依视路陆逊梯卡：“正确”的估值

EssilorLuxottica: The “"right" valuation becauseEssilorLuxotticahascontinuedtotransforminthemindsofinvestors: +41582723126luca.solca@bernsteinsg.com their respective fields, trading at similar multiples c. 24x PE. 442071700540 "transition period"because of perceived governance issues.The market de-rated thestock to a trough of around 22x PE in 1H19, as tensions stemming from the dual-leadership structure escalated into a public dispute (see blackbook:Essilor+Luxottica+GrandVision =ANew Eyewear Giant Is (Finally) Born). +85221232628eric.chen@bernsteinsg.com Yi-Peng Khoo, CFA+44 20 7676 6822yi-peng.khoo@bernsteinsg.com :At the end of the“transition period" governance concerns have subsided as a clearleadershipemerged.The stock tradedat approximatelya 27xmedian PEmultiple,with valuation momentum improving in 2H19 to around 28xfollowing the settlementagreementthateffectively resolvedtheformal 50/50governance standoff (seeblackbook: EssilorLuxottica: Unlocking the Giant's Potential). Specialist Sales Alix Turner+44 20 77624044alix.turner@bernsteinsg.com In more recent years, the equity story veered to med-tech and more recently to outrighttech, on the back of smart glasses exciting investors, with a peak PE multiple of c. 43xanda medianof c.32xfrom 2024todate. Theprevailingnarrativeinthepasttwo years has beenthat EssilorLuxottica hasa traditionaleyewearbusiness anda start-up smartglasses business.Theformerwould be growing in the low to mid-single digits,and benefit from continuing productinnovation and bolt-on acquisitions (see EssilorLuxottica:CMD signals work in progress)Thelatter would be huge,given that smartglasses would in due coursereplacemobilephones("We are increasinglyconvinced thatthis category has thepotentialovertimetoreplacethemobilephoneastheprimarypersonalcomputing interface inbothpersonalandprofessionalcontexts"-FrancesciMilleri,FY25annualresultpresentation).Thishasexcited investors to thepointof propelling EL.FPaboveEUR3o0.Onlytogetthemto loseexcitement,ascompetitionfromtechgiants andcannibalization riskforthetraditionaleyewearmarket would dawn on them. Weopposedthisvision, consideringthatEssilorLuxottica-astheundisputedkingdisruption.Celebrating the arrival of smart glasses for EssilorLuxottica investors wouldbe tantamounttoKodak investors celebrating the invention of digital photography(Seeblackbook:EssilorLuxottica:The Smart Glasses Paradox).EssilorLuxottica has establishedformidable grip on the traditional eyewear value chain through the three-way mergerand a series of bolt-on acquisitions.This integrated model has delivered exceptionalvaluecapture.However,theemergence ofsmartglasses threatens tofundamentallydisaggregate this ecosystem. Continued on the next page... smartglassesvaluechain.Luxurycompanies,manyofwhichhavebeenactivelyside,barriers to entryarerelatively low:lens manufacturing is already outsourced tospecialized laboratories,whilekey smartglasses components are largelyavailableoff the shelf. Most critically,software ecosystems are firmly controlled by technologycompanies, which are best positioned to capture the majority of incremental value and,consequently, a disproportionate share of the profit pool. Consumer electronics typically operate in more competitive environments and thereforecommand materially lower margins than the approximately 65%levels achieved inlikely to be substitutive rather than additive, implying a negative mix shift that woulddilute group margins. This impact would be further compounded by potential operatingdeleverageacross the company's approximately 18k retail stores,as consumerpurchasing progressivelymigratestoward wholesale-driven smartglasses distributionchannels. depends on how one assesses the impactof smart glasses on the group's long-termeconomics.Wetakeaprobabilityweightedapproachacrossbest/mid/worstscenarios,and think 21x PE is appropriate forthis stage (see EssilorLuxottica: Gauging Optionality formore details of our initial thoughts on the smart glasses optionality). 1)if onebelieves that smartglassesrepresenta genuinely incremental market on topoftraditional eyewear,andthat EssilorLuxottica can securea substantial share ofthisopportunity,then a PEmultiple above 4Oxcould be justified.We do not subscribe tothis view. Competitive intensity is increasing rapidly as both large technology playersand specialized eyewear brands enterthe category,making sustainable valuecaptureincreasingly challenging. 2) If instead one believes that EssilorLuxottica can continue to defend its traditionalof eyewear licenses -while also successfully navigating category disruption from smartglasses,amore appropriate valuation would becloserto 24-3Ox PE.We would be inclinedtoward this scenario if there were clear evidence of structural expansion in EBIT marginsand ROIC. To date, such evidence islacking, with FY25 results pointing in the oppositedirection. 3)Finally,if one concludes that EssilorLuxottica is increasingly allocating capital defensivelyd