2023-03-20 15:56:09 ET
Summary
- Moncler's full-year results demonstrated impressive double-digit growth, despite the challenging economic environment marked by inflation and low growth.
- The company has seen positive developments in China.
- The company is now a hold as the safety margin closed the gap since my last analysis.
Since my last analysis, Moncler S.p.A. ( MONRF ) has not only continued to soar, posting a +6.14% gain (change in €) in contrast to a -3.54% dip for the SPX, but also unveiled its full-year results, which showcased its ability to navigate challenges like inflation and economic deceleration while capitalizing on China's reopening. In this article, I offer an update on Moncler's performance, highlighting the outstanding results of FY22 and the robust performance of the Asian segment in Q4.
Full year results highlight double-digit growth
The group showed impressive results despite the restrictions in China in the first three quarters of 2022. Below I highlight the key points of the FY22 results:
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The group's consolidated revenue in 2022 was €2,602.9 million, which is a 27% increase at current exchange rates compared to 2021, and a 25% increase at constant exchange rates.
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The Moncler brand contributed €2,201.8 million to the group's revenue, showing a 19% increase at constant exchange rates compared to 2021 and a 36% increase compared to 2019. Comparable store sales growth was also positive, at 15%.
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The Stone Island brand had revenues of €401.1 million in 2022, which is a 28% increase at constant exchange rates compared to the pro-forma 12-month period in 2021 (since the consolidation occurred on April 1, 2021).
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The group's EBIT was €774.5 million, which represents a margin on revenues of 29.8%. This is higher than the previous year's EBIT of €603.13 million with a margin of 29.5%.
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The group's net result was €606.7 million, which is higher than 2021's net result of €411.43 million, and includes an extraordinary tax benefit of €92.3 million for the Stone Island brand's tax value realignment.
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The group's net financial position at the end of 2022 was €818.2 million in cash, which is higher than the amount at the end of 2021 (€729.6 million), despite the payment of dividends (€161.0 million), share buy-back (€48.4 million), and substitute tax payment for the Stone Island brand's tax value realignment (€124.1 million). However, lease liabilities increased to €837.4 million at the end of 2022, compared to €710.1 million at the end of 2021.
It should be noted that these are the results of the group and not of the single brand. In fact, comparing the results of the different brands in the group, Stone Island, which accounted for only 15% of total revenue, was the segment that showed the greatest growth (+28% cFX vs +19% cFX for the Moncler brand).
The Asian segment
In 2022, the Moncler segment ’s revenues from the Asian markets amounted to €1,029.3 million, reflecting a 14% cFX growth compared to 2021. The fourth quarter of 2022 saw Asia's revenues grow by 12% cFX against Q4 2021 and 56% cFX against Q4 2019. This growth can be attributed to the acceleration of sales in Korea and solid performance in Japan.
For the Stone Island brand, revenues in Asia reached €80.2 million in 2022, a 101% cFX growth compared to the 2021 pro-forma. This growth can be attributed to the conversion of wholesale to retail channels in Korea and Japan.
Stone Island Revenues by Geography (Moncler annual results FY22)
However, the APAC region experienced challenges in October and November due to severe Covid restrictions in Mainland China, but in the report the company writes:
... by the severe Covid restrictions in Mainland China, which were eased at the beginning of December, prompting a recovery in stores traffic.
Furthermore, in my previous article I wrote:
A major boost to revenue could come from China, which according to estimates should record an increase in consumption, fueled by the U-turn of zero-Covid policy.
The easing of the anti-Covid measures announced in recent weeks and the stop to quarantines for travelers should favor tourism and therefore the shopping of luxury goods both in China and in other countries. In fact, consumption in Europe in 2021 and 2022 has also been negatively affected by the absence of Chinese tourists, while, last summer, as soon as the Chinese measures against Covid slightly widened, purchases for personal luxury goods immediately soared in the People's Republic.
This means that by the end of Q4FY22, Moncler started to see improvements, which gives a lot of hope for better sales in China. Moreover, it's reassuring to know that within less than a month, the company has already started to see positive results, with a positive impact as I forecasted.
Valuation
To conduct the valuation, I used a discounted cash flow model which I updated based on my previous article. For those interested in seeing the tables and assumptions I used, I have provided a link here .
In comparison to my previous valuation, I made slight adjustments to the growth values for the Asian segment, improved the gross margin, and modified the balance sheet data to reflect new information.
As a result, the valuation is slightly lower than the previous assessment, partly due to the higher WACC resulting from increased interest rates. Consequently, the price target can be estimated at €63.00, which still aligns closely with my previous estimate of €63.02. This suggests that the company has a potential upside of 5.7% compared to its current price on the Milan Stock Exchange.
Conclusion
Although Moncler has achieved remarkable growth and demonstrated resilience in margins despite inflation and an economic slowdown, the company's safety margin is too narrow due to a rally in the stock price that has occurred in recent months. Without a sufficient margin of safety, the company's stock price may soon reach its peak in my view. Therefore, I have downgraded my rating of the company from “Buy” to “Hold”.
For further details see:
Moncler: Impressive Full Year Results, But Too Close To My Price Target