PSL - Estée Lauder: Temporary China Disruption Since Q3 FY22 Presents Bargain

• EL shares fell 5.8% on Tuesday after disappointing results. Organic sales growth was 9% last quarter and expected to be 5-7% for FY22.
• The reason was China, where COVID lockdowns have reduced in-store sales and disrupted EL's national distribution centers in Shanghai.
• EL sales growth fell below L'Oréal's, but we attribute this mostly to EL's Shanghai facilities and its higher exposure to Travel Retail.
• The weakness in China is supply-driven, and demand for Beauty products remains robust, especially for luxury brands.
• With shares at $245.52, we expect an exit price of $435 and a total return of 82% (21.1% annualized) by June 2025. Buy.

For further details see: