Analyst Note| Jelena Sokolova, CFA |
We are increasing our fair value estimate for wide moat Hermes to EUR 500 as we incorporate better 2021 assumptions for revenue and profits following very strong first-half results. Revenue was up 33% against 2019 comparables in both the first and the second quarters, with strong growth across all categories. Other Hermes, which comprises jewellery and home goods and watches, recorded the strongest performances with 84.5% and 76% growth against 2019 comparables in the quarter. Leather goods, the biggest division, recorded 24% increase against 2019 levels in the quarter, a spectacular performance, which we expect to moderate in the quarters to come, given capacity constraints, non-recurrance of extra stock availability in the beginning of the year, and limited price increases (less than 2%). Nonetheless, we increase our expectations for Leather goods growth in 2021 to 22% (implying 9% increase from 2019 levels in the second half) from 17% previously forecast.