PRADA(01913.HK)：MOST REGIONS ACCELERATED IN 1Q24 APAC REMAINED ROBUST-格隆汇

机构：中金公司
研究员：Liwei HOU/Yawen GAO/Shengyong GOH/Jiayu WANG/Jianheng CHEN/Xin YANG

　　What's new
　　Prada Group released 1Q24 update: Revenue grew +16% YoY at constant exchange rates (CER), or +12% reported YoY to EUR1.19bn, beating Bloomberg consensus of EUR1.17bn and CICCe of EUR1.16bn, forex headwind was 500bps. All growth rates below are CER YoY unless specified.
　　The group recorded growth in all regions, brands, and channels.
　　Group retail growth (+18%) accelerated QoQ vs. 4Q23’s +17%, driven by like-for-like and full price volumes, of which (o/w) Prada brand (PR, +7%) benefited from introduction of leather goods novelties, such as the Buckle Bag, and Miu Miu brand (MM, +89%) saw expedited growth (vs. 4Q23: +82%) also buoyed by leather offerings including both new lines (Ivy and Softy) and icons (Arcadie and Wander). MM now constitutes 22% of group retail revenue, meaningfully higher than 1Q23’s 14%.
　　Group retail-wise, despite against strong comparison base, Asia Pacific excl. Japan (AeJ, +16%) slowed but maintained high growth, while Japan (+46%) accelerated being the fastest growing region, Europe (+18%) accelerated supported by both local and tourists, Middle East accelerated (+15%) and Americas (+5%) had improved growth (vs. 4Q23’s +4%) supported by local spending. Group wholesale was flattish in 1Q24.
　　As of March 31, 2024, the Group operated 594 stores, implying a net closure of 12 stores during the quarter.
　　Comments
　　As we go deep into 1Q24 earnings season, Prada Group delivered hard- earned and the one and only retail acceleration among all peers who have reported results so far. Early success of leather goods division for both Prada and Miu Miu brand provides further assurance on the Group's sustained margin expansion. Our top pick in the sector remains to be Prada.
　　Key takeaways from earnings call include:
　　1) For 2024, managements aims to deliver above-market revenue growth and in the meantime to maintain a trajectory of progressive　margin expansion, with more visible operating leverage in 2H24 as marketing expense is frontloaded. 2) Despite against a very strong April 2023 (fastest-growing month in 2023), April 2024 month-to-date maintained similar growth trend to 1Q24’s. 3) During 1Q24, sales to Chinese cluster grew low double-digit YoY, to Japanese strong growth, to European up mid-single-digit, Koreans positive and North Americans flattish. 4) Spending by Chinese overseas is still 20-30% below 2019’s level but made up currently more of wealthy individuals comparatively. 5) Group-wise in 1Q24, growth was predominantly driven by volume, then price hike, with very limited contribution from mix. The Group had a low start during the quarter, then great business for 45 days and slowdown after Chinese New Year. 6) Management expects only marginal retail space expansion in 2024, but in 2025 to increase +10-15% more stores for Miu Miu and +5-10% for Prada. 7) Miu Miu brand is underpenetrated in North America and in leather goods category, per management, and these are where strong growth are generated from at the moment. 8) Leather goods both at group level and at Prada brand level is the only category with QoQ acceleration of growth. 9) E-commerce makes up c10% of Group revenue currently. 10) Prada eyewear is now No.1 or No.2 among eyewear brands in the world.
　　Financials and valuation
　　We lift our 2024 and 2025 revenue forecasts by 3% to EUR5,196mn and EUR5,616mn on sustained strong brand momentum of both Prada and Miu Miu and lift 2024 and 2025 net profit forecasts by 7% and 6% to EUR757mn and EUR867mn on faster growth of margin-accretive leather goods category. Accordingly, we maintain an OUTPERFORM rating and lift our target price by 7.1% to HK$75, implying 29.2x 2024e P/E. The stock is trading at 24.4x 2024 P/E. Our TP offers 22.8% upside.
　　Risks
　　Fashion risks; intensified competition; geopolitical tensions.