Main points of investment
The group maintained a high gross profit margin in fiscal year 23, and brand impairment treatment affected operating profit margin: sales of the group in fiscal year 2023 were 2.135 billion euros, a simultaneous increase of 19.8% at the reported exchange rate. The strong growth was mainly driven by the excellent performance of Sol de Janeiro and the solid growth of ELEMIS. The gross profit in fiscal year 23 was 1.718 billion euros, up 17.4% from the same period last year, and the gross profit margin was 80.5%. Due to the effect of brand combination, the group maintained a high gross profit margin. Operating profit reached 239 million euros, a decrease of 23.0% compared with last year, and operating profit margin fell 6.2 percentage points to 11.2%, mainly due to the poor performance of LimeLife and Melvita brands and losses caused by impairment treatment on both brands, which accounted for 2.3 percentage points of the decline respectively. It is proposed to pay a final dividend of 0.031 euros per share, with a dividend yield of 40 per cent.
Q4 brands performed strongly, and ELEMIS reset its channel strategy in major markets: Q3 performance was under pressure, and major brands performed strongly in Q4 in fiscal year 23. L'OCCITANE en Provence recorded a slight 0.5% drop in fiscal year sales at a fixed exchange rate, mainly due to the weakness of the Chinese market and the withdrawal from Russia. Q4 benefited from the steady growth of tourism retail channels and China's lifting of COVID-19 restrictions, returning to growth of 0.8 per cent. After rising 13.1 per cent in the first half of the year, ELEMIS's full-year growth slowed to 8.9 per cent, mainly due to the reform of its consumer channel strategy in the UK, its largest market, and Q4 sales recovered to 18.1 per cent. China is one of the most potential markets for ELEMIS, and it has launched direct radio stations through Tmall's flagship store.
Sol de Janeiro has become the second largest brand in the group, and the multi-brand model has grown steadily: Sol de Janeiro's performance exceeded expectations, and sales increased by 135.2%, making it the second largest brand in the group. The brand launches the second body care product to promote steady growth in all channels. Sales of other brands increased by 7.3% at fixed exchange rates, respectively, by 33.4% and 41.2% for L'OCCITANE au Erborian and BR é sil, respectively. In recent years, the group has accelerated mergers and acquisitions to expand its leading portfolio of high-end beauty brands, making it more geographically balanced, more attractive to millennials and generation z consumers, and a more diversified brand portfolio.
Our view: with the gradual recovery of international tourism, the rebound in the Chinese market and the continued expansion of new brands, sales are expected to increase by 17% in FY24. The Group is expected to strengthen the coordinated operation of brands in different regions by increasing operational investment in major markets such as China, the United States and Japan. We estimate that the company's revenue for the 2024-2026 fiscal year will be 24.92,28.29 and 3.197 billion euros respectively, an increase of 16.8%, 13.5% and 13.0% over the same period last year, and the net profit will be 1.78,2.38 and 283 million euros respectively, with year-on-year changes of + 54.7%, + 33.8% and + 19.0% respectively. The target price corresponds to a PE of 25, 19 and 16 times for fiscal year 2024-2026, respectively.
Risk tips: 1) intensified market competition; 2) COVID-19 epidemic and other factors that may affect the macro environment; 3) market acceptance of new products is not as expected; 4) exchange rate changes; 5) overseas business operation risk.