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Luxottica<br />
Italy/Personal Goods Analyser<br />
Luxottica (Accumulate)<br />
Accumulate<br />
Recommendation unchanged<br />
Share price: EUR<br />
closing price as of 07/05/2012<br />
Target price: EUR<br />
from Target Price: EUR<br />
Reuters/Bloomberg<br />
28.40<br />
31.40<br />
29.80<br />
LUX.MI/LUX IM<br />
Market capitalisation (EURm) 13,076<br />
Current N° of shares (m) 460<br />
Free float 24%<br />
Daily avg. no. trad. sh. 12 mth 730,316<br />
Daily avg. trad. vol. 12 mth (m) 17<br />
Price high 12 mth (EUR) 28.40<br />
Price low 12 mth (EUR) 18.73<br />
Abs. perf. 1 mth 6.01%<br />
Abs. perf. 3 mth 11.94%<br />
Abs. perf. 12 mth 26.45%<br />
Key financials (EUR) 12/11 12/12e 12/13e<br />
Sales (m) 6,223 6,960 7,499<br />
EBITDA (m) 1,131 1,334 1,521<br />
EBITDA margin 18.2% 19.2% 20.3%<br />
EBIT (m) 807 977 1,137<br />
EBIT margin 13.0% 14.0% 15.2%<br />
Net Profit (adj.)(m) 512 621 732<br />
ROCE 8.7% 10.5% 12.0%<br />
Net debt/(cash) (m) 2,032 1,890 1,465<br />
Net Debt/Equity 0.6 0.5 0.4<br />
Debt/EBITDA 1.8 1.4 1.0<br />
Int. cover(EBITDA/Fin. int) 10.4 12.6 16.3<br />
EV/Sales 2.0 2.2 2.0<br />
EV/EBITDA 11.1 11.7 9.9<br />
EV/EBITDA (adj.) 11.1 11.7 9.9<br />
EV/EBIT 15.6 15.9 13.3<br />
P/E (adj.) 19.6 21.0 17.8<br />
P/BV 2.8 3.6 3.2<br />
OpFCF yield 7.4% 7.2% 7.4%<br />
Dividend yield 1.7% 1.8% 1.8%<br />
EPS (adj.) 1.11 1.35 1.59<br />
BVPS 7.85 7.88 8.78<br />
DPS 0.49 0.50 0.50<br />
30 vvdsvdvsdy<br />
28<br />
26<br />
24<br />
22<br />
20<br />
18<br />
Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12<br />
Source: Factset<br />
LUXOTTICA Stoxx Personal Goods (Rebased)<br />
Shareholders: Del Vecchio 68%; Giorgio Armani 5%;<br />
Analyst(s):<br />
Giada Cabrino, CIIA, Banca Akros<br />
giada.cabrino@bancaakros.it<br />
+39 02 4344 4092<br />
Q1 12 results: outstanding<br />
The facts: Luxottica reported an outstanding set of figures slightly ahead of<br />
consensus estimates, yesterday at market closed, conf call followed.<br />
Our analysis: Revenues were up 11.1% CN, with sales in NAM at +9% CN<br />
(approx 60% of total sales), Western Europe +6% (mid single digit positive in Italy,<br />
flat in Spain, negative only in Portugal and Greece). Retail channel (+10.5% CN):<br />
every chain reported positive comps (overall comps +6.5%) with the exception of<br />
Pearle Vision (NAM); Lenscrafter in NAM: +4.9% comps., SGH worldwide: +9.6%<br />
comps., OPSM: +6.3% comps. In Emerging markets retail sales increased by<br />
14%, helped by GMO – now it counts more than 450 stores. Retail EBIT adjusted<br />
increased by 120bps in Q1 12 (CN it was up 100 bps). Wholesale channel<br />
revenues were up 11.9% CN (the organic growth CN was +10.1%) and they were<br />
positive in every region (Western Europe +6%, NAM +18%, Emerging markets<br />
+19%, RoW +10%); solid performance came from Ray Ban and Oakley (both d/d)<br />
and Coach, as well as from licensed brands (especially Chanel, Burberry and<br />
Prada). EBIT wholesale increased by 70 bps. FCF generated in the period was<br />
EUR 36m, net debt grew by approx EUR 15m vs. YE 11 (Tecnol acquisition<br />
weighed for EUR 88m); net Debt/EBITDA CN was stable at 1.7x.<br />
75 / 80% of Tecnol integration should be done, according to the management by<br />
YE, with 5 ongoing projects (brand rationalisation and new collections – start of<br />
Vogue RX production in Q3 12; commercial organization; IT, warehouse projects;<br />
manufacturing unit role definition and organization integration).<br />
Luxottica Q1 results<br />
EUR m Q1 11 Q1 12 adj.* Y/Y % Chg. Q1 12 reported<br />
Wholesale 641.1 726.8 13.4% 726.8<br />
Retail 915.0 1,061.4 16.0% 1,061.4<br />
Total sales 1,556.1 1,788.2 14.9% 1,788.2<br />
EBITDA 283.0 345.6 22.1% 323.9<br />
EBITDA margin 18.2% 19.3%<br />
18.1%<br />
Wholesale EBIT 147.8 172.9 17.0% 172.9<br />
% margin 23.1% 23.8%<br />
23.8%<br />
Retail EBIT 96.8 124.8 28.9% 103.2<br />
% margin 10.6% 11.8%<br />
9.7%<br />
Inters. EBIT -37.2 -39.6<br />
-39.6<br />
Total EBIT 207.4 258.2 24.5% 236.5<br />
EBIT margin 13.3% 14.4%<br />
13.2%<br />
Net profit 114.7 146.0 27.3% 130.8<br />
% on sales 7.4% 8.2%<br />
7.3%<br />
Source: company data *retail EBITDA is adjusted for EUR 21.7m one-off related to the OPSM reorganisation;<br />
at net income level the adjustment is EUR 15.2m.<br />
Conclusion & Action: Although Q1 12 figures were already discounted by the<br />
market and no big surprise was reported, the capability to deliver must be outlined<br />
this time also. This is the year of Armani, Coach, Tecnol and the retail<br />
development in Latam: the impact (ex-Armani) is just material. We have fine tuned<br />
our estimates, with no material impacts on our DCF, however, we are now more<br />
convinced than before that Lux could deliver another outstanding year being<br />
resilient to the negative macroeconomic scenario. Rule of thumb is confirmed.<br />
We have just moved our beta (WAC from 7.33% to 7.2%) obtaining a new price<br />
target of EUR31.4/sh: we still believe in a small potential upside for the stock. The<br />
stock trades at premium vs. it luxury peers, but we outline that none of them is<br />
market leader in its segment. We do not rule out stock volatility in the short run.<br />
Page 30 of 80 European Securities Network<br />
Please refer to important disclaimer on the last page
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