LVMH - Further bolstered by sector’s accelerating sales growth – to remain above peers
Our Buy rating is underpinned by two factors. The first is absolute: business model stabilisation. After declining for three years, the EBIT margin remained almost flat in 2015-16 and should increase in 2017, with lower capex/sales and a now stable tax rate of 31-32% (vs under 30% previously). The second is relative: the c.18% EBIT margin, which is back above the still-falling sector average (now c.16%), and a current capex/sales ratio of c.5.0% (vs c.6% for the past 10 years), below the sector average of 5.5-6.0%.