HARD LUXURY : Swiss Watch Exports: May flat with US +12% & China -21%

研报英文原文证据摘录

HARD LUXURY : Swiss Watch Exports: May flat with US +12% & China -21%

More favourable macroeconomic environment. FX tailwinds. Stock-specific upside risks

include: (i) highest China exposure in our coverage translating into the group benefiting

more than peers from Chinese luxury spending; (ii) Harry Winston acquisition finally

contributing to earnings growth; (iii) regained brand heat for key brands Omega,

Longines and Tissot; (iv) management additions; (v) CHF weakening; (vi) higher

operating leverage if and when top line picks up; (vii) the company being taken private

at a premium to current share price.

To the downside:

Luxury Goods is a cyclical sector. Macroeconomic deterioration brings subdued trading

conditions for luxury goods players. Luxury goods companies face a 'double whammy'

as lower sales growth (or even worse, negative sales growth) brings operating

deleverage, given the high fixed cost nature of the industry. Lower sales growth and

operating deleverage compound multiple compression. Luxury goods sales and share

price performance suffer from travel disruption. The travel retail market is important for

luxury goods - the bulk of luxury goods products are bought by people abroad - given

the significant price gaps between markets (both structural and FX-related) and the

relatively 'high ticket' nature of these purchases. Events such as war, terrorist attacks

and epidemics would negatively affect the luxury sector. Stock-specific downside risks

include: (i) a stronger CHF; (ii) increasing gold prices; (iii) younger customers lacking

interest in watches; (iv) smart watches threatening the group's portfolio beyond entry

level brands; (v) market share loss.

Swatch Group B (Underperform, Target Price CHF160)

Investment case