[ET Net News Agency, 27 November 2018] Daiwa Research lowered its target price for
L'Occitane International (00973) to HK$17 from HK$17.5 and downgraded its rating to
"outperform" from "buy" after outperforming the HSI by 23% rally year-to-date.
The research house said L'Occitane's 1H FY2019 earnings is not a surprise as 1H profit
generally represents a small portion of its full-year profit and the company is bearing
the marketing campaign costs of its new hero product that was only launched in September.
Management highlighted the conference call that sales in its key markets, namely the US,
Europe and Asian countries, continued to see a solid performance. With robust sales trends
seen for its new hero product, management plans to extend the hero product line and has
already set up a multi-functional team to devise the plan.
Despite a weak operating margin (of only 1% in 1H FY2019), management continues to
target for a stabilised profit for its core brand. Daiwa cut its FY2019-21 EPS forecasts
by 6-14% after factoring in its updated FX, lower gross margin and higher LimeLife
expansion cost assumptions. (KL)