Safilo shines, Equita recommends 'buy' and raises target price

(Il Sole 24 Ore Radiocor)- The stock of Safilo Group in the Italian Stock Exchange, thanks to the improvement in the rating and price target by Equita analysts. The share price of the high-end eyewear company jumped more than 10 per cent.

In detail, the sim sees "much stronger fundamentals than in the past, but a still depressed valuation". The recommendation changes to 'Buy', with the experts therefore recommending buying the stock, believing that "management has built a much more solid business model than in the past", an improvement that "has not yet been priced in by the market". In particular, the brand portfolio now generates more than 50 per cent of revenues from home brands (Smith, Carrera, Polaroid and Blenders) compared to about a third a few years ago, Equita points out, and the most important licences (Boss, Carolina Herrera, Marc by Marc Jacobs and Tommy Hilfiger) are less concentrated (none exceeds 10 per cent of revenues) and have all recently been extended until 2030-2031.

Sales are growing, albeit moderately (about +2% at constant exchange rates in the first quarter, a trend expected for the second quarter as well), and analysts seeroom for improved margins in 2025 and beyond. This is also thanks to the exchange rate, as the group's margins benefit from a weak dollar (since April, the single currency has gained over 6% against the greenback). In addition, the experts point out, the group has structurally improved the conversion of ebitda into cash, thanks to "better working capital management": it has generated between 30 and 50 million of free cash flow in 2023-2024, a level according to the sim that is "sustainable". In addition, Safilo has reduced net debt to below 1 times ebitda at the end of 2024 and has allocated free cash flow to acquisitions (such as the perpetual licence for Eyewear by David Beckham in 2024) and buy-backs (12 million in 2024 and 18 million just launched in 2025).

On the tariffs front, Safilo facesa "significant" risk from the imposition of tariffs, considering 40% of revenues generated in the US and 70% of sourcing from China in 2024 (expected to fall below 40% in 2026). However, after the recent US-China agreement, the risk appears 'manageable' according to analysts, thanks in part to price increases initiated in the US, negotiations with suppliers, and inventory management.

It should be emphasised that the group is working on the opportunities offered by product innovation such as smart glasses and audio glasses and, according to the experts, 'can offer counterparts design, distribution and branding capabilities': the recent Google-Warby Parker agreement for the co-development of smart glasses, for instance, 'seems to underline the importance of these assets'.