LPP: Organic growth should continue
We upgrade LPP to BUY (from SELL) and lift our FV from PLN 6,030 to PLN 10,183 on the back of 39%/44%/60% EBITDA upgrades in 18E/19E/20E. We were wrong and underestimated LPP’s potential to turn around both the top-line (LfL and ecommerce) and gross margin line performance (exp 54.5% vs 53.5% before). After internal restructuring that happened over the last 3 years, LPP looks much stronger and more immune to potential headwinds. First, the improved collection quality supports the performance both in brick and mortar (LfL) and ecommerce channels. Second, renegotiated rentals and investments in technology and logistics optimize store costs and inventory per sqm. Third, optimized working capital unlocked PLN 0.5bn in cash and has led LPP to have a net cash position. Thanks to LPP’s goal to increase the avg store size, we see ca. 700k sqm organic growth potential in existing locations over the next 5 years, hence LPP should remain a growth company.LPP SA Gdansk is clothing manufacturing group based in Poland. Co. is engaged in the design and distribution of clothing. Co.'s headquarters is located in Gdan'sk, including designing resources for all its brands. Co.'s stores offer its customer products that include jackets, shirts, sweaters, dresses, skirts, trousers, jeans, underwear and garment products. Co. also sells promotion clothing under a special selected brand. Co.'s product offering is addressed to a variety of customers for whom separate brands and chain stores are set up. Co. launches clothing under such brand names as: RESERVED, CROPP, MOHITO, HOUSE, and PROMOSTARS.
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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