Henkel: Turnaround Not Priced In, Still Cheaper Than Peers & History (Preview)

Coverage Initiation (HEN3 GR) (Buy)

Summary

• Henkel is a German conglomerate with the global #1 industrial adhesives business and solid consumer brands in beauty, home and laundry.

• The company has been in a turnaround since the start of 2020, after too much acquisitions and cost cuts, and not enough investments.

• The turnaround aims to return Henkel to mid-to-high single-digit EPS growth. We believe this will succeed; sales already rebounded in Q1.

• Shares remain a quarter below their 2017 peak and offer a dividend yield of 2.0%. The dividend has never been cut since the 1985 IPO.

• With shares at €94.66, we expect an exit price of €131 and a total return of 44% (11.1% annualized) by 2024 year-end. Buy.

Introduction

Henkel is a German conglomerate involved in industrial adhesives and consumer goods, with a market capitalization of €38.0bn ($45.6bn).

We believe Henkel shares to be undervalued and can deliver a 10%+ annualized return by 2024 year-end. Henkel has experienced a number of operational and macro challenges in the last few …