L'Oréal: Stock Still Down 13% Year-To-Date Despite Strong Q3
(Preview) Company Update (OR FP) (Buy)
Summary
L'Oréal's strong sales growth has continued into Q3, despite renewed COVID restrictions in China, thanks to its broad portfolio.
The company has clearly outperformed arch rival Estée Lauder operationally, including in the key Chinese market.
Including currency tailwinds, we believe EPS can grow 25% this year, giving the stock a 32x P/E, reasonable in our view.
Management is still bullish on the Chinese consumer, and we agree. L'Oréal is less exposed to China than Estée Lauder.
With shares at €350.25, our forecasts show a total return of 36% (10.6% annualize) by 2025 year-end. Buy.
Introduction
We review our investment case on L'Oréal SA, which we believe to be one of the highest-quality franchises in public markets and to still offer a 10%+ annualised return to investors.
Our current Buy rating on L’Oréal followed an upgrade in March. Since then, L’Oréal shares trading in Paris have gained 5.0% (including a dividend) in euros, though the share price remains down 13% in the past year. …