Editing LVMH Moët Hennessy - Louis Vuitton, Société Européenne
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- Diversity & Inclusion | - Diversity & Inclusion | ||
- | - Dîner des Maisons engages (Fund raising dinner - Sickle cell anemia) | ||
- EllesVMH (Group initiative for Gender Equity) | |||
- Heart Fund | |||
- LIVE (help people back into work after long-term unemployment) | |||
- Disability Inclusion | - Disability Inclusion | ||
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=== Total Addressable Market === | === Total Addressable Market === | ||
Here, the total addressable market (TAM) is defined as the luxury goods global market, and based on a number of assumptions, it is estimated that the size of the market as of today (6<sup>th</sup> July 2023) in terms of revenue, is US$354.80bn, and is expected to grow at a CAGR of 3.38% in the forecast period of 2023- | Here, the total addressable market (TAM) is defined as the luxury goods global market, and based on a number of assumptions, it is estimated that the size of the market as of today (6<sup>th</sup> July 2023) in terms of revenue, is US$354.80bn, and is expected to grow at a CAGR of 3.38% in the forecast period of 2023- 2028.<ref name=":0">Luxury Goods - Worldwide | Statista Market Forecast</ref> | ||
== Financial Highlights <ref name=":2" /> == | |||
{| class="wikitable" | |||
!'''Key Consolidated Data ''(EUR Millions)''''' | |||
!'''2020''' | |||
!'''2021''' | |||
!'''2022''' | |||
|- | |||
|Revenue | |||
|44,651 | |||
|64,215 | |||
|79,184 | |||
|- | |||
|Profit from recurring operations | |||
|8,305 | |||
|17,151 | |||
|21,055 | |||
|- | |||
|Net profit | |||
|4,955 | |||
|12,698 | |||
|14,751 | |||
|- | |||
|Net profit, Group share | |||
|4,702 | |||
|12,036 | |||
|14,084 | |||
|- | |||
|Cash from operations before changes in working capital | |||
|13,997 | |||
|22,621 | |||
|26770 | |||
|- | |||
|Operating investment | |||
|2.478 | |||
|2,664 | |||
|4,969 | |||
|- | |||
|Operating free cash flow | |||
|6,117 | |||
|13,531 | |||
|10,113 | |||
|- | |||
|Total equity <sup>(a)</sup> | |||
|38,829 | |||
|48,909 | |||
|56,604 | |||
|- | |||
|Net financial debt <sup>(b)</sup> | |||
|4,241 | |||
|9,607 | |||
|9201 | |||
|- | |||
|Adjusted net financial debt/Equity ratio | |||
|10.9% | |||
|19.60% | |||
|14.30% | |||
|} | |||
<small>''(a) Including minority interests''</small> | |||
<small>''(b) Excluding “Lease liabilities” and “Purchase commitments for minority interests’ shares” included in “Other non-current liabilities”''</small> | |||
=== Business Group - Highlights === | === Business Group - Highlights === | ||
{| class="wikitable" | {| class="wikitable" | ||
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==== Revenue by business group ==== | ==== Revenue by business group ==== | ||
[[File:Capture4.png|thumb|Revenue by business group, as a % of total revenue.|left]] | |||
==== Revenue by geographic region delivery ==== | ==== Revenue by geographic region delivery ==== | ||
[[File:Revenue by region.png|thumb|Revenue by geographic region of delivery, in %|left]] | |||
== Financial Statements<ref>lvmh_2022_annual-report.pdf (lvmh-static.com)</ref> == | == Financial Statements<ref>lvmh_2022_annual-report.pdf (lvmh-static.com)</ref> == | ||
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|'''26,720''' | |'''26,720''' | ||
|} | |} | ||
[[File:LVMH Annual Income Statement.png|left|thumb|465x465px]] | |||
=== LVMH's Annual Balance Sheet === | === LVMH's Annual Balance Sheet === | ||
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|'''35,147''' | |'''35,147''' | ||
|} | |} | ||
[[File:LVMH Balance Sheet.png|left|thumb|443x443px]] | |||
=== LVMH's Cash Flow Statement === | === LVMH's Cash Flow Statement === | ||
{| class="wikitable" | {| class="wikitable" | ||
!'''EUR''' €, Millions | !'''EUR''' €, Millions | ||
Line 1,191: | Line 1,301: | ||
|'''10,113''' | |'''10,113''' | ||
|} | |} | ||
=== Financial Forecast === | === Financial Forecast === | ||
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| +/- | | +/- | ||
|} | |} | ||
[[File: | == Valuation == | ||
[[File:Screenshot 2023-07-06 at 11.10.01.png|thumb|Unlevered Free Cash Flow [[File:Screenshot 2023-07-06 at 11.10.11.png|thumb|Fixed Assets[[File:Screenshot 2023-07-06 at 11.10.21.png|thumb|Net Working Capital[[File:Screenshot 2023-07-06 at 11.10.54.png|thumb|Weighted Average of Capital[[File:Screenshot 2023-07-06 at 11.11.11.png|thumb|Implied Share Price and Sensitivity Table[[File:Screenshot 2023-07-06 at 11.59.35.png|thumb|Base Case, Bear Case, Bull Case]]]]]]]]]]]] | |||
[[File: | In the following section, there are 2 valuation methods, the DCF model and the relative valuation. | ||
[[File: | |||
For the | For the DCF model, the base case implied share price is $1175.92, which has a 27.64% potential upside; the bull case implied share is 1436.27, which has a 55.90% upside; the bear case implied share is 782.49, which has a 15.07% downside. Therefore, for a weighted average of 50% bull case, 25% bull case, and 25% bear case, we get 1142.65, which has a 31.09% upside. We take these weighted average percentages because the inflation rate remains high, and the FED has a 95% chance to increase the interest rate in the next FOMC meeting, due to this uncertainty, a conservative prediction is applied. Also, we assumed that all the growth is constant in the next 5 years of projection, taking the average from the past 5 years for the base case. The bull case and bear case are calculated with the earnings in EV/EBITDA and Net Debt/EBITDA, and the Free Cash Flow Equity Yield based on their free cash flow, both earning price target and the FCFE price target are weighted 50% each. Throughout the calculation, we obtained the WACC of 13.33% and the CAPM is 14.08%, and the difference between ROIC% and WACC% is 5%. Furthermore, the CapEx has decreased by 10% every year since 2018, indicating that the company is investing its money in future growth. Due to the uncertainty of the predicted value of the CPI, we believed that the actual upside of the share price would be higher, because of the effect of lowering the interest rate for the first time in the third bull phase according to Dow's theory and the transition from hawkish sentiment to dovish sentiment. | ||
For the relative valuation, firstly, its Piotroski F-Score, Altman Z-Score, and Beneish M-Score have the score of 9, 4.59, and not manipulator respectively, indicating that LVMH is not a manipulator on their financial reports. Secondly, The PE ratio is currently at 30.5, which is just above the median of its history of 24.71, the minimum value of 11.39, and the maximum value of 78.7. Although the PE ratio is ranked worse than 74.97% across the whole retail-cylindrical industry, LVMH has a huge increase in Revenue, EPS, and operating cash flow, indicating that LVMH remains undervalued if this trend continues. This prediction could be seen by looking at the PEG value, which has a value of 1.5. The median value in its history is 2.28, which is way lower than the maximum value of 5.65 in its history. Thirdly, the EV-to-EBITDA is currently at 16.89, which has a similar value to the medium of 12.85. Although it has a higher value than 10, it is significantly lower than its competitors in the industry, where Hermes International SA, St Dupont SA, and Maison Clio Blue SA have the EV-to-EBITDA of 35.02, 124.72, 395.23, this indicating that LVMH is undervalued compared to the industry. The PS ratio is currently at 5.42, it is near to the medium for the past 10 years of 3.05, and has a similar number comparing to the industry, which is 4.5. This indicating that the LVMH stock is slightly undervalued comparing to its industry. | |||
For the relative valuation, firstly, its Piotroski F-Score | |||
Secondly, The PE ratio is currently at 30.5, which is just above the median of its history of 24.71, the minimum value of 11.39, and the maximum value of 78.7. Although the PE ratio is ranked worse than 74.97% across the whole retail-cylindrical industry, LVMH has a huge increase in Revenue, EPS, and operating cash flow, indicating that LVMH remains undervalued if this trend continues. | |||
This prediction could be seen by looking at the PEG | |||
Thirdly, the EV-to-EBITDA is currently at 16.89, which has a similar value to the medium of 12.85. Although it has a higher value than 10, it is significantly lower than its competitors in the industry, where Hermes International SA, St Dupont SA, and Maison Clio Blue SA have the EV-to-EBITDA of 35.02, 124.72, 395.23, this indicating that LVMH is undervalued compared to the industry. | |||
The PS ratio is currently at 5.42, it is near to the medium for the past 10 years of 3.05, and has a similar number comparing to the industry, which is 4.5. This indicating that the LVMH stock is slightly undervalued comparing to its industry. | |||
In summary, both the results from the DCF model and the relative valuation method indicate that LVMH is undervalued, compared to itself in history, the industry, and the potential growth using its free cash flow. LVMH has a potential upside of 31.09% upside. | In summary, both the results from the DCF model and the relative valuation method indicate that LVMH is undervalued, compared to itself in history, the industry, and the potential growth using its free cash flow. LVMH has a potential upside of 31.09% upside. | ||
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== Competitors Comparison == | == Competitors Comparison == | ||
'''LVMH Overview''': In 2023, LVMH reported a Q1 FY 2023 revenue of 21 billion euros, showing a significant increase of 17% compared to the same period in 2022. LVMH's strength lies in its high level of customer loyalty and diverse portfolio of 75 prestigious brands across various luxury sectors. | '''LVMH Overview''': In 2023, LVMH reported a Q1 FY 2023 revenue of 21 billion euros, showing a significant increase of 17% compared to the same period in 2022. LVMH's strength lies in its high level of customer loyalty and diverse portfolio of 75 prestigious brands across various luxury sectors. | ||
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1. Richemont could be a big competitor: Based on the revenue data and performance analysis, LVMH remains the market leader in the luxury industry. However, it faces major challenges from Richemont, each with its own strengths and weaknesses. LVMH should focus on expanding its presence in the jewellery industry to compete more effectively with Richemont. Besides, The decision of Richemont to reject the acquisition proposal from LVMH could potentially impact Richemont's stock and attract more attention, particularly from investors who value the "more boutique in core business" mindset. | 1. Richemont could be a big competitor: Based on the revenue data and performance analysis, LVMH remains the market leader in the luxury industry. However, it faces major challenges from Richemont, each with its own strengths and weaknesses. LVMH should focus on expanding its presence in the jewellery industry to compete more effectively with Richemont. Besides, The decision of Richemont to reject the acquisition proposal from LVMH could potentially impact Richemont's stock and attract more attention, particularly from investors who value the "more boutique in core business" mindset. | ||
2. Geographical Factor: LVMH has a strong geographical presence in the Asia Pacific region, with most sectors and revenue generated from Asia in 2022. Particularly in China, where the Covid policies have allowed for reopening, the spending power of Chinese consumers continues to rise. The total revenue in Asia will be very significant in 2023. Richemont also generates a significant portion of its revenue from the Asian market. The 2023 total revenue in Asia Pacific of Richemont would be positive to be expected. On the other hand, Kering's performance has been negative, experiencing a decline of 7% from Q1 2022 to Q4 2022. The pace of growth was well below that of competitors. | |||
Overall, LVMH's performance is expected to continue to increase, and there is optimism regarding its total revenue for 2023. | Overall, LVMH's performance is expected to continue to increase, and there is optimism regarding its total revenue for 2023. |