LPP: heart of steel (stays BUY)
We maintain our BUY rating on LPP, with a new 12M price target (PT) of PLN 20,161/share (from PLN 9,760). LPP has, again, proven its superior ability to overcome serious challenges. Having recovered from the pandemic, the company has also coped with the crisis triggered by the Russian invasion of Ukraine. Bearing a loss of about one-third of its store count and c.50% of its previous rollout target, LPP has pushed forward in other markets. Facing the erosion of consumers’ real income and inflationary pressure on costs, LPP decided to halve its marketing spend, and optimise its labour and logistics costs. On top of that, we see turning macro tides, with the PLN recovering c.20% vs. the USD from the bottom in October 2022, and easing inflation improving the purchasing power of consumers and allowing for further cost reductions. Overall, we expect historically high earnings in 2023E (PLN 1.5bn, almost 4x above the pre COVID-2019 profit), remaining on a growth path afterwards. In the light of our 2022-25E earnings CAGR of 30%, we see P/Es of 15.8x for 2023E and 11.3x for 2024E, 40-43% below its peers, as a still attractive level.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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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