L’Oréal suffered on the stock market last Friday, in the wake of the publication of quarterly accounts, which reflects a slowdown in Asia (impact of China’s zero-Covid policy) and for the luxury business. Bordier & Cie remains confident, however, recommending keeping the share. For the Swiss bank indeed, “beyond quality fundamentals”, the profile of L’Orealwhich combines defensive qualities and growth stock status, “is reassuring in today’s more uncertain environment”.
And beyond the market’s disappointment in luxury and China, the quarterly performance of L’Oréal is considered “remarkable” by Bordier & Cie, with a turnover generally higher than analysts’ expectations. Outside of China, momentum in emerging markets “has been strong”, while demand has been “resilient” in Europe and the United States, the bank argues. The group, which is outperforming the beauty market (gaining market share to the detriment of competitors), has also largely benefited from a very favorable currency effect, due in particular to the soaring dollar against the euro.
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The L’Oréal Luxe division suffered from repeated confinements in China and Hainan this summer and supply difficulties (perfume bottles), among other things. And yet, the perfume “is booming thanks to blockbusters (Libre by Yves Saint Laurent, La Vie est Belle by Lancôme)”, while L’Oreal has made “promising launches (Paradoxe by Prada and Code by Armani)” and “strong innovations in skincare (Lancôme Rénergie Triple Sérum and Absolue)”, asserts Bordier & Cie.
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For its part, the Active Cosmetics branch “continues to achieve feats” thanks to the La Roche-Posay brand carried by Cicaplast and Effaclar, and by the success of UVMune 400 and CeraVe, notes Bordier & Cie. The consumer products division experienced double-digit growth thanks to “rediscovered momentum in make-up” and “in haircare”, reports the Swiss bank. The professional products branch confirmed its recovery.
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L’Oréal “is pursuing its offensive product launch strategy while investing in relevant growth drivers, which indicates a continued strengthening of support for brands in order to fuel the momentum of market share gains”, underlines Bordier & Cie .
L’Oréal may at first glance seem a little expensive on the stock market, the capitalization representing 27 times the expected profits for 2023, but this relatively high valuation multiple at first reading is largely justified by its status as a world leader and value of growth, the group’s technological lead and the extreme solidity of its balance sheet, not to mention the qualities defensive linked to its activity (the hygiene-cosmetics sector is reputed to be defensive in times of economic slowdown).
On the side of thetechnical analysis, L’Oréal’s outlook is more mixed. Discover our analysis (financial and graphic) of Friday, October 21 on the cosmetics giant in momentumCapital’s dedicated daily premium investment letter and newsletter, which helps its readers identify entry (buy) and exit (sell) points on stocks (click on the link below to subscribe) .
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