HSBC Global Research lowered its target price for L'Occitane International (00973) to HK$20 from HK$21 and maintained its "buy" rating.
The research house remains convinced that the integration of the ELEMIS brand should generate earnings accretion of about 14% to 18% over the next three fiscal years for the group. But the stock is up only around 6% since the acquisition.
More importantly, HSBC noted that the core business has become a lot stronger, notably linked to product initiatives. As a consequence, we believe that despite the likely headwinds in Hong Kong (1Q was down 15% and should be more under pressure now) and the US (soft retail trends), like for like growth can probably hold a level at around 2% again in 2Q.
HSBC believes the group should be able to maintain teen constant currency growth of 13% versus 16% in 1Q.
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