LPP: the glass is half full (stays BUY)
We maintain our BUY rating for LPP, with a new 12M price target (PT) of PLN 20,842/share. Its image of superior corporate governance has been challenged with accusations of continued operations in Russia. In our view, while the management has proven the discontinuation of legal or personal links to its former operations, the damage has been done, especially in transparency. Despite declarations that all direct sales to Russia were suspended in 2Q22, LPP maintains indirect supplies to ReTrading. While we estimate conservatively that corporate governance issues could increase LPP’s WACC to 11.5%, from 9.6% previously, we still find these more than neutralised by its superior growth prospects, driven by its new guidance to double the store count by the end of 2026E. We expect that by democratising fast fashion in Central and Southern Europe, LPP should deliver 2023-26E sales and earnings CAGRs of 22% and 20%, respectively. On that basis, we find the 36-43% discounts to its peers on 2024-25E P/E as excessive, and expect these to narrow with the delivery of the Sinsay rollout.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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