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03 Feb 2023
Over achiever
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Over achiever
- Published:
03 Feb 2023 -
Author:
Ghayor Lina LG | Packer William WP -
Pages:
10
Publicis Groupe reported FY22 result ahead of consensus
Q4 organic net revenue growth came in at +9% versus consensus at +5%, implying a 15% 3y stack. We note the strong momentum of Epsilon at +26% 3y stack and Sapient at +36% 3y stack. Margins came in line with consensus with the company paying a record high bonus pool as % of net revenues.
The main surprise: positive organic growth outlook for FY23
In our view, the key highlight of the result was that the company guided for organic net sales growth between 3% and 5% for FY23, above pre-result consensus of c0%. Margins-wise, the company guides for headline operating margins between 17.5% and 18% and expressed confidence during the call in its ability to absorb cost inflation. We note that the announcement of a EUR200m share buyback was also a welcomed initiative.
More clarity on capital allocation in the medium-term
During the call, Management clearly stated that the company capital allocation policy in the near future does not involve a larger-scale buyback program. Publicis Groupe announced a EUR500-600 MandA envelope for bolt-on acquisitions, which we believe is a key investment to support the development of growth accretive revenue streams (Sapient and Epsilon).
Reiterate Outperform: Publicis well-placed in 2023 and beyond - key pick in Media and Internet
We increased our EPS forecast by 5% for 2023e and by 2% for 2024e reflecting the healthy growth outlook and the stabilizing share count. Publicis remains a key pick in media offering exposure to a structural rerating story driven by a more visible revenue transition, a best-in-class operating model and strong FCF yield. We upgrade our DCF-derived target price to EUR82 per share (from EUR73), suggesting 16% upside. For more on our key pick for 2023 please see MEDIA and INTERNET : How to play Media in 2023? (133).