Henkel: Chinese tariffs causing deceleration of adhesives in Q3
Henkel: (BUY, Fair Value EUR131 vs. EUR134 (+30%))Chinese tariffs causing deceleration of adhesives in Q3
We expect Henkel to release weak Q3 results on 15th November. Organic sales should only be up 2.6% over the quarter, deteriorating strongly vs Q2 (+3.5%). This is mainly due to Chinese tariffs on US goods which are impacting demand in the automotive and electronics industry. In addition, the strong EBIT margin expansion expected in H2 should be postponed to Q4. We have cut our EPS estimates for the next three years by just 1% on average as the deteriorating operational performance is offset by a slightly more optimistic FX outlook. We think bad news is more than factored into the share price. We maintain our Buy recommendation on the stock with a Fair Value downgraded to EUR131.
Henkel business comprised of Laundry & Home Care, Beauty Care, and Adhesive Technologies. Co.'s Laundry & Home Care business unit include laundry and home care Branded Consumer Goods business. The Laundry Care business includes heavy-duty and specialty detergents, fabric softeners, laundry performance enhancers, and other fabric care products. Co.'s Beauty Care business unit is active in the Branded Consumer Goods business with Hair Cosmetics, Body Care, Skin Care, Oral Care, and professional Hair Salon business. Co.'s Adhesive Technologies business unit provides solutions with adhesives, sealants and functional coatings in two business areas: Industry; and Consumer, Craftsmen and Building.
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