L'ORÉAL : Berenberg raises its recommendation to 'buy
February 27, 2024 at 04:48 am EST
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Berenberg announced on Tuesday that it had raised its recommendation on L'Oréal shares from "hold" to "buy", with a price target raised from 436 to 530 euros, representing a potential upside of 18%.
In a research note, the intermediary backs up its favorable recommendation with the prospect of average annual organic growth of 6.7% over the period 2025-2030, which would make it the best performer among the consumer staples stocks it monitors.
The analyst also forecasts an average return to shareholders of 11.3% over the next six years, taking into account both earnings per share (EPS) growth and dividend yield.
Finally, Berenberg believes that the cosmetics group's highly cash-generative business model points to future share buybacks, and even possible mergers and acquisitions (M&A).
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L'Oréal is the world leading cosmetic group. The group offers skincare products (39.9% of sales), makeup products (19.7%), haircare products (15.4%), fragrances (12.6%), hair colouring products (8.3%) and other (4,1%). Net sales break down by family of products as follows:
- consumer cosmetics (36.9%): L'Oréal Paris, Garnier, Maybelline New York, NYX Professional Makeup, Essie Niely, Dark and Lovely, Mixa, MG and Carol's Daughter brands;
- luxury cosmetics (36.2%): Lancôme, Kiehl's, Giorgio Armani Beauty, Yves Saint Laurent Beauté, Biotherm, Helena Rubinstein, Shu Uemura, IT Cosmetics, Urban Decay, Ralph Lauren, Mugler, Viktor&Rolf, Valentino, Azzaro, Prada, Takami, A?sop, etc.;
- active cosmetics (15,6%): La Roche-Posay, Vichy, CeraVe, SkinCeuticals, Skinbetter Science, etc.;
- professional products (11,3%): L'Oréal Professionnel, Kérastase, Redken, Matrix and PureOlogy brands.
Products are marketed through mass distribution and distance selling, selective distribution, hair salons and pharmacies.
At the end of 2023, L'Oréal has 37 production sites worldwide.
Net sales are distributed geographically as follows: Europe (31.6%), North America (27%), North Asia (25.9%), Asia/Pacific/Middle East/Africa (8.4%) and Latin America (7.1%).