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Euromonitor''s view of Beauty and Personal Care in 2024 Euromonitor recently published its detailed view of the evolution of the global Beauty and Personal Care market in 2024. While the data is not perfect, it is generally accepted as giving the best single source view of global trends. Within we explore 2024 developments that particularly caught our eye. Small manufacturers have made strong market share gains in all categories Small manufacturers have made strong market share gains in all categories (including Premium Fragrance). Share gains from ''Others'' are very much a global phenomenon (and likely a function of the continued rise of social media esp. TikTok) which is more acute in Premium than in Mass. Unusually, Premium underperformed Mass in most categories Premium Beauty tends to outperform Mass; interestingly this was not the case in 2024. Globally, Mass outperformed Premium in almost all categories (particularly Skin Care). Taking a category perspective: Fragrances and Deodorants were relatively strong Overall industry constant FX growth (+6.7%) was led by Fragrances (+11.9%) and interestingly, Deodorants (+10.5%), which has now experienced double-digit growth for three consecutive years. Facial Skin Care was the weakest sub-category at +3.8% (driven by China). We explore relevant share trends by company L''Oreal gained share in most categories, with Cosmetics being a notable exception (losses in China, N. America and W. Europe). While Beiersdorf gained 20bp of share in Skin Care (with both Nivea and Eucerin gaining share), it lost -20bp in Sun Care (with both Coppertone and Nivea losing share). Puig gained 10bp of share in Premium Fragrance, notwithstanding share losses in its main regions (W. Europe, N. America and L. America). As to Unilever, it experienced share losses in most of its key beauty categories.
BEI OR OR ULVR ICOS PUIG
Summary of Q125 sales Beiersdorf''s Q1 Group LFL at +3.6% came in ahead of Bloomberg (Bbg) consensus expectation of +2.6%, with Consumer LFL at +2.3% being broadly in line with Bbg cons of +2.2% and Tesa LFL at +10.7% coming in materially ahead of Bbg cons of +4.7%. Scanning Q1 Consumer LFL by brands, we note that Nivea LFL at +2.5% was slightly ahead of Bbg cons of +2.2%, Derma was broadly in line (+11.4% vs. Bbg cons at +11.2%), La Prairie missed (-17.5% vs. Bbg cons at -11.3%), and Health Care was materially ahead (+10.8% vs. Bbg cons at +5.3%). FY guidance was reiterated. News At the moment, Beiersdorf plans to be at the lower end of the Consumer FY LFL guidance range of +4-6% for Q2. Earnings We reduce our EPS estimates by c.2% in FY25e and c.3% in FY26e/27e, primarily as a result of updating for FX translation. Investment thesis We can see the longer-term attraction in the story, but consensus looks reasonable, and we believe a re-rating is unlikely against the current beauty market backdrop. Rating and target price We maintain our Neutral rating. Our target price moves to EUR129 from EUR133 before. 15 questions for management At what level are you currently observing European skincare market growth? Thiamidol-/epicelline-containing products aside, are you outperforming the market?
Beiersdorf AG
BNPP Exane View The two key comments from the call are that 1) Beiersdorf expects Q2 Consumer LFL to be at the lower end of the +4-6% range (Bbg cons at +5.8%, for what it''s worth we expect +4.1%) and 2) while Beiersdorf hopes to be at the upper end of the Consumer LFL guidance range for the FY, it could end up at the lower end. While the release this morning was a relief, the conf call comments are unlikely to spark material incremental attraction for the shares, as sell-side consensus LFL expectations are likely to be subject to some downward revisions for Q2/FY (although this was to some extent expected by the buy-side). Additionally, key European beauty peer''s share price weakness today is likely weighing a bit on Beiersdorf shares. In a nutshell, we find the share price reaction (around +1% at the moment of writing) understandable. QandA highlights . Tariffs: In the US, only a small part of imports is coming outside US/Mexico (and Mexico is covered by the free trade agreement), hence, so far - no material direct impacts. As for indirect impacts, there is a risk that consumer sentiment may weaken. At the moment US market is growing LSD and Beiersdorf is outperforming. . La Prairie: Q2 is expected to be hopefully flat, more pronounced improvement to come in H2. The objective was to have clean inventory levels at the end of Q1. . Q2: So far, Beiersdorf plans to be at the lower end of the Consumer guidance range (+4-6%) for Q2, partially driven by Easter timing impact on suncare and the fact that many launches are coming in H2. Beiersdorf assumes a normal sun season. . Epicelline: Nivea will be launched in Q3. . North America: Coppertone - beginning of the season was not v. good (the market was down) also it is losing market share (on the contrary Eucerin Sun is gaining share). Coppertone is negative and La Prairie was slightly negative as well. These two factors explain NorAm LFL vs. v. strong Nivea and Eucerin in the US. . Manager Magazin...
BNPP Exane View We believe that today''s release, with Consumer Q1 LFL broadly in line with consensus expectations and FY guidance reiterated, will come as somewhat of a relief and hence expect a positive share price reaction relative to the market, likely in the +2-3% range, maybe even a bit more (as a usual disclaimer, it is rather difficult to call Beiersdorf shares on results days). Headline metrics . Group LFL: +3.6% (Bbg cons +2.6%; Vara cons +2.5%) . Consumer LFL: +2.3% (Bbg cons +2.2%; Vara cons +2.4%) . Tesa LFL: +10.7% (Bbg cons +4.7%; Vara cons +3.6%) Top-line drivers Scanning Q1 top-line drivers by Consumer regions, while Western Europe and AAA were ahead of Bbg consensus expectations, Eastern Europe, Latin America, and North America missed. Examining Q1 LFL by brand, we note that Nivea grew by +2.5% (Bbg cons +2.2%), La Prairie declined by -17.5% (Bbg cons -11.3%), Derma grew by +11.4% (Bbg cons +11.2%), Healthcare grew by +10.8% (Bbg cons +5.3%), Chantecaille grew +15.9% (no reliable cons). Bottom-line drivers N/A - only a sales update. Other . China: ''We are putting our house in order in China to set the foundation for future growth. Excluding the effects of our proactive measures in this key market, our Consumer quarterly performance was within our guidance.'' Outlook / guidance All elements of FY guidance remain unchanged: . Group LFL: +4-6%; Bbg cons: +5.0% . Consumer LFL: +4-6%; Bbg cons: +5.6% . Tesa LFL: +1-3%; Bbg cons: +2.5% . Group margin: slightly above the PY; Bbg cons: +30bp . Consumer margin: +50bp; Bbg cons: +60bp . Tesa margin: around 16%; Bbg cons: 16.1% Likely revisions of consensus We don''t expect material consensus earnings estimate revisions on the back of this release per se. It is important to note that relative to Bbg consensus we estimate that FX M2M will have around a -2% impact on FY25 revenues. Sector read-across This print is a small positive read-across for the beauty space. Conference call details Call...
We have slightly adjusted our operational estimates for Q1/FY25, predominately to reflect our latest thinking wrt. Beiersdorf''s top-line prospects; we have also updated for FX translation. We have previously argued (see March. On to where?) that Beiersdorf should best be valued on c.24x FY26e ex-cash Consumer EPS + c.15x FY26e ex-cash Tesa EPS + FY26e net cash. Keeping in mind the market''s seemingly increased nervousness around the beauty space of late (e.g. post the recent Douglas warning) and the recent Manager Magazin article referring to Nivea''s ''underperformance'', and resulting Beiersdorf''s share price underperformance over the past week, we reduce our target multiple for Consumer to c.23x and reduce our target price to EUR133 from EUR138 before. We do not consider the changes to be material; our rating is unchanged.
Summary of Q4/FY24 results Q4 Consumer LFL at +8.2% came in c.50bp ahead of Visible Alpha (VA) consensus; FY24 Group margin and EPS were broadly in line with consensus. As to returns to shareholders, dividend was flat at EUR1.00, and a new SBB of EUR500m (announced yesterday post market close) will begin after AGM. On FY25 guidance, Group/Consumer LFL is expected at +4-6%, with Group margin up slightly and Consumer margin +50bp. Lastly, CEO''s contract was extended to the end of 2030. News Beiersdorf expects Q1 Consumer LFL to be below the +4-6% range due to last year seeing +10% in Consumer (strongly driven by pricing), and prudent expectations on the La Prairie travel retail business in China, where Beiersdorf intends further stock clean-up. Earnings We leave our FY25e EPS estimates broadly unchanged and increase them by c.1% in FY26e/27e. Investment thesis While we see attraction in the Beiersdorf story longer term (underpinned by solid innovation pipeline), consensus appears reasonable, and further re-rating seems unlikely against the current beauty backdrop. Rating and target price We maintain our Neutral rating. Our target price moves to EUR138 from EUR137 before. 15 questions for management Looking at your Consumer Q4 LFL delivery, Western Europe and North America came in materially below VA consensus expectations. What, in your view, has driven this material miss?
BNPP Exane view Overall, a confident call, with the major incremental colour being Beiersdorf''s comment that it expects Q1 Consumer LFL to be below the +4-6% range, in part driven by further stock clean-up in China. QandA highlights . Q1: Expected to be below the +4-6% range for several reasons: 1) last year saw +10% in Consumer, driven in part by pricing actions; 2) remaining cautious on the luxury outlook; and 3) making efforts to right the China business - there will be further stock clean-up, to make inventory levels healthy as at the end of March. If not for the China inventory clean-up, would be able to reach the +4-6% range in Q1 already. . Pricing: Expected around +3% in Europe and around +5% in EMs. . Skincare market: The global skincare market was growing +5-5.5% in 2024. In 2025, is expected to grow at around +5% (lower in DM, higher in EM). . Vision: The vision is to make Beiersdorf a leading skincare business - driven by upcoming launches; being more daring with white space expansion. The aim is to always outperform the market. Margin commitment - if there is a moment when they need to invest more, they will, but it is important to have this mindset of profitable growth, hence the +50bp ambition. . Epicelline roll-out: Launched within 4 months in 40 countries. Sell-out - Beiersdorf was absolutely astonished. Strong market positions in Germany, France, Mexico, Chile, and Thailand. The moment of truth - are people repurchasing the product? The first signs from Germany are very exciting. Ready to launch with Nivea in the coming months. The great thing is that it doesn''t need regulatory approval like Thiamidol. . Skincare category: If you are able to come up with a product which is solving a specific skin problem, you are able to drive a strong business. Global derma market growth at +7%, overall skincare at +5%. This growth can accelerate if players come up with strong innovations. . US tariffs: 1/3rd of products sold in the US are produced...
BNPP Exane View While results are broadly in-line (some feared a Q4 Consumer miss) and a further SBB will be welcomed, as will the CEO contract extension to 2030, this will likely be somewhat tempered by what the market makes of FY25 Consumer LFL guidance of +4-6% (cons: +6%) and comments on the skin care market growing at a slower pace. We expect a neutral share price reaction. Headline metrics . Q4 Group LFL: +6.3% (cons +6.6%) . Q4 Consumer LFL: +8.2% (cons +7.7%) . Q4 Tesa LFL: -2.0% (cons +1.9%) . FY EBIT mgn Group: 13.9% (cons 13.9%) . FY EBIT mgn Consumer: 13.4% (cons 13.4%) . FY EBIT mgn Tesa: 16.3% (cons 15.9%) . FY EBIT Group: EUR1,370m (-0.4% vs. cons) . FY EPS: EUR4.31 (+0.2% vs. cons) . FY DPS: EUR1.00 (-2.1% vs. cons) Note: all consensus estimates are as per Visible Alpha (VA). Top-line drivers Scanning the Q4 top-line Consumer drivers by region, the main surprise relative to VA consensus expectations is in Eastern Europe (+12.6% vs. VA cons at +8.0%) and Latin America (+14.1% vs. VA cons at +9.2%) and this helped to offset weakness in Western Europe (+3.3% vs. VA cons at +6.0%) and North America (+6.0% vs. VA cons at +9.5%). Examining Q4 LFL by brand, the shape is broadly as expected. Bottom-line drivers The +50bp margin expansion reflects GM: +110bp (H1: +150bp); Marketing and Selling: -70bp (H1: -180bp); RandD: -20bp (H1: -20bp); GandA: -10bp (H1: -70bp) and Other Operating: +40bp (H1: +30bp). Other . SBB: up to EUR500m . FCF: EUR1,105m (+EUR505m YOY) . Net cash (''net liquidity''): EUR4,566m . CEO contract: Extended to the end of 2030 Outlook / guidance . Group LFL: +4-6% (VA cons: +5.6%) . Consumer LFL: +4-6% (VA cons: +6.0%) . Tesa LFL: +1-3% (VA cons: +3.8%) . Group margin: Slightly above the PY (VA cons: +40bp) . Consumer margin: +50bp (VA cons: +60bp) . Tesa margin: around 16% (VA cons: 16.1%) . Note: Beiersdorf comments that the global skin care market is expected to continue growing in 2025, although at a slower pace than...
Summary of Q324 sales Consumer LFL at +5.7% came in c.150bp below Visible Alpha (VA) consensus expectation of +7.2%, with the miss largely driven by La Prairie (LFL at -8.0% vs. VA consensus at +6.1%) and, to a lesser extent, by Nivea (LFL at +5.9% vs. VA consensus at +8.2%), while Derma was in line with expectations (LFL at +10.0% vs. VA consensus at +9.8%). FY outlook was reiterated with Beiersdorf commenting on expectations of ''strong performance overall in Q4''. News Beiersdorf sounded optimistic on the innovation (and renovation) pipeline for 2025; from a near-term perspective, comp base in Europe in Q4 should be easier than it was in Q3 - Beiersdorf repeated that not reaching towards the upper end of Consumer FY LFL outlook would be disappointing. Earnings We reduce our estimates by c.1% in FY24e and keep them broadly unchanged in FY25e/26e. Investment thesis Beiersdorf''s innovation pipeline should underpin Consumer LFL outperformance vs. the market. In addition, we see double-digit EPS growth in both FY24 and FY25, and view valuation as palatable. Rating and target price We maintain our Outperform rating and EUR149 target price. 15 questions for management Visible Alpha consensus currently expects Consumer LFL of +6.3% in FY25. In your view, are there any meaningful building blocks that consensus does not take into account?
We have slightly adjusted our operational estimates for Q3/FY24 and FY25/26, predominately to reflect our latest thinking wrt. Beiersdorf''s top-line prospects; we have also updated for FX translation. We do not consider the changes to be material; our rating is unchanged.
Summary of Q2/H124 results Consumer Q2 LFL at +6.1% came in below Visible Alpha (VA) consensus of +7.2%, with the miss driven largely by La Prairie and, to a lesser extent, by Derma, while Nivea LFL was ahead of VA consensus. H1 EBIT was c.5% below VA consensus, with the miss largely explained as a matter of margin phasing between H1 and H2. FY top- and bottom-line guidance was reiterated. News Beiersdorf reiterated its message delivered at the CMD stage wrt. FY Consumer LFL guidance of +6-8%: that achieving the lower end of this range would be a disappointment. Earnings We reduce our EPS estimates by c.3% in FY24e and c.2% in FY25e/26e. Investment thesis Beiersdorf''s innovation pipeline should underpin Consumer LFL outperformance vs. the market. In addition, we see double-digit EPS growth in both FY24 and FY25, and view valuation as palatable. Rating and target price We maintain our Outperform rating. With our EPS downgrades being broadly offset by the roll-forward of our target earnings base, our target price remains unchanged at EUR149. 15 questions for management Keeping in mind that you managed to achieve Consumer LFL of +8.0% in H1 against the backdrop of poor weather and La Prairie challenges, is it fair to expect H2 to see sequential improvement in growth, with weather headwinds behind, easy comps in luxury skincare and the promising innovation pipeline for the coming months?
We have received a lot of questions from investors on Beiersdorf''s innovation pipeline While we are cognisant of some areas of the beauty market starting to slow and of the likely weather-driven headwinds in sun care in the near term, we have received a lot of questions from investors regarding the likely medium- to long-term sales contribution from Beiersdorf''s two upcoming innovations announced at the recent CMD - this is the topic we address in this report. Epicelline will be Beiersdorf''s first broad anti-ageing offering While Beiersdorf has some anti-ageing products with specific focus (e.g. age spots or wrinkles), Epicelline will be its first ingredient with a broader anti-ageing claim to be rolled out across Eucerin, Nivea, La Prairie, and Chantecaille, and thus should be incremental to the existing product offerings. Opportunity in acne treatments, which are expected to outperform skin care Acne treatments currently account for only c.3% of the skin care market, with severe cases treated with antibiotics or prescription creams. With 1.2bn people globally suffering from acne, there is a clear opportunity for effective OTC skin care products. For reference, Euromonitor expects acne treatments to outperform skin care with a 2023-28 CAGR of +7.9% vs. overall skin care at +6.9%. We estimate innovation will contribute c.1.4% p.a. to Consumer LFL in the next decade Beiersdorf''s last big innovation (Thiamidol, launched in 2018) should be a good gauge of the likely sales evolution for the upcoming launches: products with Thiamidol reached c.EUR350m in sales in FY23 (c.4.5% of Consumer), on average contributing ~1% to Consumer LFL each year in FY19-23. Assuming a similar trajectory for the upcoming launches (and further growth runway for Thiamidol), we estimate that Thiamidol/Epicelline/S-Biomedic will, on average, contribute c.1.4% to Consumer LFL in FY24-33, which should underpin Beiersdorf''s outperformance vs. the market; both innovations are...
We have slightly adjusted our operational estimates for Q2/H1/FY24 and FY25/26, predominately to reflect our latest thinking wrt. Beiersdorf''s top-line prospects; we have also updated for FX translation. We do not consider the changes to be material; our rating is unchanged.
Capital Markets Day on 18th June Beiersdorf will host a CMD in Hamburg on 18th June. It will give an update on its C.A.R.E.+ strategy and provide a deep dive into specific business areas and opportunities ahead. In this report, we provide 100 questions (accompanied by 25 charts) that would be useful for management to address to give investors a better view of industry dynamics and the Beiersdorf equity story. We expect focus on innovation and product launches as well as colour on luxury trends We expect Beiersdorf to provide colour on its innovation (and renovation) pipeline and recent/ upcoming launches for Nivea (additional Luminous 630 launches and opportunities in the acne treatment area) and Eucerin (roll-out of Face Care in the US and innovation in the field of epigenetics). We also expect Beiersdorf to provide an update on the trajectory of sales trends at La Prairie and Chantecaille post the Asian travel retail inventory clean-up which completed in Q1. Beiersdorf may point to the upper end of Consumer FY24 LFL guidance With Consumer FY24 LFL guidance upgraded to +6-8% (from MSD) relatively recently (in mid-April), we expect Beiersdorf to err on the side of conservatism and maintain the range, albeit potentially pointing to its upper end. Note that we estimate Consumer FY LFL of +8.8% (vs. Visible Alpha consensus at +8.1%). We expect Consumer FY margin guidance of +50bp YOY to be reiterated. We reiterate our Outperform recommendation With scope for a positive surprise on FY24 LFL and d-digit EPS growth in FY24/25, combined with palatable valuation, we continue to view shares as attractive and reiterate our Outperform rating. Top question Are you not concerned that you may be pushing the limits of Nivea as a mass offering in terms of pricing, which may lead to volume elasticities (which W. European scanner data seems to point to)?
Summary of Q124 sales Beiersdorf''s Q1 Group LFL at +7.3% came in ahead of Visible Alpha (VA) consensus expectation of +5.9%; the beat was driven by Consumer with LFL at +10.0% vs. VA consensus at +6.7%, while Tesa missed with LFL at -5.4% vs. VA consensus at +2.8%. Scanning Q1 Consumer delivery by brands, we note that the beat was largely driven by Nivea with LFL at +12.6% vs. VA consensus at +7.5%; we also note that La Prairie posted positive LFL at +1.0% (VA consensus at +0.7%). As to FY guidance, LFL outlook for Group and Consumer was raised to +6-8% from MSD before. News Reflecting on the US beauty market, Beiersdorf doesn''t have any consumer insight suggesting that there is a big change in the way consumers are buying. Looking at the first week of April, Beiersdorf feels more positive looking at the market dynamics. Earnings We increase our EPS estimates by c.2% in FY24e/25e/26e. Investment thesis LFL sales growth should continue to positively surprise in FY24, and the valuation is palatable. In addition, we see double-digit earnings growth in both FY24 and FY25. Rating and target price We maintain our Outperform rating. As a result of our estimates revisions, our target price moves to EUR149 from EUR146 before. 15 questions for management Is there an element of conservatism baked into your revised Consumer LFL guidance of +6-8%? If yes, which parts of the business do you think can surprise positively?
We have adjusted our operational estimates for Q1/H1/FY24 and FY25/26, predominately to reflect our latest thinking on Beiersdorf''s top-line prospects and the likely half-yearly margin cadence in FY24; we have also updated for FX translation.
Summary of Q4/FY23 results Beiersdorf''s Q4 Group LFL at +9.5% came in slightly below Visible Alpha (VA) consensus expectation of +9.8%, with Consumer at +9.2% (VA cons +11.4%) and Tesa at +9.7% (VA cons +5.1%). Scanning Q4 Consumer LFL by brand, we note that the miss was largely driven by La Prairie with LFL at -14.3% (VA cons -3.5%). As for the bottom-line, EBIT margin was c.20bp below VA cons, EBIT was c.2% below VA cons and EPS c.3% below. News Beiersdorf commented that Consumer had a ''pretty good'' start to the year, and Beiersdorf assumes that Consumer LFL could even grow at least MSD in FY24. Earnings We reduce our EPS estimates by c.3.5% in FY24e/25e/26e. Investment thesis LFL sales growth should continue to positively surprise in FY24, and the valuation is palatable. In addition, we see double-digit earnings growth in both FY24 and FY25. Rating and target price We maintain our Outperform rating. In light of our EPS revisions, our target price moves to EUR146 from EUR150 before. 15 questions for management Reflecting on your comment that you expect Consumer to grow at least MSD in FY24, which brand, in your view, can provide the most meaningful surprise to the upside?
We have adjusted our estimates to reflect Beiersdorf''s decision to increase FY23 dividend to EUR1.00 (cf. EUR0.70 in FY09-FY22; we had previously assumed FY23 dividend at EUR0.70) and to reflect the share buyback of EUR500m to begin in May-2024 and to be completed by the end of 2024.
With Beiersdorf shares being well liked / owned, what to get excited about from here? As highlighted in our investor feedback, we sense that Beiersdorf is now well-liked by both hedge funds and long-only investors, who appear to agree with our view that it is an attractive way to play beauty growth at a more palatable valuation vs. L''Oreal. So, what can drive the shares from here? Could we see pricing in Europe? Yes, really While this may sound heretical given the context, our detailed analysis of 10 years of European Nielsen data suggests that Nivea has consistently priced below competition in most of its key categories in Western Europe over the past decade. With beauty management now in situ and a solid innovation plan, we see scope for Beiersdorf to drive further valorisation. Consensus underestimates white space expansion potential of Eucerin We estimate that ~40% of Eucerin''s sales are generated in the US and Germany, with the brand still being in a white space expansion mode. With LFL around or above +20% p.a. in the past 3 years, we view VA cons. FY24 LFL expectation for Eucerin of +12.7% as rather modest; we est. +15.0%. Looking further ahead, innovation can provide a tangible increment to the top-line In the coming years, innovation in acne treatment (Beiersdorf acquired S-Biomedic in Dec-22) can provide a tangible increment to sales; to bring an analogy, products with the latest big innovation Thiamidol (hyperpigmentation) added almost 4% to Consumer sales between FY18 and FY22. Best-in-class EPS growth should underpin the shares'' outperformance even without re-rating Coupling the above with easy volume comps for Nivea in H1 (de-listings in Europe in H123), easy comps for La Prairie and Chantecaille, margin expansion (growing EM manufacturing footprint), B/S optionality (bolt-on MandA, potential to increase dividend) and, consequently, best-in-class EPS growth (c.+17%/+11% in FY24/25), we believe the shares can outperform even without...
We have slightly adjusted our operational estimates for Q423/FY23/FY24, predominately to reflect our latest thinking wrt. Beiersdorf''s top-line prospects; we have also updated for FX translation.
Summary of Q323 sales Beiersdorf''s Q3 Group LFL at +9.0% came in below Visible Alpha (VA) consensus expectation of +9.5%, with Consumer at +10.9% (VA cons +11.2%) and Tesa at +1.5% (VA cons +3.1%). Scanning Q3 Consumer LFL by brands, we note that Nivea grew by +15.8% (VA cons +13.5%), La Prairie declined by -27.6% (VA cons -4.1%), Derma grew by +22.2% (VA cons +19.6%) and Healthcare grew by +2.0% (VA cons +4.6%) - therefore, the miss in Consumer was driven largely by La Prairie. News Beiersdorf commented that the predominant driver behind La Prairie''s weak print was the adjustment of its inventory levels (75% of inventory reduction was completed in Q3 and the remining 25% is to be done by the end of Q4), with sell-out for La Prairie up MSD YOY in Q3 and showing an encouraging trend; for instance, Hainan sell-out grew by +33% in Q3. Earnings We maintain our EPS estimates broadly unchanged in FY23e/24e/25e. Investment thesis While a positive stance on Beiersdorf is rather consensual, the stock firmly ticks the GARP box: Consumer LFL should keep surprising, and we have double-digit EPS growth (FY23e/24e/25e). Rating and target price We maintain our Outperform rating; our target price remains unchanged at EUR140. 15 questions for management You commented that your current assumption for the European market growth next year is +2-3%. Could you please share your thinking wrt. expectations for the global Consumer reference market growth next year? Is it fair to assume that you will target to outperform the market?
Beiersdorf’s growth continued in the third quarter despite the headwinds in the luxury segment coming from China. While La Prairie suffered from lower travel retail, Derma and Eucerin clocked double-digit growth rates. tesa continued to see organic growth backed by good demand from auto and in the Consumer business. The sales statement was a beat versus our expectations.
Beiersdorf reported a strong set of figures as some well-known Consumer brands benefited from the early hot weather in the Northern Hemisphere and the ability to serve customers demand. This was compounded by the re-listing at some retailers, especially in Germany. On the back of the better-than-expected figures, the management lifted its FY top-line guidance although the profitability guidance remained unchanged. Following the call our conclusion was that this implies some conservatism as the luxury segment many recover faster.
Summary of Q2/H123 results A strong delivery from Beiersdorf with Q223 Consumer LFL at +14.9%, c.3.7% ahead of VA consensus (with the beat primarily Nivea-driven) and H123 group EBIT c.11% ahead of consensus (H123 EPS was only c.4% ahead of consensus, as a result of one-off tax headwinds). Turning to FY outlook, as it was likely widely expected, Consumer and Group LFL guidance was increased to HSD-LDD (''there is an opportunity to achieve growth at the upper end of this range, if the luxury market conditions improve'') and margin guidance unchanged (''achieving this growth range will require investments in the market to increase'' in H223). News Beiersdorf commented that excluding the luxury business, volume growth in Q223 accounted for more than 1/3rd of total organic growth in Consumer. Earnings We maintain our FY23e EPS estimate broadly unchanged (due to one-off tax headwinds) and increase our FY24e/25e EPS estimates by c.3%. Investment thesis While there is a lot to like about Beiersdorf, we believe that a lot is now reflected in consensus expectations and the share price. Rating and target price We maintain our Neutral rating; our target price moves to EUR130 from EUR129 before. 15 questions for management As things stand now, looking at Consumer, what is your expectation for market growth next year? Do you expect to achieve organic sales growth above market in FY24, and, if yes, would you expect to see outperformance as pronounced as it has been YTD?
Summary of Q123 results With headline Q123 numbers pre-released and Group/Consumer LFL guidance upgraded 3 weeks ago, the main focus of today''s release was on brand/regional performance. On this front, we note that Nivea LFL at +18.0% came in stronger than expected (VA cons +13.1%), while La Prairie LFL at -12.0% was below expectations (VA cons -3.1%), with a caveat that VA numbers are not yet fully reflecting the ad-hoc pre-release. We also note Beiersdorf''s comments that Nivea growth was underpinned by price increases and a positive volume contribution for the entire portfolio of Nivea, and the brand recorded double-digit growth in all key markets. News Beiersdorf commented that it is seeing good trading in Q223 so far and agreed with a view that FY23 LFL guidance for Consumer of MSD-HSD growth is somewhat conservative. Earnings We increase our EPS estimates by c.1% in FY23e/24e/25e. Investment thesis While there is a lot to like about Beiersdorf, we believe that a lot is now reflected in consensus expectations and the share price. Rating and target price We maintain our Neutral rating. As a result of our estimates revisions and increase in our target multiple, our target price moves to EUR128 from EUR120 before. 15 questions for management You agreed that your FY LFL guidance (mid- to high-single digits for Consumer/Group) is somewhat conservative. What potential developments, in your view, would prevent you from achieving Consumer LFL in, say, the high-single to low-double digit range?
After Beiersdorf’s strong start to the year, the higher FY sales guidance seems to have baked in some conservatism as the Q2 is likely to also be a strong quarter. The firm seems to have sloughed off some habits like old clothes. Innovation and digitalization are two sides of the same coin. The so-called brand equity has become strong at all four Consumer main brands, which should stabilise the future revenue streams.
Today’s Beiersdorf looks different to prior to the pandemic. The last management change seems to have given the company a positive impetus. This is also the case for shareholder returns, with the CEO seemingly working hard to make better use of the significant cash pile. Any change on this front could be a trigger for the Beiersdorf story, in our view, although Rome wasn’t built in a day.
Summary of Q4/FY22 results From an operational perspective, the print was broadly in-line with consensus expectations: Consumer Q4 LFL at +6.7% was below VA consensus of +7.3%, however the miss was largely driven by La Prairie, which could be expected given the situation in China; FY23 guidance came in largely in-line with consensus. The main surprise was the absence of an increase in the dividend or a share buyback (the market was likely expecting some news on the returns-to-shareholders front); later, Beiersdorf commented that it hopes to come back to the market on this topic in the coming months. News Against the backdrop of double-digit sales growth in Consumer YTD, Beiersdorf admitted that there may be an element of conservatism baked into its Consumer LFL guidance of MSD growth in FY23 (''as you know, we always prefer to under-promise and over-deliver''). Earnings We increase our EPS estimates by c.1% in FY23e/24e/25e. Investment thesis While there is a lot to like about Beiersdorf, we believe that a lot is now reflected in consensus expectations and the share price. Rating and target price We maintain our Neutral rating, and our target price remains unchanged at EUR117. 15 questions for management Reflecting on your ''under-promise and over-deliver'' comment, what level of LFL growth for Consumer do you target internally for FY23? Could you please shed more colour on your thinking by brands (especially, Nivea and La Prairie)?
BEIERSDORF | SELL | EUR96 vs. EUR103 • Management more cautious on profitability than on sales momentum! • Clear slowdown in Western Europe Consumer sales in Q3: tough price negotiation! • Sales guidance lifted, but management more cautious on profitability
Summary of Q322 sales Beiersdorf''s Group Q322 LFL at +12.3% came in materially ahead of consensus at +9.7%, with Consumer at +11.8% vs. cons. at +10.7% and Tesa at +14.3% vs. cons. at +8.6%. Scanning the implied Q322 top-line drivers by Consumer regions, all regions came in ahead of consensus bar Western Europe with Q322 LFL (implied from 9M22) at +3.6% vs. cons. at +6.6%. Scanning Q322 LFL by brand, we note that Nivea grew by +9.9% (cons. +7.9%), La Prairie by +14.0% (cons. +15.0%), Derma by +22.6% (cons. +18.8%) and Healthcare by +8.8% (cons. +8.7%). News One needs to see how the market develops in 2023, but Beiersdorf aims to outperform; it agreed that mid-single digit Consumer LFL expectation for FY23 is reasonable. Earnings We increase our EPS estimates by c.1% in FY22e and maintain broadly unchanged in FY23e/24e. Investment thesis We believe that Beiersdorf offers a good organic growth profile and margin expansion potential from a low starting point. Coupling this with the new management team and increased possibility of the balance sheet being used, we see attraction in the shares. Rating and target price We maintain our Outperform rating. Our target price moves to EUR120 from EUR124 before (reflecting a reduction in target multiple given recent market weakness). 15 questions for management Even if one assumes the upper end of your FY Consumer LFL guidance (+10%), one would have to expect a very material sequential slowdown in growth in Q422 on a 3-Y CAGR (+1.9% vs. +4.8% in Q322). Given how October has been developing so far, how realistic is such a scenario?
Beiersdorf found it difficult to totally allay analysts’ concerns regarding profitability and potential recessionary developments in the coming quarters. However, the management tried the tackle this point by lifting the guidance against a backdrop of strong growth across all the brands. The positive point, in our view, is that profitability could be ‘managed’ as the company is managing to make some positive investments. The reported figures were above our estimates.
º A slight slowdown expected in Q3 for the Consumer division Beiersdorf Q3 sales expected to gain 10.5%, but tough negotiations with retailers in WE A FY 22 guidance lift is very likely, but the consensus is still quite high
BEIERSDORF - SELL | EUR103 vs. EUR100 Likely some challenges in H2 H1 above expectations… … But FY guidance is unchanged
Beiersdorf delivered another strong quarter, reporting a moderate acceleration in organic growth momentum in Consumer. The Blue Elephant trumpeted on to attack, whereas China backed La Prairie pushed the gas pedal. The Chinese restrictions were also part of the explanation for tesa’s still good but subdued performance.
Summary of Q2/H122 results Beiersdorf top- and bottom-line came in materially ahead of consensus expectations with Q2 Consumer LFL at +11.9% (Visible Alpha at +7.5%) and H1 Consumer EBIT margin at 15.1% (VA at 13.8%); H1 Group EBIT was c.13% ahead and H1 EPS was c.15% ahead. It is also notable that the LFL beat was largely driven by Nivea with Q2 LFL at +13.2% (VA at +7.2%). Scanning the implied Q2 LFL by Consumer regions, while the beat was broad-based, Americas were particularly strong. News While Beiersdorf maintained its FY guidance unchanged, Beiersdorf specified that it expects at least upper end of mid-single digit LFL growth for FY22 (we understand for both Group and Consumer). Earnings We increase our EPS estimates by c.5% in FY22e/23e/24e, largely as a result of reflecting H1 results, Beiersdorf''s outlook commentary, and updating for FX translation. Investment thesis We believe that Beiersdorf offers a good organic growth profile and will likely continue benefiting from reopening. Coupling this with the new management team and increased possibility of the balance sheet being used, we see attraction in the shares. Rating and target price We maintain our Outperform rating. As a result of our earnings revisions and roll-forward of our target estimates base by 6 months, our target price moves to EUR125 from EUR112 before. 15 questions for management Could you please shed more colour on your thinking wrt. potential LFL for Consumer (by brands and geographies) and Tesa in H222 in a scenario where the major risks that you mentioned (gas, inflation impact on consumers, lockdowns) do not materialise as significant headwinds for Beiersdorf?
The Beiersdorf management made a big show of presenting the company and their belief in how the new Consumer growth and profitability targets will be reached. Interestingly, investors did not seem to see the blue sky scenario as a given. There was also some disbelieve about the success of recently acquired companies as well as about future ones. The management thus had to answer many critical questions, which it did underwhelmingly in our view.
Capital Markets Day on 9th June Beiersdorf will host a Capital Markets Day in Hamburg on 9th June (its first investor day since 2010). It will give an update on its C.A.R.E.+ strategy and provide a deep dive into specific business areas. Within we list 50 questions (accompanied by 25 charts) that management could usefully address to give investors a better view of industry dynamics and the Beiersdorf equity story. Evidence of Nivea market share gains in Europe Referring to Nivea in Europe, you recently commented that you ''have been systematically gaining market shares since the summer of 2021, especially in body, face and sun''. Looking at your Nivea European market share data in Skin Care as per Nielsen (analysis within), we have not observed any meaningful inflection in your market shares over this period. Are your share gains concentrated in non-tracked channels, can you please shed more colour? Premiumisation of Nivea Premiumisation of Nivea has been on the forefront of the C.A.R.E.+ strategy of late; however recent data for the brand in Europe (as per Nielsen) doesn''t suggest a step-change in your price per volume or share of promotional sales (analysis within). Which data points would you suggest analysing if one were to assess the progress of Nivea premiumisation? Leaving the Luminous launch aside, what other actions / innovations have you taken to premiumise Nivea''s average price point? How to think about Beiersdorf Consumer''s profitability? We estimate that Beiersdorf Consumer''s gross margin is c.1360bp lower than that of L''Oreal. While we appreciate that there are important differences between the two businesses (e.g. L''Oreal generates more sales from higher margin luxury products and Beiersdorf''s manufacturing footprint is more skewed to Western Europe which weighs on profitability), the differential is very pronounced. To what extent do you believe this gap can be narrowed? What should be Beiersdorf Consumer''s normalised level...
Premium has been the major driver of skincare growth... While the skincare category overall has been thriving in recent years, it is little secret that luxury skincare was materially outperforming: over the last 5 years, premium skincare has grown at a CAGR of +7.4% vs. mass at +4.1% (according to Euromonitor). This trend has become even more pronounced with ultra-premium offerings seemingly booming of late (e.g. L''Oreal with Lancome Absolue and Helena Rubinstein, and Estee Lauder with La Mer and its Genaissance collection). ... and hence, understandably, the major MandA focus Premium outperformance explains why a lot of acquisitions by HPC majors have been focused on this space in recent years e.g. Unilever with multiple skincare acquisitions, including Kate Somerville, Dermalogica, Tatcha, and Paula''s Choice; Beiersdorf with Chantecaille; L''Oreal with Youth to the People and Takami; Colgate with Filorga; PandG with First Aid Beauty; L''Occitane with Elemis. Investors have been questioning what else is there to acquire With premium (and ultra-premium) skincare likely to remain an attractive category, we have increasingly been asked by investors what else could potentially be acquired in the premium skincare space. We have come up with a list of 60 companies We have screened more than 150 premium skincare brands - not a straightforward task as most of them are relatively small. We have come up with a list of 60 companies that could be attractive potential acquisition targets (for the likes of Beiersdorf, L''Oreal and Unilever) and provided as much information on them as we could find. The companies that stand out include Dr. Barbara Sturm, Augustinus Bader, Valmont, MBR, Erno Laszlo, Biologique Recherche, Tata Harper, and Derm Institute, among others. We have also included relevant social media data to help assess brand ''buzz''.
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Summary of Q122 sales With Q122 LFL sales already pre-released (Group at +10.3%, Consumer at +11.6%, Tesa at +5.1%), the report largely provided incremental colour. Growth by brand was as follows: Nivea at +9.2%, La Prairie at +11.1%, Derma at +27.5%, and Health at +15.5%. Scanning the regional Consumer trends, the main positive surprise relative to (Visible Alpha) consensus expectations was in Americas, with NorAm LFL at +23.1% (cons. +14.4%) and LatAm at +25.5% vs. cons. at +10.0%. We note that Beiersdorf has reiterated its FY outlook for the group (mid-single digit LFL and margin at PY level). News Beiersdorf expects Q222 to be a difficult quarter for La Prairie in China due to lockdowns, with a likely recovery in Q3/Q422. Earnings We increase our EPS estimates by c.1% in FY22e and by c.2% in FY23e/24e. Investment thesis We believe that Beiersdorf offers a good organic growth profile and will likely be a reopening beneficiary. Coupling this with the new management team and increased possibility of the balance sheet being used, we see attraction in the shares. Rating and target price We maintain our Outperform rating. Our target price moves to EUR109 from EUR107 before. 15 questions for management Reflecting on the sell-in and sell-out data you have been observing in China in March and April, is it reasonable to expect that La Prairie''s global organic sales development YOY will likely be in negative territory in Q222?
The pandemic is far from over and developments in China will have a material impact on Beiersdorf’s performance. To make it a perfect storm, the situation on the raw material side also remains challenging, and not only in terms of prices. The up date situation has slightly watered down the strong Q1 start with management none too enthusiastic for the remainder of the year. We see Q2 developments potentially triggering some guidance revision.
The margin guidance looks odd at first sight, as it may be a challenge in the current business environment, which might become even worse against the background of the Ukraine war. Beiersdorf has been quite successful in passing on higher input costs, but we believe that pricing power will become more and more limited and internal cost cutting will also see its limits. We were beaten at the revenue line by +2.5% and on EBIT level by +5.0%.
BEIERSDORF - SELL | EUR100 Ambitious strategy for Nivea and La Prairie but FY 22 margin under pressure Rebound of La Prairie in Q4 Focus on Nivea and La Prairie for 2022 Sell recommendation reiterated
Summary of Q4/FY21 results While Q421 LFL came in slightly ahead of consensus expectations and FY21 earnings were broadly in-line, the main focus of the release was on FY22 margin guidance. On that front, Beiersdorf guided for group margin around the FY21 level (13.0%) vs. slight EBIT margin growth guided at the Q321 stage. In light of the recent margin warnings in the HPC space, there was some level of nervousness around Beiersdorf''s FY22 margin outlook, and hence we believe that today''s guidance was a relief. News Beiersdorf commented that 2022 started very well in Consumer, with the segment seeing acceleration of growth in Q122, with both Nivea and La Prairie accelerating growth of the division. Earnings We reduce our EPS estimates by c.1% in FY22e and maintain them broadly unchanged in FY23e/24e. Investment thesis We believe that Beiersdorf offers a good organic growth profile and will likely see two years of above-par LFL growth. Coupling this with the new management team and an increased possibility of the balance sheet being used, we see attraction in the shares. Rating and target price We maintain our Outperform rating. Our target prices remain unchanged at EUR115. 15 questions for management Can you please specify how much of Consumer growth in Western Europe in Q4 was driven by the recovery of travel retail at La Prairie?
FY 21 figures almost in line with expectations More cautious on 2022 profitability
Beiersdorf has returned to the not well-paved M&A path with a small and expensive acquisition. The US-based business might help the company to speed up its CARE ambitions, but it does not need any toe-holds in these regions. Chantecaille’s philosophy might be helpful to target a new customer group, but there are limited cross-fertilisation opportunities. However, it looks different when it comes to sustainability. Here Chantecaille makes a difference, which might be beneficial for La Prairie.
BEIERSDORF - SELL | EUR95(-2%) Disappointing FY 21 guidance and poor Europe in Q3 Slowdown in Asia and poor Europe in Q3 Disappointing sales guidance for FY 2021 Sell recommendation reiterated
Today it was made crystal clear that Beiersdorf is a marketing machine with a skin care affiliate. The sluggish Q3 performance was covered by presenting 9M figures in the trading statement. Some additional Q3 figures were provided in the presentation, of which those representing growth rates of core product groups could not be correlated to other information provided. Beiersdorf’s figures came in weaker than anticipated and the potential future development was not well explained.
Summary of Q321 sales Beiersdorf''s Q321 LFL at +4.3% came in a touch below consensus expectations (VA cons at +4.4%) and group LFL guidance for FY21 at +8-10% was slightly below consensus (VA cons at +10.6%). Turning to margins, Beiersdorf reiterated FY21 guidance of group EBIT margin at the prior year level and commented that it is targeting slight EBIT margin growth in FY22. News Beiersdorf commented that next year''s slight EBIT margin growth is expected to be of high quality driven by pricing/mix/efficiencies and not by reduction in investment behind either its strategy or AandP. Earnings We reduce our EPS by c.-2% in FY21e/22e/23e. Investment thesis Consumer margin is now likely at a nadir, and the new management team is likely be viewed as a positive change. Against this backdrop, we believe that Beiersdorf offers a good organic growth profile and will now likely see two years of above-par LFL growth; combining this with undemanding valuation vs. peers, we see attraction in the shares. Rating/target price We maintain our Outperform rating. Our target price moves to EUR118 from EUR120 before. 15 questions for management There are understandably a lot of moving parts behind recent performance of La Prairie (e.g. travel retail pressures, situation in Hainan, reduction of retail doors in Europe, refusing to promote). Against this backdrop, how should we think about the brand''s growth in FY22 and beyond?
BEIERSDORF (SELL, TP EUR95) | Q3 sales slightly below expectations and cautious FY guidance :
Basically, the Q2 growth was against quite a weak basis, but a good continuation of the already paved recovery. La Prairie especially saw strong demand, despite some travel restrictions still. Digitalisation seems also to be taking off, supporting Beiersdorf’s luxury brand, which was solely sustained by offline retail. tesa made a strong and lasting contribution due to its positioning in electronics and electrics. Our quite moderate expectations were beaten.
Summary of Q2/H121 results Beiersdorf''s Q221 LFL at +28.3% came in materially ahead of the Visible Alpha consensus expectation at +23.8%, while H121 EPS was c.12% ahead of Bloomberg consensus (margin driven), with the beat driven by both Consumer and Tesa. Scanning the implied Q221 top-line drivers by Consumer regions, the main surprise relative to consensus expectations was in North America with implied LFL at +41.2% vs. Visible Alpha consensus at +8.2%. News Beiersdorf commented that H221 margins will be impacted by the sharp rise in commodity prices, significant increases in transportation costs and investment programs for digital and sustainability. Against this backdrop, Beiersdorf plans to take advantage of pricing opportunities and doesn''t expect FY22 margins to be lower YOY. Earnings We increase our EPS estimates by c.+1% in FY21e and c.+2% in FY22e/23e. Investment thesis Consumer margin is now likely at a nadir, and the new management team is likely be viewed as a positive change. Against this backdrop, we believe that Beiersdorf offers a good organic growth profile and will now likely see two years of above-par LFL growth; combining this with undemanding valuation vs. peers, we see attraction in the shares. Rating and target price We maintain our Outperform rating. Our target price moves to EUR120 from EUR114 before. 15 questions for management You mentioned that your goal is to develop Nivea as a global, more modern and transgenerational brand. What actions are you envisaging in order to achieve this?
BEIERSDORF (SELL, TP EUR95) | H1 results higher than expected but cautious guidance
Many reasons for being overlooked Beiersdorf was one of the Staples names most impacted by Covid, yet it has not meaningfully participated in the reopening trade. Frequent concerns are: i) lagging peers on e-commerce; ii) margins; iii) growth prospects and iv) management. We explore each of these issues in turn. Beiersdorf''s e-commerce sales are more impressive than meet the eye Many point to L''Oreal Consumer with c.20% of sales in e-commerce vs. Beiersdorf Consumer at c.9%. However ex. China, we estimate that L''Oreal Consumer would be closer to c.11%. In terms of e-commerce growth, last year Beiersdorf kept pace with L''Oreal in both Consumer and Active. Beiersdorf Consumer margins are likely at a nadir We struggle to think of any other Skin Care focused companies which has not grown margins since 2007. We are likely at a margin nadir. Furthermore, given the relatively low absolute magnitude of margins, any future improvement is material from an earnings growth perspective. We see over 5% momentum sales growth Firstly, let us not forget that Beiersdorf Consumer grew relatively strongly prior to Covid. Secondly, our momentum growth analysis points to a c.+5.2% mkt share neutral sales growth profile for Consumer (this ranks highly within a broader Staples context and within HPC is only bettered by L''Oreal). Both the CEO and CFO have now changed Confidence in management had been low and this has been reflected in the valuation: on consensus forward P/E ex. cash, Beiersdorf has not been cheaper relative to Staples in 25 years. We now have a new CEO and CFO; both have spent most of their careers outside Beiersdorf. And we see upside risk to LFL sales growth. We reiterate our Outperform recommendation Coupling the above observations with what we believe is meaningful upside risk to consensus LFL sales growth estimates (in both FY21e and FY22e), we reiterate our Outperform recommendation.
BEIERSDORF - SELL | EUR95(+4%) Why a new CEO? Tesa booming in Q1! Slight disappointment at Nivea and in Asia in Q1 New CEO from 1st May but with likely the same C.A.R.E+ strategy! BEI still lagging behind peers: sell recommendation maintained
Summary of Q121 sales With the Q121 LFL sales evolution (Group at +6.3%, Consumer at +2.7%, Tesa at +23.6%) already pre-released, the report only provided incremental colour. Looking through the brand lens, we note that the performance was as follows: Nivea at +0.5%, La Prairie at +17.0%; Derma at +12.1% and Healthcare flat. Scanning the regional Consumer trends, the main positive surprise relative to (Visible Alpha) consensus expectations was in Latin America with LFL at +16.0% materially ahead of consensus at -1.1%; in contrast, Western Europe at -0.8% was below consensus at +3.2%. News Commenting on the C.A.R.E.+ strategy, new CEO Vincent Warnery said he believes that with the focus on digitalisation, growth markets and sustainability, Beiersdorf have found the right answers to the questions and expectations of consumers. Earnings We leave our EPS estimates for FY21e/22e/23e broadly unchanged. Investment thesis Nerves around margins are likely to abate post Feb-2021 rebasing, and the recently announced CEO change is likely to be viewed as a positive. Against this backdrop, we believe that Beiersdorf still offers a good organic growth profile and will now likely see two years of above-par LFL growth; combining this with close to a record low valuation vs. peers, we see attraction in the shares. Rating and target price We maintain our Outperform rating. Our target price remains unchanged at EUR106. 15 questions for management Vincent Warnery sounded convinced that the C.A.R.E.+ strategy is focused on the right areas. What changes (if any) should we be expecting in the strategy once Mr. Warnery takes over?
… we have to change our view on Beiersdorf. Until yesterday evening, we had the impression things were going well, but the unexpected dismissal of the CARE+ initiator, Mr De Loecker, has forced us to re-think our position despite the indication that the new CEO will follow the same path. Like all other CEOs, we believe, Mr Vincent Warnery will put his own mark on the position, but this might be difficult given the current time frame. Preliminary figures had been released earlier this month.
… thanks to smaller tesa. As a quite close competitor in this area already flagged (Adhesives Technologies – Henkel), adhesives in general had a strong start to the year but, due to tesa’s stronger focus on automotive and electronics, the direct comparison differs greatly. The second message was the re-bounce at the group level continued sequentially, and Consumer sending some vital signs was the third message. Nevertheless, the absolute figures fit into our broad picture as FX headwinds knocked off 4.5pp.
The higher investments under the umbrella of the already expensive CARE programme have to seen and valued against the back of the current CEO’s predecessor and his targets. This meaningful investment needs to be better explained. Having already pre-released some adjusted figures, the full set of figures brought profitability much closer to our expectations.
Summary of FY20 results While Q420 results came in broadly in-line with consensus expectations (and were likely better than some had feared), all focus was around margin rebasing in light of the newly announced EUR300m of investment in sustainability, digitalisation, and growth markets in the next 5 years, with FY21 guidance of Group and Consumer EBIT margins at the prior levels implying c.-7% consensus earnings downgrades in FY21. News Beiersdorf explained the incremental EUR300m of investment by the sense of urgency to invest behind longer-term growth as Beiersdorf is seeing acceleration in some trends at a faster pace than it envisaged in 2019, at the previous margin reset stage (e.g. digitalisation, sustainability). Earnings We reduce our EPS estimates by c.-6% for FY21e/22e, and c.-7% for FY23e, primarily as a result of incorporating Beiersdorf''s guidance on margins (both for FY21 and beyond). Investment thesis Yes, confidence in management is low, however nervousness around margins is likely to abate post rebasing. Against this backdrop, we believe that Beiersdorf still offers a good organic growth profile and will now likely see two years of above-par organic growth; combining this with close to a record low valuation relative to peers, we see attraction in the shares. Rating / target price We maintain our Outperform rating. Our target price moves to EUR105 (from EUR111 before). 15 questions for management Assuming normalisation of the Covid situation starting from H221, is it fair to think of FY22 as a post Covid year and hence to expect Consumer EBIT to grow ahead of sales in FY22?
BEIERSDORF - SELL vs. NEUTRAL | EUR95 VS. EUR100 (+4%) Disappointing guidance for 2021 as new investments are necessary! FY sales almost in line with expectations FY 2020 EBIT margin down 140bp to 12.9% More investments in 2021 imply disappointing guidance Target price lowered to EUR95. Sell recommendation vs Neutral
Summary of Q320 sales Beiersdorf''s group Q3 LFL at +0.2% came in materially ahead of Vara consensus at c.-4.0%, with the beat driven by both Consumer and Tesa. In Consumer, the main surprise relative to (Visible Alpha) consensus expectations was in Latin America with implied Q3 LFL at +11.5% vs. Visible Alpha consensus at -5.0%. News Beiersdorf commented that FY EBIT margin in Consumer is expected to decline broadly in line with what H1 YOY decline was (H1 was -210bp), having added that Beiersdorf is being prudent in its margin guidance. Earnings We reduce our EPS by c.(5)% in FY20e, c.(3)% in FY21e and c.(2)% in FY22e. Investment thesis While management confidence in delivery of the 2023 margin target is seemingly shaken, consensus is already there. Even assuming a material 2023 margin miss (we look for 15.0% in Consumer vs. the 16-17% target) we still derive high-single digit mid-term (FY22e/FY23e) EBIT growth courtesy of what should be relatively strong top-line growth and a relatively low absolute margin. Rating/target price We maintain our Outperform rating. Our target price moves from EUR109 to EUR106. 15 questions for management Can you please roughly quantify each of the moving blocks behind your FY20 margin expectation (e.g. increased investment behind your brands, promotional pressures, transactional FX)?
Group organic sales rose 3.3% in 3Q’19, missing consensus by 105bps due to a difficult performance in Tesa, which declined 1.1% organically in the quarter. Consumer organic sales rose 4.7% vs. consensus on 4.8% driven by La Prairie, which grew 22.7% in the 9M’19 despite a tough comp.
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Group organic sales rose 3.6% in 2Q’19, in-line with consensus and against a tough comp of 8.9%. Consumer division organic sales rose 3.8% vs. consensus on 4.8% driven by 7.8% organic growth in AAA, 0.4% in Europe and 7.4% in the Americas.
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Group organic sales rose 6.0% in 1Q’19, beating consensus by 230bps driven by strong, broad-based growth in the Consumer division. Consumer organic sales rose 6.8% (vs. consensus on 4.0%) driven by 10.6% organic growth in AAA, 5.3% in Europe and 4.4% in the Americas.
Today, we published a note updating our view on Beiersdorf that the group’s C.A.R.E.+ strategic reset does not guarantee success and highlight key news and our views below.
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Maintain HOLD on lowered €88 target price (€100 prior). New CEO Stefan De Loecker warned that the industry faces an historical disruption and announced plan to reset EBIT margin and step up investments. The C.A.R.E.+ strategy will see €70-80m in additional investments from 2019 to open new markets, drive innovation and upskill the workforce.
Group adj. EBIT margin remained flat yoy at 15.4%, in line with guidance but 20bps below consensus on 15.6%. Consumer margin rose 10bps to 15.3% vs. consensus on 15.5% while tesa's margin declined -80bps to 15.7% vs. consensus on 15.8%. tesa's margin declined -80bps in 2H’18 driven down by consolidation impact of acquisitions and higher raw material prices.
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