Henkel: Not Cheap Enough Ahead Of Capital Markets Day

(Preview) Company Update (HEN3 GY) (Neutral)

Summary

• Henkel shares have fallen 45% in the past 5 years and are at approximately 17x 2022 guided EPS and a 3% Dividend Yield.

• While commodity prices have softened somewhat recently, we believe Henkel will likely continue to see strong cost headwinds.

• Management expects a 15-35% ex-currency decline in Adjusted EPS this year; even including currency tailwinds, EPS fell 18.5% in H1.

• We would like management to address Henkel's low overall business quality, restructuring risks and unclear targets.

• With Preferred Shares at €62.50, we do not believe they are cheap enough, and reiterate our Hold rating. Avoid.

Introduction

We review our Holding rating on Henkel AG & Co. KGaA three months after our original downgrade, and ahead of Henkel’s capital markets day on September 20.

Henkel’s Preferred Shares have risen 2.6% since our downgrade, but remain down by 45% in the past 5 years. (In this article we refer exclusively to Henkel's Preferred Shares, the class most commonly held by institutional inves…