Hermès: playing growth - Credit Suisse upgrades stock

(CercleFinance.com) - Credit Suisse has directly upgraded its rating on the share of French luxury group Hermès International from "Underperform" to "Outperform".


The broker has increased its target price for the share from 476 euros to 531 euros (+11%), meaning upside potential of around 7%.

The group is distinguished for its "unique business model" and "the visibility on sales growth in an uncertain environment," the broker says in its report." In leather goods, accounting for 50% of sales and 60% of profit in 2018e, demand clearly exceeds supply," Credit Suisse points out.

In addition, thanks to planned factory openings, Hermès should be able to increase its volumes by 7% to 8% p.a. until 2021. "Coupled with more ambitious price increases than in recent years, we estimate leather goods sales can grow +10% in 2019 and 2020e," Credit Suisse believes.

Finally, the valuation of the Hermès share, although still high, with the stock is trading at a 12-month P/E of 34x, is considered "far more reasonable" than its level last May (47x).



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