Cucinelli weak despite good sales growth in first half year

(Il Sole 24 Ore Radiocor) - Brunello Cucinelli declined at Piazza Affari, despite the double-digit growth in sales recorded in the first six months of the year (+14.1% at current exchange rates and +14.7% at constant exchange rates). The sales figures, although on a brisk upward trend, were in line with market forecasts.The company also confirmed its growth estimates for the full year 2024, at 10%, and for 2025, also at around 10%. The company also reiterated that it is aiming for a doubling of turnover to 2030. The indications are undoubtedly positive and above the industry average, but at this point analysts believe that the stock is already correctly valued by the market and that the Umbrian company will still fail to surprise investors in the coming months, as it did last year, revising several times upwards the forecasts on business performance..

Intermonte, for example, recommends caution ('Neutral'), while estimating a target price of EUR 105, above the stock market price. "The group continues to benefit from its positioning in absolute luxury clothing, thanks to an exclusive, highly chic and recognisable product made with great craftsmanship. These factors seem to us to justify the premium at which the stock trades compared to its competitors," they pointed out, recalling that the ratio of price to expected year-end earnings is around 52 times.

Equita also confirmed its 'Hold' recommendation, although it indicated a higher target price than the actual price, at EUR 100. The sim's expertsappreciated the sales performance in the first six months of the year, but at the same time pointed their index finger on the trend of the capex-debt ratio, which could be slightly higher than expected due to the investments that the company will make, from the doubling of the Solomeo factory (work on which will be completed in 2026) and the new men's tailoring factories in Penne and Gubbio. In detail, the capex-to-debt ratio is expected to be 9.5%, compared to the previously indicated 9-9.5%. "A similar ratio is now also expected for 2025, compared to 7-8%," Equita's experts commented, adding, "our revenue estimate for the full year 2024 remains slightly more optimistic than the company's, at around 13%, assuming slightly accelerating retail in the second half of the year."

As far as wholesale is concerned, a deterioration of turnover in the second half of 2024 is to be expected, with flat or even negative sales performance due to more difficult comparisons and the timing of Fall/Winter deliveries more skewed towards the second quarter of 2024. "Valuations appear reasonable, but at the same time not particularly attractive, both in absolute terms (the ratio of price to expected earnings in 2024 stands at 46 times, close to the historical average of 50 times in the 2022-2023 period) and relative to competitors (premium of 120% versus average 113% in 2022-23, range 80%-140%)," the sim's analysts concluded.

Caution was also advised by the experts at Jefferies, who confirmed the 'Hold' rating with a price target of EUR 97. For the business house, first-half earnings, which will be announced at the end of August, assume an ebit margin that is 50 basis points better than a year earlier (ebit seen at 103 million). "We believe thatmore moderate revenue progress in the second half (of +11.5% net of foreign exchange) underpins a stable margin," they added, forecasting a year-end ebit of 212.6 million, which is based on sales growth at constant exchange rates of 13% (compared to the roughly 10% target) and ebit margin of +29 basis points year-on-year. Jefferies, however, points out that Brunello Cucinelli cannot be considered a company that anticipates trends in the luxury sector. The title of the report is in fact 'The calm before the storm?'. After all, the Umbrian company is very exposed to shopping by the wealthy and also has little presence in China, where it still has ample room for growth. 'A factor, the latter, which also justifies the premium prices compared to rival companies, despite the company's below-average margins,' the Jefferies analysts concluded.