CICC: Maintains SAMSONITE (01910) outperform rating with a target price of HK$20.
Affected by U.S. tariffs, the firm expects the company's gross profit margin to be between 59-59.5% in 2025, but the company is taking corresponding measures to offset this impact.
CICC released a research report stating that due to the weaker-than-expected sales momentum and unfavorable operating leverage of SAMSONITE (01910), the revenue forecast for 2025 and 2026 has been lowered by 3% to $3.42 billion and $3.65 billion, respectively. The company has also reduced the net profit forecast for 2025 and 2026 by 17% and 9% to $271 million and $316 million. Considering the company's solid market leadership position, CICC maintains an outperform industry rating with a target price of HK$20 (switching valuation to 12 times the 2026 P/E ratio, corresponding to 14 times the 2025 P/E ratio), which represents a 21% upside potential from the current stock price. The current stock price corresponds to a 11.4 times the 2025 P/E ratio and 9.8 times the 2026 P/E ratio.
Key points from CICC include:
Disappointing 2Q25 performance
SAMSONITE announced 2Q25 performance: net sales of $865 million, a year-on-year decrease of 5.8% in constant currency terms; adjusted EBITDA of $141 million (EBITDA margin of 16.3%, compared to 19.0% in the same period last year); adjusted net profit of $71.4 million (compared to $86.9 million in the same period last year). The company's performance fell short of expectations, mainly due to underperformance in Asia and North America.
In the earnings conference call, management pointed out:
1) The company experienced significant sales growth during the post-pandemic travel recovery period from 2021 to 2023, with a compound annual growth rate of 37%, significantly higher than the industry's annual sales growth of 4.5%. The company's sales performance is expected to normalize from 2024 to 2025. The long-term global passenger travel growth rate from 2024 to 2029 is estimated to be around 4%, and management expects the company to benefit from the long-term increase in travel demand.
2) Sales outlook: The company's performance so far in 3Q25 is similar to 2Q25, with low single-digit declines in sales. Boosted by base effects, improved consumer sentiment, and a clearer outlook on US tariffs, management expects sales to improve slightly in the second half of this year compared to the first half. The penetration rate of non-travel categories has increased (sales accounted for 36.2%, compared to 34.4% in the same period last year). Lifestyle and outdoor brand Gregory (sales accounted for less than 3%) saw a year-on-year sales growth of 14.7% in the first half of this year in constant currency terms.
3) Profit margin outlook: Due to the impact of US tariffs, the company is expected to have a gross margin of 5959.5% in 2025, but the company is taking measures to offset this impact. The US has confirmed a 20% tariff on imports from major production countries (Indonesia, Thailand, Cambodia, Vietnam). The company plans to use inventory purchased in 1H25 and price increases in 2H25 to help alleviate the pressure on gross margins. A further decline in the high-margin sales in Asia has further dragged down the gross margin, partially offset by an increase in the proportion of direct sales (from 38% in the same period last year to 40% in 1H25), and by the better sales performance of TUMI compared to the group average (in constant currency terms, TUMI sales decreased by 2.5% year-on-year, while overall sales of the group decreased by 5.2%).
Risk factors: macroeconomic headwinds; impairment losses of assets; intensified external competition, internal competition between brands; foreign exchange rate risks; uncertainty about the timing of secondary listing.
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