5 Jul 2019

CMB International Securities | Equity Research | Company Update

Prada (1913 HK)

SELL (Down)
Rich in valuation plus sluggish growth ahead
Target Price HK$21.17
(Previous TP HK$24.84)
SUMMARY. Downgrade to SELL and TP cut to HK$ 21.17, based on 25x FY19E Current Price HK$25.20
P/E. We believe Prada is transforming itself for the digital age, intending to Up/Downside -16.0%
become more relevant among the youth and have a greater presence in China.
However, with headwinds such as 1) greater-than-expected IT and marketing Global Luxury Goods Sector
expenses, 2) softening demand for luxury goods amid macro uncertainty in
2H19E and 3) rich valuation. Given a 3%/ 7% Sales/ NP CAGR in FY18-21E, its Walter Woo
current valuation of 30x FY19E P/E and 4.3x PEG, is not attractive & overly rich. (852) 3761 6974
walterwoo@cmbi.com.hk
 FY19E core net profit is under pressure. If we exclude potential Patent
Box tax benefits (~EUR 50mn), our forecasted FY19E’s core net profit may Stock Data
drop by 7% YoY to EUR191mn (4%/10% YoY decline in 1H19E/ 2H19E). Mkt Cap (HK$ mn) 64,482
Avg 3 mths t/o (HK$ mn) 45.89
 Softening sales growth in 1H19E. Sales growth (in cFX) may fall by 1 % in 52w High/Low (HK$) 39.45/20.75
1H19E (up 1% in reported terms), slowing down from MSD in 2H18. Sales Total Issued Shares (mn) 2,558.8
growth by region: Japan is still positive, Europe is relatively resilient, thanks to Source: Bloomberg
EUR depreciation, but APAC and US are rather disappointing, due to fragile Shareholding Structure
consumer sentiment. China is performing slightly better, perhaps aided by Prada Family 79.98%
relocation of menswear fashion show to Shanghai, the first time out of Milan. Invesco Ltd 5.38%
Free Float 14.64%
 EBIT margins dragged by geographic mix, rising I.T and marketing fees Source: HKEx
in FY19E. We expect EBIT margin to drop by 1.1 ppt to 9.3% in 1H19E, as
a result of 1) soft HK & Macau sales as these highest margin regions were Share Performance
Absolute Relative
heavily impacted by protests in 2Q19 (esp. in Jun), 2) extra IT investments, 1-mth 13.9% 6.1%
i.e. partnering with Oracle in Apr 2019, installing a cloud based customer 3-mth 6.8% 11.0%
analytic system for more real time data, better financial planning, product 6-mth 1.2% -12.1%
assortment and inventory management, and 3) additional advertising fees 12-mth -31.0% -31.7%
Source: Bloomberg
(~EUR 40mn higher in FY19E), including appointments of several brand
ambassadors (e.g. Gigi Hadid, Liu Wen/刘雯 and Cai XuKun/蔡徐坤, etc). 12-mth Price Performance
(HK$)
 European wholesalers restructuring would be a drag in 2H19E - 1H20E. 40
Stock HSI

In order to better control mark down sales, Prada has adopted a stricter
35
wholesale policy, which may result in terminations of many partnerships in
EU. Hence, we foresee a 9% reduction of franchise sales in FY19E. 30

 Downgrade to SELL and cut TP to HK$ 21.17. We downgrade our rating 25

to SELL and reduced TP to HK$ 21.17, based on 25x FY19E P/E. We also 20
7/2018 10/2018 1/2019 4/2019 7/2019
revised down our FY19E/ 20E/ 21E EPS estimates by 15%/ 16%/ 16%, to
factor in 1) slower sales growth, 2) operating deleverage and 3) higher opex. Source: Bloomberg

Earnings Summary Auditor: Deloitte & Touche

(YE 31 Dec) FY17A FY18A FY19E FY20E FY21E
Related Reports
Revenue (EUR mn) 3,056 3,142 3,178 3,288 3,405
1. Prada (1913 HK) - Profit dragged by
YoY growth (%) (4.0) 2.8 1.1 3.5 3.6 FX and brand relaunch investments -
Net income (EUR mn) 249 205 241 232 252 18 Mar 2019
2. Prada (1913 HK) – Slowdown in
EPS (EUR) 0.097 0.080 0.094 0.091 0.098
4Q18 results in no operating leverage
YoY growth (%) (10.6) (17.5) 17.4 (4.0) 8.6 - 13 Feb 2019
P/E (x) 27.6 35.0 29.8 31.0 28.5
P/B (x) 2.4 2.5 2.5 2.4 2.4 Please cast your valuable vote
Yield (%) 2.8 2.1 2.5 2.4 2.6 for CMBI research team in the
ROE (%)
2019 Asiamoney Brokers Poll:
8.4 7.2 8.3 7.9 8.3
https://euromoney.com/brokers
Net gearing (%) 3.5 10.7 8.3 2.7 Net cash
Source: Company data, CMBIS estimates

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 1
ACCESS KEY TO OUR REPORTS ON BLOOMBERG: CMBR
5 Jul 2019

Focus Charts
Figure 1: Sales/ net profit growth (reported, in EUR) Figure 2: GP/ OP/ NP margin
25% 17% 80.0% 71.8% 72.4% 71.9% 73.5% 72.0% 72.0% 72.2% 72.4%

15%
9%
60.0%
3% 3% 4%
5% 1%

-5% -1% 0% 40.0%

-4% -4%
-15% -10% -11% 19.8%
20.0% 14.2% 13.5% 11.8%
-16% -17% 10.3% 9.4% 9.9% 10.4%
-25%
12.7% 9.3%
-35% -28% -27% 0.0% 8.7% 8.1% 6.5% 7.6% 7.0% 7.4%
FY14A FY15A FY16A FY17A FY18A FY19E FY20E FY21E FY14AFY15AFY16AFY17AFY18AFY19E FY20E FY21E

Sales growth NP att. growth GP margin EBIT margin NP att. margin

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

Figure 3: Sales growth by Direct/Franchise (reported) Figure 4: Opex breakdown (CMBI est.)
35% 61.7% 61.7% 62.6% 62.3% 62.0%
29% 58.2% 58.4%
60.0% 5.6% 6.1% 6.2% 6.2% 6.2%
25% 21% 6.2% 5.6%
15% 8% 45.0%
5%
1% 3% 4% 3% 4%
3% 44.7% 44.9% 45.1%
5%
30.0% 42.8% 43.4% 45.8% 45.0%
-5%
-2% -4% -5%
-6% -8% 15.0%
-15% -10%
-14% -18% -13% 5.4% 5.4% 6.0% 6.6% 7.7% 7.2% 6.7%
-25% -20% 0.0% 3.8% 3.9% 4.3% 4.0% 4.0% 4.0% 4.0%
FY15AFY16AFY17AFY18AFY19E FY20E FY21E

Design, R & D A&P

Direct sales Franchise sales Selling costs General & Admin

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

Figure 5: Sales growth by region (Constant FX) Figure 6: Sales growth by segment (Constant FX)
20% 20%
15%
10% 15%
10% 8% 7%
5% 6% 10%
3%2% 4% 10%
5% 2% 6% 7% 6%
0%
0% 5% 2%
-5% -1% -2% -3%-2% -1% 0%
-3% 0%
-1% -1% -2% -1%
-5%
Leather Ready to Footwear Other Total
Goods Wear

1H18 FY18 1H19E 1H18 FY18 1H19E

Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

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5 Jul 2019

Figure 7: Sales mix by region, FY18 Figure 8: Number of stores by brand

Middle 700
Other 625 634 631 635 646
Japan, East, 618 620
countrie
11.3% 3.0% 600 63 63 63 64
s, 0.1% 52 54 57

Europe, 500 171

173 171 167 166 167 168
38.4%
400

Asia 300 386 387 394 398 394 397 404

Pacific,
33.4% 200
FY15A FY16A FY17A FY18A FY19E FY20E FY21E
America Prada Miu Miu Church's Car Shoe Marchesi
s, 13.8%
Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates

Figure 9: Sales growth by channel, region, product and brand

Sales growth trend 1H17 2H17 1H18 FY18 1H19E
(constant FX) Feb-Jul17 Aug-Dec17 Jan-Jun18 Jan-Dec18 Jan-Jun19
By channel
Retail -8% -3% 10% 7% 1%
Wholesale 4% 34% 8% 1% -7%
Total -6% 1% 9% 6% -1%

By region
Europe -7% 6% 7% 3% 2%
Asia Pacific -1% 1% 14% 10% -3%
Greater China 5% 10% 17% 8% 0%
Americas -6% -3% 8% 4% -1%
Japan -14% -6% 9% 7% 2%
Middle East -13% -3% 7% 5% -2%
Others -29% -2% 4% -3% -2%
Total -6% 1% 9% 6% -1%

By product
Leather Goods -8% 0% 8% 6% -1%
Ready to Wear 4% 10% 20% 10% 0%
Footwear -9% -4% 4% 2% -1%
Other 6% -5% 2% 7% -2%
Total -6% 1% 9% 6% -1%

By Brand
Prada -5% 4% 10% 7% 1%
Miu Miu -10% -10% 8% 2% -6%
Church's -10% -8% -4% -2% -2%
Other 12% 2% 2% 4% 3%
Total -6% 1% 9% 6% -1%
Source: Company data, CMBIS estimates

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5 Jul 2019

Earnings revision
Figure 10: Earnings revision
New Old Diff (%)
(EUR mn) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E
Revenue 3,178 3,288 3,405 3,281 3,441 3,618 -3.1% -4.5% -5.9%
Gross profit 2,288 2,374 2,465 2,369 2,491 2,627 -3.4% -4.7% -6.2%
EBIT 292 318 344 360 380 408 -18.9% -16.2% -15.7%
Reported Net profit 241 232 252 283 276 298 -14.8% -16.2% -15.6%
Diluted EPS (EUR) 0.094 0.091 0.098 0.111 0.108 0.116 -14.8% -16.2% -15.6%
Gross margin 72.0% 72.2% 72.4% 72.2% 72.4% 72.6% -0.2ppt -0.2ppt -0.2ppt
EBIT margin 9.2% 9.7% 10.1% 11.0% 11.0% 11.3% -1.8ppt -1.4ppt -1.2ppt
Net profit att. margin 7.6% 7.0% 7.4% 8.6% 8.0% 8.2% -1ppt -1ppt -0.8ppt
Source: Company data, CMBIS estimates

Figure 11: CMBI estimates vs consensus

CMBI Consensus Diff (%)
(EUR mn) FY19E FY20E FY21E FY19E FY20E FY21E FY19E FY20E FY21E
Revenue 3,178 3,288 3,405 3,265 3,432 3,594 -2.7% -4.2% -5.3%
Gross profit 2,288 2,374 2,465 2,365 2,496 2,620 -3.3% -4.9% -5.9%
EBIT 292 318 344 338 396 450 -13.5% -19.6% -23.6%
Net profit att. 241 232 252 266 268 307 -9.4% -13.4% -18.1%
Diluted EPS (EUR) 0.094 0.091 0.098 0.100 0.105 0.122 -5.4% -13.7% -19.6%
Gross margin 72.0% 72.2% 72.4% 72.4% 72.7% 72.9% -0.4ppt -0.5ppt -0.5ppt
EBIT margin 9.2% 9.7% 10.1% 10.3% 11.5% 12.5% -1.2ppt -1.8ppt -2.4ppt
Net profit att. margin 7.6% 7.0% 7.4% 8.2% 7.8% 8.5% -0.6ppt -0.7ppt -1.2ppt
Source: Bloomberg, CMBIS estimates

Valuation
Figure 12: 12M forward P/E band Figure 13: 12M forward P/B band
45.0 (x) 5.0 (x)

40.0 4.5
4.0 3.8
35.0
30.9 3.5
30.0 28.7 3.0 3.0
25.0 25.8
2.5 2.5
20.0 20.8 2.0 2.3
15.0 1.5
Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19
Avg. Fwd. P/E 1 s.d. Avg. Fwd. P/B 1 s.d.
5 yrs Avg. PE -1 s.d. 5 yrs Avg. PE -1 s.d.

Source: Bloomberg, CMBIS estimates Source: Bloomberg, CMBIS estimates

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 5 Jul 2019

Figure 14: Peers’ valuation

12m Up/ ROE 3yrs Yield
Price Mkt. Cap Year P/E (x) P/B (x)
TP Down- (%) PEG (x) (%)
Ratin
Company Ticker (LC) (LC) side (HK$mn) End FY1E FY2E FY1E FY2E FY1E FY1E FY1E
g
H shares Luxury, Jewellery, Watches
Prada 1913 HK SELL 21.17 25.20 -16% 64,482 Dec-18 29.8 31.0 2.5 2.4 8.4 4.3 2.5
Samsonite 1910 HK NR n/a 18.02 n/a 25,787 Dec-18 14.2 12.6 1.6 1.5 11.2 2.0 3.3
Chow Tai Fook 1929 HK NR n/a 8.38 n/a 83,800 Mar-19 16.2 14.6 2.7 2.5 14.3 1.3 4.8
Luk Fook 590 HK NR n/a 24.10 n/a 14,149 Mar-19 9.2 8.4 1.2 1.1 14.5 1.5 4.7
Chow Sang Sang 116 HK NR n/a 11.32 n/a 7,669 Dec-18 7.0 6.5 0.7 0.6 9.9 0.9 5.6
Emperor Watch 887 HK NR n/a 0.21 n/a 1,390 Dec-18 n/a n/a n/a n/a 6.0 0.0 n/a
Oriental Watch 398 HK NR n/a 2.40 n/a 1,369 Mar-19 n/a n/a n/a n/a 6.1 0.0 n/a
Hengdeli 3389 HK NR n/a 0.41 n/a 1,912 Dec-18 n/a n/a n/a n/a 1.6 0.0 n/a
Avg. 15.3 14.6 1.7 1.6 9.0 1.2 4.2
Med. 14.2 12.6 1.6 1.5 9.1 1.1 4.7
A-shares Luxury, Jewellery, Watches
Lao Feng Xiang 600612 CH NR n/a 44.58 n/a 21,668 Dec-18 17.0 15.0 3.3 2.9 19.9 1.4 2.8
Chow Tai Seng 002867 CH NR n/a 34.23 n/a 18,901 Dec-18 17.0 14.1 3.7 3.1 21.8 1.0 2.2
Leysen Jewelry 603900 CH NR n/a 12.53 n/a 4,834 Dec-18 13.2 10.9 1.6 1.5 8.9 1.5 n/a
Guangdong Chj 002345 CH NR n/a 4.57 n/a 4,688 Dec-18 13.3 12.5 1.1 1.1 1.9 0.2 1.3
Fiyta Holdings 000026 CH NR n/a 7.88 n/a 3,722 Dec-18 16.2 13.6 1.3 1.2 7.3 1.0 n/a
Zhejiang Ming 002574 CH NR n/a 6.11 n/a 3,655 Dec-18 29.8 26.6 1.0 1.0 3.0 2.0 1.3
Eastern Gold Jade 600086 CH NR n/a 4.27 n/a 6,532 Dec-18 n/a n/a n/a n/a (75.3) 0.0 n/a
Avg. 17.8 15.4 2.0 1.8 (1.8) 1.0 1.9
Med. 16.6 13.8 1.5 1.4 7.3 1.0 1.8
International Luxury, Jewellery, Watches
Prada 1913 HK SELL 21.17 25.20 -16% 64,482 Dec-18 29.8 31.0 2.5 2.4 8.4 4.3 2.5
Samsonite 1910 HK NR n/a 18.02 n/a 25,787 Dec-18 14.2 12.6 1.6 1.5 11.2 2.0 3.3
LVMH MC FP NR n/a 380.95 n/a 1,691,532 Dec-18 26.1 23.9 5.3 4.7 20.7 2.8 1.8
Kering KER FP NR n/a 526.30 n/a 583,869 Dec-18 20.4 17.6 5.8 5.0 34.0 14.4 2.2
Hermes RMS FP NR n/a 641.60 n/a 595,049 Dec-18 44.5 40.5 10.2 8.7 26.6 6.2 0.9
Richemont CFR SW NR n/a 83.50 n/a 378,923 Mar-19 23.5 21.1 2.4 2.3 17.6 (3.0) 2.6
Tiffany & Co TIF US NR n/a 93.60 n/a 88,480 Jan-19 18.9 17.4 3.3 3.1 17.8 2.6 2.5
Moncler MONC IM NR n/a 38.52 n/a 87,291 Dec-18 26.3 24.4 7.2 6.0 33.4 3.3 1.2
Burberry BRBY LN NR n/a 1946.00 n/a 78,435 Mar-19 23.1 20.8 5.3 4.8 23.6 3.7 2.3
Ferragamo SFER IM NR n/a 21.57 n/a 31,985 Dec-18 34.1 29.9 4.5 4.2 12.0 2.4 1.8
Essilorluxottica EL FP NR n/a 114.00 n/a 436,651 Dec-18 26.0 23.7 1.6 1.6 5.6 4.4 1.8
Swatch UHR SW NR n/a 281.10 n/a 120,962 Dec-18 16.5 14.8 1.3 1.2 7.6 1.9 3.0
Tod'S TOD IM NR n/a 41.88 n/a 12,176 Dec-18 36.6 30.6 1.2 1.2 4.4 11.7 2.4
Hugo Boss BOSS GY NR n/a 57.60 n/a 35,624 Dec-18 15.3 13.6 3.8 3.5 21.4 1.8 5.0
Avg. 25.4 23.0 4.0 3.6 17.5 4.2 2.4
Med. 24.8 22.4 3.5 3.3 17.7 3.0 2.4
Source: Bloomberg, CMBIS estimates

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5 Jul 2019

Assumption
Figure 15: Major assumptions
Major assumptions FY17A FY18A FY19E FY20E FY21E
Sales by segment (EUR mn)
Direct sales 2,444 2,532 2,619 2,714 2,811
Prada 1,991 2,069 2,147 2,227 2,315
Miu Miu 388 400 408 420 429
Other 64 62 64 66 67
Franchise sales 565 566 515 530 548
Royalties 48 44 43 44 45
Total 3,056 3,142 3,178 3,288 3,405

Sales growth by segment (%)

Direct sales -7.3% 3.6% 3.4% 3.6% 3.6%
Prada -6.1% 4.0% 3.7% 3.7% 3.9%
Miu Miu -12.0% 3.0% 2.0% 3.0% 2.0%
Other -11.7% -3.1% 2.6% 2.6% 2.6%
Franchise sales 11.9% 0.3% -8.9% 2.8% 3.5%
Royalties 7.6% -8.5% -2.0% 3.0% 2.0%
Total -4.0% 2.8% 1.1% 3.5% 3.6%

GP margins 73.5% 72.0% 72.0% 72.2% 72.4%

Opex breakdown by segment

Design, R & D/ sales 4.3% 4.0% 4.0% 4.0% 4.0%
A & P/ sales 6.0% 6.6% 7.7% 7.2% 6.7%
D & A/ sales 6.4% 7.3% 8.5% 8.8% 9.0%
Labour costs/ sales 17.0% 17.4% 17.7% 17.4% 17.4%
Variable rental/ sales 9.7% 9.8% 10.1% 10.3% 10.4%
Fixed rental/ sales 9.1% 9.3% 9.5% 9.5% 9.5%
Others/ sales -1.1% -1.1% -1.2% -1.2% -1.2%
G & A/ sales 5.6% 6.1% 6.2% 6.2% 6.2%
Total 57.1% 59.2% 62.6% 62.3% 62.0%

EBIT margins 11.8% 10.3% 9.4% 9.9% 10.4%

Pre-tax margins 11.6% 9.6% 9.2% 9.7% 10.2%

Effective tax rate -29.7% -31.2% -17.0% -27.0% -27.0%

Net proft att. (EUR mn) 249 205 241 232 252
Net proft att. margins 8.1% 6.5% 7.6% 7.0% 7.4%
Net profit att. Growth (%) -10.6% -17.5% 17.4% -4.0% 8.6%

Number of stores by brand

Prada 394 398 394 397 404
Miu Miu 167 166 167 168 171
Others 64 70 70 70 71
Franchises stores 34 34 30 30 30
Sum total 659 668 661 665 676
Source: Company data, CMBIS estimates

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5 Jul 2019

Financial Summary
Income statement Cash flow summary
YE Dec 31 (EUR mn) FY17A FY18A FY19E FY20E FY21E YE Dec 31 (EUR mn) FY17A FY18A FY19E FY20E FY21E
Revenue 3,056 3,142 3,178 3,288 3,405 EBIT 352 301 292 318 344
Direct sales 2,444 2,532 2,619 2,714 2,811 D & A 221 263 307 345 351
Franchise sales 565 566 515 530 548 Change in working capital (26) (97) (7) (20) (22)
Royalties 48 44 43 44 45 Income tax paid (27) (94) (50) (86) (94)
Others (73) (171) (136) (76) (65)
Cost of goods sold (811) (880) (890) (914) (940) Net cash from operating 447 202 406 481 515
Gross profit 2,246 2,263 2,288 2,374 2,465
Other income (8) (23) (8) (8) (8) Capex & investments (212) (229) (206) (203) (207)
Associated companies - - - - -
Operating expenses (1,886) (1,939) (1,988) (2,047) (2,113) Interest received - - - - -
D&A (221) (263) (307) (345) (351) Others 0 19 18 68 27
Staff costs (549) (572) (591) (601) (621) Net cash from investing (212) (209) (188) (135) (180)
S & D costs (ex-staff, (867) (799) (826) (838) (869)
Admin exp. (ex-staff,
D&A) (249) (305) (265) (262) (272) Equity raised - - - - -
Other operating
D&A) - - - - - Net change in bank loans 12 (83) - - -
Operating
expenses profit 352 301 292 318 344 Dividend paid (308) (192) (154) (181) (174)
Others 297 (11) - - -
Finance costs, net 2 1 1 1 3 Net cash from financing 0 (286) (154) (181) (174)
JVs & associates - - - - -
Exceptional - - - - - Net change in cash 235 (293) 65 164 161
Pre-tax profit 355 303 293 320 347 Beginning cash balance 722 893 600 665 829
Exchange difference (65) - - - -
Income tax (105) (94) (50) (86) (94) Cash at the end of the year 893 600 665 829 990
Less: Minority interests 0 3 2 2 2
Net profit 249 205 241 232 252

Balance sheet Key ratios

YE Dec 31 (EUR mn) FY17A FY18A FY19E FY20E FY21E YE Dec 31 FY17A FY18A FY19E FY20E FY21E
Non-current assets 2,775 2,917 2,859 2,764 2,667 Sales mix (%)
Fixed asset 1,523 1,577 1,524 1,446 1,366 Direct sales 80.0 80.6 82.4 82.5 82.6
Intangible assets & 921 920 911 896 884 Franchise sales 18.5 18.0 16.2 16.1 16.1
Prepaid
goodwill lease payments 2 0 0 0 0 Royalties 1.6 1.4 1.4 1.4 1.3
Interest in joint ventures 8 100 100 100 100 - - - - -
Other non-current assets 320 320 325 321 318 Total 100.0 100.0 100.0 100.0 100.0

Current assets 1,965 1,762 1,838 2,031 2,223 P&L ratios (%)
Cash and cash equivalents 893 600 665 829 990 Gross margin 73.5 72.0 72.0 72.2 72.4
Inventories 570 632 639 657 675 Operating margin 11.5 9.6 9.2 9.7 10.1
Trade and other 290 322 326 337 349 Pre-tax margin 11.6 9.6 9.2 9.7 10.2
Prepayments
receivables 6 13 13 13 14 Net margin 8.1 6.5 7.6 7.0 7.4
Other current assets 206 195 195 195 195 Effective tax rate 29.7 31.2 17.0 27.0 27.0

Current liabilities 904 987 955 1,000 1,017 Balance sheet ratios
Bank loans 353 421 421 421 421 Current ratio (x) 2.2 1.8 1.9 2.0 2.2
Trade payables 314 315 319 328 337 Quick ratio (x) 2.2 1.8 1.9 2.0 2.2
Accruals & other payables - - - - - Cash ratio (x) 1.0 0.6 0.7 0.8 1.0
Tax payables 68 85 50 86 94 Inventory turnover days 257 262 262 262 262
others 169 165 165 165 165 Trade receivables days 35 37 37 37 37
Trade payables days 141 131 131 131 131
Non-current liabilities 969 795 795 795 795 Total debt / total equity 35 32 31 31 30
Bank loans 639 487 487 487 487 ratio
Net(%)
debt / equity ratio (%) 3 11 8 3 Net
Deferred income - - - - - Returns (%) cash
Deferred tax 32 30 30 30 30 ROE 8.8 7.1 8.2 7.8 8.2
Others 298 277 277 277 277 ROA 5.3 4.4 5.1 4.8 5.1
Per share
Minority Interest 22 19 21 22 24 EPS (EUR) 0.10 0.08 0.09 0.09 0.10
Total net assets 2,845 2,878 2,926 2,977 3,055 DPS (EUR) 0.08 0.06 0.07 0.07 0.07
Shareholders' equity 2,845 2,878 2,926 2,977 3,055 BVPS (EUR) 1.11 1.12 1.14 1.16 1.19
Source: Company data, CMBIS estimates

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5 Jul 2019

Disclosures & Disclaimers

Analyst Certification
The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities
or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities
or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst
in this report.
Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities
and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue
of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve
as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies
covered in this report.

CMBIS Ratings
BUY : Stock with potential return of over 15% over next 12 months
HOLD : Stock with potential return of +15% to -10% over next 12 months
SELL : Stock with potential loss of over 10% over next 12 months
NOT RATED : Stock is not rated by CMBIS

OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months
MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months
UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months

CMB International Securities Limited

Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800
CMB International Securities Limited (“CMBIS”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly owned subsidiary
of China Merchants Bank)

Important Disclosures
There are risks involved in transacting in any securities. The information contained in this report may not be suitable for the purposes of all investors.
CMBIS does not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives,
financial position or special requirements. Past performance has no indication of future performance, and actual events may differ materially from
that which is contained in the report. The value of, and returns from, any investments are uncertain and are not guaranteed and may fluctuate as a
result of their dependence on the performance of underlying assets or other variable market factors. CMBIS recommends that investors should
independently evaluate particular investments and strategies, and encourages investors to consult with a professional financial advisor in order to
make their own investment decisions.
This report or any information contained herein, have been prepared by the CMBIS, solely for the purpose of supplying information to the clients of
CMBIS or its affiliate(s) to whom it is distributed. This report is not and should not be construed as an offer or solicitation to buy or sell any security
or any interest in securities or enter into any transaction. Neither CMBIS nor any of its affiliates, shareholders, agents, consultants, directors, officers
or employees shall be liable for any loss, damage or expense whatsoever, whether direct or consequential, incurred in relying on the information
contained in this report. Anyone making use of the information contained in this report does so entirely at their own risk.
The information and contents contained in this report are based on the analyses and interpretations of information believed to be publicly available
and reliable. CMBIS has exerted every effort in its capacity to ensure, but not to guarantee, their accuracy, completeness, timeliness or correctness.
CMBIS provides the information, advices and forecasts on an "AS IS" basis. The information and contents are subject to change without notice.
CMBIS may issue other publications having information and/ or conclusions different from this report. These publications reflect different assumption,
point-of-view and analytical methods when compiling. CMBIS may make investment decisions or take proprietary positions that are inconsistent
with the recommendations or views in this report.
CMBIS may have a position, make markets or act as principal or engage in transactions in securities of companies referred to in this report for itself
and/or on behalf of its clients from time to time. Investors should assume that CMBIS does or seeks to have investment banking or other business
relationships with the companies in this report. As a result, recipients should be aware that CMBIS may have a conflict of interest that could affect
the objectivity of this report and CMBIS will not assume any responsibility in respect thereof. This report is for the use of intended recipients only
and this publication, may not be reproduced, reprinted, sold, redistributed or published in whole or in part for any purpose without prior written
consent of CMBIS.
Additional information on recommended securities is available upon request.

For recipients of this document in the United Kingdom

This report has been provided only to persons (I)falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005 (as amended from time to time)(“The Order”) or (II) are persons falling within Article 49(2) (a) to (d) (“High Net Worth Companies,
Unincorporated Associations, etc.,) of the Order, and may not be provided to any other person without the prior written consent of CMBIS.

This report is intended for distribution in the United States to "major US institutional investors", as defined in Rule 15a-6 under the US, Securities
Exchange Act of 1934, and may not be furnished to any other person in the United States. Each major US, institutional investor that receives a copy
of this research report by its acceptance hereof represents and agrees that it shall not distribute or provide this research report to any other person.

For recipients of this document in Singapore

This report is distributed in Singapore by CMBI (Singapore) Pte. Limited (CMBISG) (Company Regn. No. 201731928D), an Exempt Financial Adviser
as defined in the Financial Advisers Act (Cap. 110) of Singapore and regulated by the Monetary Authority of Singapore. CMBISG may distribute
reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of
the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or
an Institutional Investor, as defined in the Securities and Futures Act (Cap. 289) of Singapore, CMBISG accepts legal responsibility for the contents
of the report to such persons only to the extent required by law. Singapore recipients should contact CMBISG at +65 6350 4400 for matters arising
from, or in connection with the report.

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 8