The company's recent situation
L'Occitane released revenue data for 3QFY24 (as of December 31, 2023): Revenue increased 19.5% year over year to 843 million euros, up 24.6% year over year under fixed exchange rate (CER). Overall performance slightly exceeded our expectations. By brand: Sol de Janeiro (SDJ) revenue CER increased 214% year over year, L'Occitane de Provence (LeP) growth slowed slightly to 1.5%, ELEMIS's year-on-year increase corrected (+18%, including the UK +23.2% and the US +19.4%), and LimeLife fell by more than 20%. By region: CER increased 71.8% year-on-year in the Americas, 3.8% in Asia Pacific (15% in China), and 4.5% in EMEA. Channel division: Revenue from wholesale and other channels and online channels increased 46.4% and 29.6% year over year; retail channel CER increased 4.4% year over year, mainly contributed by China.
reviews
Management stated at the results meeting: 1) Update the FY24 guidelines: due to SDJ's strong performance, the CER revenue growth rate was raised from about 17% to over 20%; due to poor performance of LeP (especially travel retail), increased marketing investment, and LimeLife's losses, the operating profit margin guidelines remained at 12%. See the table below for updates to the FY26 mid-term guidance. 2) Year-on-year revenue growth in January 2024: negative single digits for LEP, single digits for ELEMIS, three digits for SDJ; high single digits for China, negative single digits for Japan, single digits for the US, and single digits for the UK. 3) Continued renewal of the LeP brand: cut the brand's distribution in French drugstores and refurbish the brand's stores to become high-end. 4) SDJ will continue to expand: Since January 2024, SDJ has entered 700 Ulta stores in the US. The brand plans to launch in all 1,400 Ulta stores by the end of FY25, and plans to launch a new category and enter the global travel retail channel in April 2024. 5) During Black Friday and Cyber Monday in the US and UK, ELEMIS outperformed the market thanks to its high-end strategy. 6) The company's official website shows Italian luxury perfume brand Dr. The acquisition of Vranjes Firenze will be completed and consolidated in late FY24. 7) André Hoffmann will step down as Deputy Chairman of the Board and CEO at the end of FY24 and will focus on the company's strategic leadership matters thereafter. The new CEO will be Laurent Marteau (current group managing director with 15 and 8 years of experience at LVMH and La Prairie).
Profit forecasting and valuation
Taking into account SDJ's strong performance and operating leverage, we raised our FY24 and FY25 revenue forecasts by 2% and 5% to €2.6 billion and €3.1 billion, and our net profit forecasts by 3% and 6% to €232 million and €333 million. We maintain our outperforming industry rating and target price of HK$28 (based on 21x FY24 price-earnings ratio), corresponding to 21% upside. The current stock price is HK$23.1, corresponding to 16.9 times and 11.5 times FY24 and FY25 price-earnings ratios.
risks
ELEMIS volume falls short of expectations; macro adverse factors; risk of exchange rate fluctuations.