The Re-Rating Journey - REMAIN OW

Research evidence excerpt

The Re-Rating Journey - REMAIN OW

Richemont (Watch Me Shine) arguing the company were due a re-rating: shares were trading

at 16..8x P/E at the time despite having one of the best growth profiles across the space and offering exposure to the attractive

jewellery category. “Even compared to its older self, we believe Richemont today should be seen as higher quality given its

evolution over the years (higher jewellery, higher retail), and should rather trade at a premium vs. history.”

At the time, one of the main pushbacks we got from investors on the story was quality and high margin cyclicality.

Investors were not yet convinced the changes seen to company’s P&L were structural (higher vertical integration; higher control

over distribution; more retail and less wholesale; more jewellery and less watches; etc) and not simply a result of positive top line

momentum.

2023 - Delivery continued to materialise - Charting it out summarises it all in one place. At that point, Richemont had become

Chiara’s sole OW in Luxury

2024 - By this time the market was already looking at Richemont as mostly Jewellery and started giving the company some credit

for it higher quality and stronger operating model. The debate then became more tilted towards Richemont vs. LVMH, and some

concerns on the valuation gap between the two narrowing - many could not envision CFR trading at higher multiples than MC.

Of course, the track records for each company were very different at that point, but growth was starting to de-couple, and the

reasons behind it looked very much structural - see Chiara’s Bejeweled note at the time, which deep dives on the topic.

2025 - Richemont’s JM division top line outperformance became too big to ignore, and the re-rating towards LVMH solidified.