Prada: FY13 results below expectations, prospective growth rates should be closer to peers
BUY, Fair Value HKD80 vs. HKD87 (+30%)
Prada unveiled FY13 results which missed estimates, with an EBIT margin declining by 80bps to 26.2% whilst investors were expecting 27%. This difference comes from Miu Miu and the dramatic inflation in the group’s opex costs related to retail expansion (+79 DOS in 2013) and we expect this headwind to continue in FY14 and partially in FY15 as DOS openings will remain a major catalyst for Prada and Miu Miu, as highlighted in the group’s three-year plan presented yesterday at the Investors Day. Following the lower-than-expected FY13 results and the 2014-16 guidance, we are revising down our FY14-15 estimates by 6% on average, leading to our new FV our HKD80. Despite lower growth rate assumptions, they remain among the “best-in-class” within the luxury industry. Buy reiterated.
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