, has shown signs of recovery and growth, supported by improving brand popularity and momentum. The report maintains a BUY rating and raises the target price to HK$57.80, based on an unchanged 55x FY22E P/E multiple, which is significantly above the 5-year average of 30x. This valuation is considered attractive despite the median P/E of peers at 26x.

Key Financial Highlights

• Revenue:
  • FY19A: EUR 3,226 mn
  • FY20A: EUR 2,423 mn
  • FY21E: EUR 3,030 mn
  • FY22E: EUR 3,396 mn
  • FY23E: EUR 3,648 mn
• YoY Revenue Growth:
  • FY19: 2.7%
  • FY20: -24.9%
  • FY21E: 25.1%
  • FY22E: 12.1%
  • FY23E: 7.4%
• Net Profit:
  • FY19A: EUR 256 mn
  • FY20A: EUR -54 mn
  • FY21E: EUR 195 mn
  • FY22E: EUR 295 mn
  • FY23E: EUR 367 mn
• EPS (EUR):
  • FY19A: 0.100
  • FY20A: -0.021
  • FY21E: 0.076
  • FY22E: 0.115
  • FY23E: 0.143
• Adjusted Net Profit (EUR mn):
  • FY19A: 179
  • FY20A: -54
  • FY21E: 195
  • FY22E: 295
  • FY23E: 367
• P/E (x):
  • FY19A: 55.0
  • FY20A: 249.0
  • FY21E: 69.1
  • FY22E: 45.7
  • FY23E: 36.7
• P/B (x):
  • FY19A: 4.7
  • FY20A: 4.8
  • FY21E: 4.6
  • FY22E: 4.3
  • FY23E: 4.2
• Yield (%):
  • FY19A: 0.4
  • FY20A: 0.7
  • FY21E: 0.9
  • FY22E: 1.7
  • FY23E: 2.2
• ROE (%):
  • FY19A: 8.8
  • FY20A: -1.9
  • FY21E: 6.8
  • FY22E: 9.8
  • FY23E: 11.6
• Net gearing (%):
  • FY19A: 14.3
  • FY20A: 10.7
  • FY21E: 3.3
  • FY22E: Net cash
  • FY23E: Net cash

Main Points

• Sales Recovery: Retail sales in YTD 2021 recovered to 2019 levels, with a MSD growth compared to 2020, despite a 4% sales miss in 2020.
• Margin Improvement: Prada's gross profit margin is expected to rise from 74.5% in FY21E to 78% in FY22E. The EBIT margin is projected to increase from 14.5% in 2H20 to 11.5% in FY21E and 14.0% in FY22E.
• Performance Expectations: The company is expected to outperform the industry, unlike the previous period (FY14–18).
• Dividend: Despite net losses in FY20, Prada proposed a dividend of EUR 0.035 per share, indicating positive financial health.
• Earnings Revision: CMBIS revised up FY21E and FY22E EPS estimates by 7% and 6%, respectively, due to improved gross and EBIT margins.
• Market Performance: The stock has shown strong performance over the past 12 months, with a 102.3% price increase compared to the previous year.

Key Information

• Shareholding Structure:
  • Prada Family: 79.98%
  • Invesco Ltd: 5.38%
  • Free Float: 14.64%
• Share Performance:
  • 1-month: -4.9%
  • 3-months: +7.0%
  • 6-months: +50.4%
  • 12-months: +102.3%
• Valuation: The current valuation of 46x FY22E P/E is considered attractive, with a target price of HK$57.80.
• Brand Momentum:
  • Prada's brand popularity and engagement have surged on Instagram, Weibo, and Google Trends.
  • Brand heat is strong, with significant growth in site traffic and Chinese organic traffic.
• Segment Analysis:
  • Direct sales are expected to grow significantly, with the highest growth rate in FY21E.
  • Prada and Miu Miu are the top contributors to sales growth, while franchise sales and royalties show moderate growth.
• Peer Valuation: Prada's valuation is compared to peers in the luxury sector, with the P/E ratio being above the industry average.

Conclusion

Prada is experiencing a strong recovery in brand popularity and sales, supported by improved margins and positive financial indicators. The company's ability to sustain growth despite past challenges is a key factor in the continued BUY rating and the raised target price. The report highlights the importance of consumer demand, particularly in China and through e-commerce, in driving the company's performance.