Samsonite's 4Q23 revenue may increase 15-20% compared to 4Q19 at a fixed exchange rate. Samsonite plans to announce 4Q23 and 2023 results in 1Q24. We've adjusted our profit forecast based on recent trends and channel research.
Key points of interest
1) 4Q23 trend: Due to the normalization of the pace of recovery in North America and Europe and the slower than expected recovery in outbound travel in China, the company's 4Q23 revenue may increase 15-20% compared to 4Q19 (excluding the impact of Russia and Speck's business) under the fixed exchange rate (CER). GPM is likely to be close to 59.6% in 3Q23, and the adjusted EBITDA margin may be slightly lower than 20.3% in 3Q23, mainly due to the delay of some marketing expenses to 4Q23 (marketing rate may be greater than 7%). 2) The 2023 corporate guidelines remain unchanged: revenue increased 15-20% compared to 2019 CER, GPM exceeded 59%, and adjusted EBITDA margin exceeded 19%. 3) Slight reduction in 2024 company guidelines: Revenue growth under CER was high to low double (previous guidance was low double 10-15%): North American revenue is expected to grow by medium to low single-digit year-on-year growth in CER, high single digits in Europe, 10-15% in Asia, and double digits in Latin America. GPM continues to improve, and the adjusted EBITDA profit margin benefits from improved operating leverage and sets aside a budget for increased marketing investment (marketing rate over 7%). 4) The company's medium-term outlook for 5-7 years remains unchanged: the company's revenue is expected to increase from US$3.7 billion in 2023e to US$5 billion; the adjusted EBITDA margin is above 20%; and TUMI revenue is expected to reach US$2 billion. 5) Dividend payment period: Management plans to resume dividend payments in 2023 with a dividend payment rate of 30-45%, and gradually increase the dividend payment level to 40-50% before the pandemic.
6) Capital market management: The company is considering re-listing or dual listing on other exchanges. Liquidity and safeguarding the interests of existing shareholders are core concerns. The final decision may be announced on 2Q24 after the annual results meeting.
Profit forecasting and valuation
As the pace of North American and European travel recovery normalized earlier than expected, we lowered our 2023 and 2024 revenue forecasts by 3% and 6% to $3.7 billion and $4.1 billion, respectively. Taking into account the negative impact of operating leverage and additional marketing investments, we lowered our 2023 and 2024 net profit forecasts by 10% and 12% to $374 million and $450 million. We introduced revenue and net profit forecasts for 2025 of $4.6 billion and $536 million, respectively. In view of the trend of increased marketing investment and continued improvement in profit margins, we maintain our outperforming industry rating and target price of HK$34 (based on 14 times the 2024 price-earnings ratio, corresponding to 12 times the 2025 price-earnings ratio). The current stock price corresponds to 10 times and 8 times the 2024 and 2025 price-earnings ratios, and our target price provides 44% upside.
risks
Macro adverse factors such as the COVID-19 pandemic; asset impairment losses; more intense external competition, competition among internal brands; foreign exchange rate risk.