On AG(ONON) Goldman Sachs·2024-08-14 02:57Investment Rating - The report maintains a "Buy" rating for ON Holding (ONON) with a 12-month price target of 39.55 [2][3]. Core Insights - ON Holding reported strong demand trends despite short-term supply constraints in the US, with 2Q24 adjusted EBITDA of CHF 90.8 million and net sales of CHF 567.7 million, representing a year-over-year growth of 27.8% and a constant currency growth of 29.4% [2][3]. - The company reiterated its FY24 guidance, expecting constant currency sales growth of at least 30% and net sales of at least CHF 2.26 billion, with a gross margin around 60% [2][3]. - The report highlights significant growth in sales across regions, with APAC showing an impressive 84.7% growth, while EMEA and Americas grew by 22.2% and 25.8%, respectively [2][3]. Financial Performance - The report indicates that ON Holding's gross margin improved to 59.9%, up 40 basis points year-over-year, with adjusted EBITDA margins projected between 16% and 16.5% for FY24 [2][3]. - The forecast for FY24E revenue is set at CHF 2,261.2 million, with an expected EBITDA of CHF 373 million [3][7]. - The report also notes a decrease in the FY24E net finance income estimate by approximately CHF 30 million due to unrealized foreign exchange losses, leading to an adjusted diluted EPS of CHF 0.58 [2][3]. Market Position and Growth Strategy - The report emphasizes the shift towards direct-to-consumer (DTC) sales, projecting that DTC sales will account for approximately 51% of total sales by 2031, up from around 40% in 2024 [4][5]. - The anticipated increase in DTC sales is expected to drive a premium gross margin of around 63% and an EBIT margin of 18% by FY31 [5][6]. - The report outlines a long-term growth strategy that includes maintaining strong sales growth and improving operational efficiency to align with European peers [5][6].