Deep dive – finding value in the parts; upgrading to Buy
Key analyses and conclusions include:
* LVMH is a quality company and not just a sector proxy. We investigate lesser-known and under-analysed brands, and suggest their diversified value will become clearer during challenging times.
* Deep dive into all five divisions. We forecast sales and margin by brand, supporting a five-year EPS CAGR of 10% to 2020.
* Divisional, bottom-up SOTP valuation suggests upside potential to EUR 200. Further potential exists to increase shareholder returns or reinvest as the group de-levers.
* SOTP valuation and current share price imply that the Watches & Jewellery, Perfume & Cosmetics and Selective Retailing divisions are valued at zero.