MILAN, June 6 (Class Editori) — Thanks to the easing of Covid-19 restrictions in China since June 1, analysts have seen positive signs in the luxury sector. Since yesterday, in almost all districts of the capital, public transportation and table-service dining have resumed, cinemas have reopened and it is possible to circulate as long as one has had a negative test for no longer than 72 hours. With the gradual return to normality in the metropolises of Beijing and Shanghai, Equita’s experts are also positive about a quick recovery in the high-end sector.
"Remember that China accounts for about 25% of industry sales on average. Brunello Cucinelli is the least exposed brand, at 15%. The easing of restrictions is positive for the luxury sector, which is trading at 20x P/E 2023, at a 65% premium to the Stoxx 600 Europe P/E, vs. 75-80% pre-pandemic premium," the investment bank's analysts stated. "We think that the easing of restrictions will be followed by a rapid return to sales growth, after the roughly 40% decline indicated by several companies in the sector during the period of restrictions".
The institute's favorite stocks remain, among the Italian companies, Moncler, for which growth is also expected to be linked to company-specific elements —in particular the development of Stone Island, at 21x P/E 2023 or 19x ex-cash vs. five-year historical average of 18-40x— as well as Salvatore Ferragamo, whose medium-term revival story is deemed "credible" by experts, at 1.8-1.6x 2023-2024 EV/sales vs. 3.0-2.6x for peers.
On the other hand, among foreign companies, French giant LVMH stand out thanks to its leading brands, particularly those in the fashion & leather goods division, business diversification, strong pricing power and significant scale advantage —at 19.3x P/E 2023 vs. five-year average of 17.5-38x— as well as Kering, with valuations at 14x P/E 2023 vs. five-year average of 14-30x, with top industry margins and good prospects for core brands.
(Source:Class Editori)
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