Inditex: Weather taketh away, weather giveth
Post Q3 results we finetune our estimates and valuation. Despite the strong start to Q4, we have hardly moved our sales estimates as we think one should not get too carried away by the bold 29% 2-yr cum growth as it benefited from an always hard to predict tailwind from pent-up demand post the unusually warm October and the growing popularity of the Black Friday event in Europe. We did incorporate into our numbers the miss at the opex level leading to an average 1% cut for EBITDA in ‘17e-‘19e. Still, we leave earnings largely unchanged as we have also cut depreciation. We are mostly in line with BBG consensus for both ‘17e and ‘18e and thus after a negative period around Q2 and Q3 results we expect earnings momentum to be more neutral over the next few quarters. Valuation wise, our FV ticks down to Eur29.5 from Eur30.0 to adjust for the final DPS recently paid and the small EBITDA cut but we reiterate our Neutral rating. Our DCF-set FV implies a 1-yr Fwd P/E of 25.2x, mostly in line with the 25.5x 5-yr avg.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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