Core Viewpoint - Prada has experienced a significant price increase of 35% since November, with total returns reaching 37%, contrasting with previous concerns about slowing sales growth and luxury sector challenges [1][2]. Group 1: Financial Performance - The net revenue growth for the first nine months of 2023 was 12.4% YoY, but it slowed to 3.4% in Q3 2023 due to weakness in key markets, particularly the US [4]. - Full year 2023 sales grew by 13% at current exchange rates and 17% at constant exchange rates, with Q4 2023 showing an 18.1% growth [5]. - In Q1 2024, net revenues increased to €1,187 million, reflecting an 11% rise reported and a 16% increase at constant exchange rates [6]. Group 2: Competitive Positioning - Prada's growth outpaces most peers, with only Hermès showing similar double-digit growth of 13% YoY in Q1 2024 [7]. - In contrast, LVMH reported a revenue contraction of 2% in Q1 2024, while Richemont and Kering experienced declines of 1% and 11% respectively [8]. Group 3: Profitability - Prada's net profit grew by 44.2% in 2023, surpassing earlier expectations of 23%, with net margin increasing to 14.2% from 11.1% [10]. - Cost of goods sold and operating expenses grew at slower rates than revenues, contributing to improved profitability [11]. Group 4: Market Valuation - If revenue growth is sustained, projected net income for 2024 could reach €748 million (USD 808 million), resulting in a forward P/E ratio of 24.4x, slightly lower than previous levels [12]. - Prada's long-term forward P/E averages 32.1x over the past decade, indicating a potential 30% upside [14]. Group 5: Long-term Outlook - Prada has demonstrated resilience in the luxury market slowdown, with a five-year CAGR of 8.6% for revenues and 26.7% for net income, suggesting strong long-term potential [16].
Prada: Stand Out Luxury Stock (Rating Upgrade)