24H1 net profit increased 25.7% at the same time, achieving steady growth

24H1's revenue was 2.55 billion euros, up 17.4%; net profit was 0.38 billion euros, up 25.7% (at a fixed exchange rate, same below). Revenue growth was mainly due to full-price sales and year-on-year increase in sales volume.

By channel, net retail sales also increased by 18.2%; sales through wholesale channels increased 7.8% year over year, thanks to duty-free channels, and the development of independent wholesale is controllable, in line with the company's strategy; royalty revenue increased by 28.1% year over year, and the strong performance was driven by the contribution of glasses and perfumes.

By region, net retail sales in Japan/ Middle East/ Europe/ Asia Pacific/ America were +55%/+20%/+18%/+12%/+7%, respectively.

Japan once again became the best performing region in the first half of the year, benefiting from the region's steady demand and strong tourist traffic, and the growth rate accelerated in the second quarter; retail sales in the Middle East were steady and accelerated in the second quarter; Europe achieved continuous and steady growth with the support of local customer and tourist consumption; the Asia-Pacific region's higher Q2 benchmark led to a slowdown in growth, but spending outside the region increased; and America improved slightly in the second quarter.

Miu Miu has performed well and the brand continues to improve

24H1Miu Miu's retail sales performance was excellent, with a year-on-year increase of 92.7%, and strong growth in all regions and product categories.

Miu Miu's community enthusiasm continues to soar through acclaimed fashion shows and engaging events, and the brand continues to shine. The brand received an extremely positive commercial response in all categories, and the brand's appeal was enhanced through influential communication initiatives such as a new leather goods promotion campaign.

Special projects such as Miu Miu Upcycled and successful collaborations have brought continued attention to the brand.

Prada high-quality development, balanced combination of benefits

24H1Prada's retail sales increased 5.5% year over year, achieving high quality development driven by full price and year-on-year sales. Growth was achieved in all product categories and men's and women's clothing, despite challenging comparisons in China and the rest of the Asia-Pacific region.

The Prada brand continues to maintain positive trends thanks to its creative strengths, high-impact initiatives, and close interaction with its audience. Outstanding performance is due to a balanced mix of categories: new and classic models continue to support leather goods, while creative vitality drives the development of ready-to-wear and footwear. The men's and women's shows were a huge success, verifying the appeal of the brand's aesthetic standards.

The pace of retail upgrading is accelerating, and the supply chain is further strengthened

At the retail level, the pace of network upgrades accelerated, and the company completed 36 refurbishment and replacement projects in the first half of '24, confirming the company's commitment to improving the customer experience and supporting retail execution. After opening 9 stores and closing 22 stores, the company had a total of 593 direct-run stores on June 30, 2024.

Further progress has also been made in digital development and supply chain strengthening. The capital expenditure for industrial and IT projects was €0.015 billion and €0.032 billion, respectively. In May, the company announced the expansion of an important factory dedicated to the production of knitwear, employing a total of 214 employees.

Raise profit forecast to “buy” rating

Considering the continuous improvement of the Miu Miu brand power and the high-quality development of the Prada brand, and the further strengthening of the company's digital development and supply chain, we raised our profit forecast. The annual revenue for 24-26 is 5.11 billion euros, 5.53 billion euros, and 6 billion euros respectively; net profit is 0.75 billion euros, 0.85 billion euros, and 0.93 billion euros, respectively (the original value is 0.74 billion euros, 0.8 billion euros, 0.87 billion euros);

EPS was €0.29 per share, €0.33 per share, €0.36 per share (original values were €0.29 per share, €0.31 per share, and €0.34 per share, respectively);

Corresponding PE is 23, 21, and 19x, respectively.

Risk warning: intellectual property and brand protection risks; corporate image risks; supply chain management risks; business soundness risks; liquidity risks; exchange rate risks.