Kering (PRTP.PA) — Gucci Still Blooming: Raise Estimates and TP, Reiterate Buy
Post-investor meetings with Kering management, we come away with more confidence.
We see current strategies and trends at Kering offering stand-out resilience in a
deteriorating operating environment. We are also optimistic about a near-term Puma
exit, which could be a catalyst for further re-rating. Based on our revised EPS and
updated SOTP valuation, our new TP is €375 (was €340). Kering remains our top pick
and is part of Citi’s Focus List Europe. Shares have strongly outperformed the luxury
sector YTD (+54% vs. sector +25%), following significant outperformance in 2016
(+35% vs. +13%) reflecting industry-beating growth at Gucci and Saint-Laurent, and
optionality at Puma (disposal) and Bottega Veneta (restructuring). The shares continue
to look attractively valued to us, trading on a ~19x 2018E P/E, a ~10% discount to the
sector. We forecast 2017-19E Luxury sales and EBIT CAGRs of 11% and 18%
respectively and ~430bp cumulative Luxury EBIT margin expansion.
Buy | Target price €375.00