Henkel: Mixed Progress In Q2 But Heading In Right Direction (Preview)

Company Update (HEN3 GR) (Buy)

Summary

• Henkel's Preferred shares are close to their 52-week low, having fallen another 12.7% since our initial Buy rating in June.

• Q2 results were mixed, as different cyclical factors offset each other; H1 sales were close to 2019 level but EBIT was 13% lower.

• 2021 outlook was revised down slightly, due to higher inflation, but still implies EPS growth of low-single digits to 10% in EUR.

• Progress on the turnaround is mixed, with share gains in some areas but not others, and good sales in key regions outside North America.

• With Preferred shares at €82.60, we expect a total return of 54% (13.9% annualized) by 2024 year-end. The Dividend Yield is 2.2%. Buy.

Introduction

We review our investment case on Henkel AG & Co. KGaA after the company released H1 2021 results last Thursday (August 12).

We initiated our coverage on Henkel with a Buy rating in June. Since then, its Preferred shares have lost another 12.7% (in EUR), and are close to their 52-week low:

H1 results were mixed, with different mov…