LUXOTTICA GROUP S.p.A.
Consumer Goods - Luxury
Cattolica Student Research Team
Investment Research Challenge 2012
Investment Summary
Price Target: € 28.54
29
Current Price (February 1st, 2012): € 25.65
27
Potential Upside: 11.78%
25
Recommendation: Accumulate
23
21
19
17
1/3/11
7/3/11
Three reasons for investing in Luxottica:
Great potential in EMs
1/3/12
Net Sales
2011E
6,223.10
Growth YoY
EBITDA
Strong CFs generation
1,207.24
Growth YoY
Net
Income
Investment reliability
471.61
Growth YoY
EPS
1.27
Growth YoY
Company Overview
Financial Analysis
Valuation
Risk Analysis
2012E
6,602.10
2013E
7,368.60
2014E
8,047.92
6.09%
11.61%
9.22%
1,309.81
1,449.77
1,630.38
8.50%
10.69%
12.46%
510.82
570.97
648.35
8.31%
11.78%
13.55%
1.37
1.53
1.74
8.31%
11.78%
13.55%
Data
Company Overview
Design
Shared know-how
Manufacturing
Quality control throughout
production process
Logistic
“A focused and efficient
organization,
ready to take advantage
of further growth opportunities”
3 Hubs serving 130 countries
Distribution
200.000 doors
(Cit. Luxottica – 50 Years Publication)
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Company Overview
Three key words: Efficiency, Efficiency, Efficiency
24h delivery everywhere across the World
Innovation in the processes of the value chain – e.g. STARS system
New contracts to grant longer working days
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Company Overview
Luxottica
In-house &
Licensed brands:
Provided thanks to the expertise of:
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Company Overview
Ray Ban
Founded in 1937, acquired in 1999
First sunglasses in Luxottica
Synergy: Sunglasses market
Oakley
World leader in sport sunglasses
More than 600 patents
Synergy: Polarization of lens
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Company Overview
What’s in store for Luxottica?
Expansion in Emerging Markets
- “ Sun Belt” expansion strategy
Enlargement of customer base
- Incoming brands
- New product lines
Efficiency improvements
- Reduction of inventories
Company
Overview
Risk Analysis
Company
FinancialOverview
Analysis
Valuation
Data
Risk
Analysis
Valuation
Data
Financial Analysis
Company Overview
Expansion in Emerging Markets
How:
Expansion via acquisitions
Tecnol in Brazil, Erroca in Israel
Opening of new stores
Target of 500 new stores only in China
Why:
Exploitation of potential growth
Diversification of revenues
Seasonality reduction
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Company Overview
Enlargement of customer base
How:
2012 Coach joins the Group
2013 Giorgio Armani returns
Focus on “Asian Fit” product lines
US market:
reduction of entry price
new product lines
additional services
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Company Overview
Efficiency
improvements
How:
SAP system
Reduction in Lead time
Improvements of order flow control in Hubs
Why:
Reduction in employed NWC
Higher CFs generation
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Financial Analysis
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Financial Analysis
Key drivers:
1. Emerging Markets will drive Luxottica’s growth
2. Increasing diversification in revenues
Graph 2: Geographical Areas %
Contribution to Net Sales
Graph 1: Net Sales by Geographical Units
9.000
100
8.000
80
7.000
60
6.000
5.000
40
4.000
20
3.000
0
2.000
-20
1.000
0
-40
2007
2008
2009
Rest Of The World
2010
2011E
Europe
2012E
2013E
2014E
2008
2009
RoW
North America
2010
2011E
Europe
2012E
2013E
2014E
North America
Note: 2007 Total Net Sales Benchmark
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Valuation
Key drivers:
3. Margin consolidation and NWC improvements
4. Net Financial Position is expected to improve
Graph 2: Net Debt/EBITDA Ratio
Graph 1: WACC vs. ROE
18%
16%
3.500 €
3,5
3.000 €
3
2.500 €
2,5
2.000 €
2
1.500 €
1,5
1.000 €
1
14%
12%
10%
8%
6%
4%
500 €
2%
0,5
- €
0%
2008A
2009A
2010A
ROE
Company Overview
2011A
2012E
2013E
2014E
WACC
Financial Analysis
0
2007
2008
Net Debt
Valuation
2009
2010 2011E 2012E 2013E 2014E
EBITDA
Risk Analysis
Net Debt/EBITDA
Data
Valuation
Discounted Cash Flow
Two different Beta and WACC:
Growth/Convergence Phase
Terminal Value
Three-Stage Operating Cash Flow Model
Current
Economic
Scenario
Two-Stage Operating Cash Flow Model
(Growth Phase – Convergence Phase – Terminal
Value)
Company Overview
Financial Analysis
Long-Term
Economic
Scenario
Valuation
(Growth Phase – Terminal Value)
Risk Analysis
Data
Valuation
Discounted Cash Flow
Generation of DCF by Geographical Areas:
2011E
419.11
106.78
96.84
622.74
North America
Europe
RoW
Total DCF
2012E
436.45
134.48
133.14
704.07
2013E
452.88
115.44
162.96
731.28
2014E
476.29
108.32
232.57
817.19
CAGR 11-14
4.36%
0.48%
33.92%
9.48%
Source: IBOVESPA estimates
EV
€ 15,163.11 M
Price Target as a sum of
Geographical EVs:
NFP
€ 1,763.76 M
North America
Europe
RoW
Total EV
€ 8,110.51
€ 1,505.21
€ 5,547.38
€ 15,163.11
# Outstanding
467.34 M
Price Target
€ 28.67
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Valuation
Multiple Analysis
Outlier of the vision industry
A global player
Graph 1: Industry Competitors EBITDA Margin
Graph 2: Global Comparables EBITDA Margin
2011
2011
2010
2010
2009
2009
-100%
-50%
Luxottica
Fielmann
0%
50%
100%
Marcolin
Hoya
Essilor
-20%
0%
Luxottica
Safilo
Starbuck
Financial Analysis
40%
60%
LVMH
L'Oreal
Essilor - features of vision industry
Fielmann - retail sector dynamics
L’Oreal - global structure
Luxottica’s multiple sample
considers:
Company Overview
20%
Swatch
Valuation
Risk Analysis
Data
Valuation
Multiple Analysis
Luxottica EV/EBITDA is comparable to:
Luxottica
2009A
2010A
2011E
2012E
EV/EBITDA
12.34x
12.16x
11.48x
10.58x
P/E
27.75x
27.46x
26.30x
23.78x
Source: Company data/IBOVESPA estimates
… and leads to:
EBITDA 2012E
€ 1,309.81 M
EV 2012E
€ 15,068.17 M
EV/EBITDA
2009A
2010A
2011E
2012E
Essilor
9.62x
11.22x
12.90x
11.70x
Fielmann
10.29x
14.42x
12.93x
11.94x
L'Oreal
14.12x
13.05x
11.67x
10.87x
Average
11.34x
12.89x
12.50x
11.50x
Source: Company data/IBOVESPA estimates
NFP 2012E
€ 1,763.76 M
# Outstanding
467.34 M
Price Target
€ 28.40
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Valuation
Output of valuation methods
€ 28.67
DCF Price Target
€ 28.40
MA Price Target
50% weight
50% weight
€ 28.54
Final Price Target
Upside: 11.78%
Recommendation: Accumulate
Monte Carlo Simulation on Luxottica’s stock price
To test the soundness of the price target
Evidence prove consistency between analytic and
statistical approach
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Risk Analysis
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Risk Analysis
Operating Risk
Financial Risk
Strategic Risk
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Risk Analysis
Low Exposure
Competition
General business risks
Regulation uncertainty
Assets’ volatility tested with KMV Model
Medium Exposure
Product design
Slowdown of economic growth
Unsuccessful expansion in EMs
Company Overview
Financial Analysis
Valuation
Risk Analysis
Data
Risk Analysis
High Exposure
Exposure to fluctuation of
the €/$ exchange rate
10% variation in exchange
rate impacts EPS for 9%
Nowadays:
Wholesale segment
Retail sector
fully exposed
Natural hedging effect
Company Overview
orders completely hedged
Financial Analysis
amplified by Brazilian activities
Valuation
Risk Analysis
Data
Thanks for your attention!
APPENDIX
Appendix 1: Income Statement (€’000)
2008A
5,201.62
2009A
5,094.32
-2.06%
2010A
5,798.03
13.81%
2011E
6,223.10
7.33%
2012E
6,602.10
6.09%
2013E
7,368.60
11.61%
2014E
8,047.92
9.22%
3,109.15
3,138.98
0.96%
1,955.34
-6.55%
3,561.63
13.46%
2,236.40
14.37%
3,766.90
5.76%
2,456.20
9.83%
4,009.07
6.43%
2,593.03
5.57%
4,539.56
13.23%
2,829.04
9.10%
5,051.90
11.29%
2,996.02
5.90%
1,751.25
3,069.90
-0.55%
977.67
-9.28%
1,046.75
0.92%
1,762.60
3,478.21
13.30%
1,060.05
8.43%
1,259.77
20.35%
1,990.21
3,612.94
3.87%
1,123.54
5.99%
1,486.63
18.01%
2,146.97
3,745.64
3.67%
1,078.59
-4.00%
1,777.87
19.59%
2,244.71
4,062.11
8.45%
1,094.21
1.45%
2,212.27
24.43%
2,490.59
4,266.12
5.02%
1,114.83
1.88%
2,666.97
20.55%
2,696.05
GROSS PROFIT
Gross Profit Margin %
TOTAL OPERATING EXPENSES
3,450.37
66.33%
2,435.68
3,331.72
65.40%
2,474.73
3,807.82
65.67%
2,773.63
4,076.13
65.50%
2,868.89
4,357.39
66.00%
3,047.58
4,878.01
66.20%
3,428.24
5,351.87
66.50%
3,721.48
EBITDA
EBITDA Margin %
D&A
1,014.69
19.51%
264.92
857.00
16.82%
285.92
1,034.19
17.84%
322.04
1,207.24
19.40%
367.13
1,309.81
19.84%
418.52
1,449.77
19.67%
477.12
1,630.38
20.26%
543.91
INCOME FROM OPERATION
Income from operation margin %
INTEREST EXPENSES
749.77
14.41%
159.89
571.08
11.21%
109.13
712.15
12.28%
106.98
840.12
13.50%
114.56
891.28
13.50%
117.32
972.66
13.20%
107.54
1,086.47
13.50%
104.12
INCOME BEFORE TAXES
589.88
461.95
605.17
725.56
773.96
865.11
982.35
TAXES
Tax rate %
NET INCOME
NET INCOME NONCONTROLLING
INTERESTS
NET INCOME LUXOTTICA GROUP
194.66
33.00%
395.22
159.89
34.61%
302.06
218.22
36.06%
386.95
253.95
35.00%
471.61
263.15
34.00%
510.82
294.14
34.00%
570.97
334
34.00%
648.35
7.71
5.77
5.07
6.18
6.7
7.48
8.5
387.52
296.29
401.82
465.43
504.12
563.49
639.85
NET SALES
Reported Growth %
BUSINESS UNITS
Retail
Reported Growth %
Wholesale
Reported Growth %
GEOGRAPHICAL AREAS
North America
Reported Growth %
Europe
Reported Growth %
Rest Of The World
Reported Growth %
COST OF SALES
2,092.47
3,086.79
1,077.62
1,037.20
Appendix 2: Balance Sheet Statement (€’000)
2008A
2009A
2010A
2011E
2012E
2013E
2014E
5,098.33
5,035.00
5,328.62
5,325.55
5,361.81
5,392.59
5,522.88
Tangible Assets
1,059.64
1,170.98
1,149.97
1,229.13
1,235.39
1,251.65
1,272.43
Intangible Assets
3,900.89
3,921.84
3,838.72
4,045.40
4,080.76
4,100.76
4,110.76
Financial Assets
17.67
5.50
46.32
54.08
9.40
9.40
9.40
WORKING CAPITAL
800.82
708.94
708.19
724.31
699.80
702.32
696.71
Inventories
569.21
524.66
590.04
613.82
605.10
620.12
637.03
Receivables
630.02
618.88
655.89
736.59
780.02
871.78
950.02
Payables
398.41
434.60
537.74
626.10
685.32
789.58
890.34
OTHER ASSETS
569.21
524.66
590.04
613.82
605.10
620.12
637.03
CAPITAL EMPLOYED
5,724.74
5,376.97
5,654.22
5,640.10
5,723.93
5,829.97
6,027.35
FINANCIAL POSITION
3,209.84
2,623.36
2,384.81
2,142.82
2,009.79
1,944.36
1,834.38
Long Term Debt
2,942.38
2,336.95
2,111.43
1,876.42
1,763.76
1,662.36
1,580.10
Other Liabilities
267.46
286.41
273.38
266.40
246.03
281.10
254.27
2,514.91
2,753.62
3,269.41
3,497.28
3,714.14
3,885.61
4,192.97
2,501.18
2,737.24
3,256.38
3,028.79
3,239.30
3,328.77
3,448.98
13.73
16.38
13.03
12.16
13.01
13.37
13.85
FIXED ASSETS
SHAREHOLDER
EQUITY
Luxottica Group
Non-Controlling
Interests
Appendix 3: Free Cash Flow Statement – North America (€’000)
2008A
2009A
2010A
2011E
2012E
2013E
2014E
NET SALES
3,086.79
3,069.90
3,478.21
3,612.94
3,745.64
4,062.11
4,266.12
Total Sales %
59.34%
60.26%
59.99%
58.06%
56.73%
55.13%
53.01%
Growth %
1.14%
(0.55%)
13.30%
3.87%
3.67%
8.45%
5.02%
EBITDA
EBITDA Margin
%
D&A
602.15
516.44
620.41
700.89
743.11
799.05
862.79
19.51%
16.82%
17.84%
19.40%
19.84%
19.67%
20.22%
122.96
125.31
133.93
221.62
245.49
271.85
294.34
TAXES
115.52
96.35
130.91
147.43
153.69
166.88
181.95
RECEIVABLES
146.79
151.01
158.07
183.23
203.74
235.37
261.27
PAYABLES
234.05
261.90
322.59
363.30
386.88
435.57
472.85
INVENTORIES
337.79
316.17
353.96
356.18
341.59
342.09
338.32
WC
250.53
205.28
189.44
176.10
158.45
141.88
126.74
NWC
37.04
(45.25)
(15.83)
(13.34)
(17.65)
(16.57)
(15.14)
CAPEX
172.14
118.29
132.42
147.68
170.62
195.86
219.68
FCF
277.45
347.04
372.91
419.11
436.45
452.88
476.29
25.08%
7.45%
12.39%
4.14%
3.76%
5.17%
FCF Growth %
Appendix 4: Free Cash Flow Statement – Europe (€’000)
2008A
2009A
2010A
2011E
2012E
2013E
2014E
NET SALES
1,077.62
977.67
1,060.05
1,123.54
1,078.59
1,094.21
1,114.83
Total Sales %
20.72%
19.19%
18.28%
18.05%
16.34%
14.85%
13.85%
Growth %
5.60%
(9.28%)
8.43%
5.99%
(4.00%)
1.45%
1.88%
EBITDA
EBITDA Margin
%
D&A
210.21
164.47
189.08
217.96
213.98
215.04
225.60
19.51%
16.82%
17.84%
19.40%
19.84%
19.65%
20.24%
44.28
38.00
37.46
59.53
61.61
63.67
69.83
TAXES
40.33
30.69
39.90
45.85
44.26
44.91
47.58
RECEIVABLES
324.46
309.44
310.89
336.44
328.10
337.19
353.51
PAYABLES
81.71
83.41
98.31
113.68
113.59
117.46
122.50
INVENTORIES
117.92
100.69
107.88
111.45
100.30
92.25
87.65
WC
360.67
326.72
320.45
334.21
314.80
311.98
318.66
NWC
(68.90)
(33.95)
(6.27)
13.75
(19.41)
(2.82)
6.68
CAPEX
64.62
40.59
46.79
51.58
54.65
57.51
63.03
FCF
174.16
127.15
108.66
106.78
134.48
115.44
108.32
(26.99%)
(14.54%)
(1.73%)
25.94%
(14.16%)
(6.16%)
FCF Growth %
Appendix 5: Free Cash Flow Statement – Rest Of The World (€’000)
2008A
2009A
2010A
2011E
2012E
2013E
2014E
NET SALES
1,037.20
1,046.75
1,259.77
1,486.63
1,777.87
2,212.27
2,666.97
Total Sales %
19.94%
20.55%
21.73%
23.89%
26.93%
30.02%
33.14%
Growth %
16.08%
0.92%
20.35%
18.01%
19.59%
24.43%
20.55%
EBITDA
EBITDA Margin
%
D&A
202.33
176.09
224.70
286.06
352.72
435.04
540.05
19.51%
16.82%
17.84%
19.24%
19.84%
19.67%
20.25%
41.86
41.95
46.85
85.98
111.41
141.60
179.75
TAXES
38.82
32.85
47.41
60.17
72.95
90.86
113.89
RECEIVABLES
158.77
158.43
186.93
216.93
248.18
299.23
335.24
PAYABLES
78.65
89.30
116.84
149.12
184.85
236.55
294.99
INVENTORIES
113.50
107.80
128.20
146.19
163.21
185.78
211.06
WC
193.62
176.94
198.29
214.00
226.54
248.46
251.31
NWC
20.03
(16.68)
21.35
15.71
12.54
21.92
2.85
CAPEX
59.66
41.53
51.14
63.34
84.09
109.30
140.74
50.00
50.00
50.00
50.00
INVESTMENTS
FCF
FCF Growth %
83.83
118.39
104.80
96.84
133.14
162.96
232.57
41.23%
(11.48%)
(7.59%)
37.48%
22.40%
42.72%
Appendix 6: Geographical Revenues (€’000)
2007A
Net Sales
2009A
2010A
2011E
2012E
2013E
2014E
5,094.32
5,798.03
6,223.10
6,602.10
7,368.60
8,047.92
4.74%
-2.06%
13.81%
7.33%
6.09%
11.61%
9.22%
59.34%
60.26%
59.99%
58.06%
56.73%
55.13%
53.01%
3,069.90
3,478.21
3,612.94
3,745.64
4,062.11
4,266.12
1.14%
-0.55%
13.30%
3.87%
3.67%
8.45%
5.02%
20.72%
19.19%
18.28%
18.05%
16.34%
14.85%
13.85%
1,020.49 1,077.62
977.67
1,060.05
1,123.54
1,078.59
1,094.21
1,114.83
5.60%
-9.28%
8.43%
5.99%
-4.00%
1.45%
1.88%
4,966.05 5,201.62
Reported Growth
Relative Weight
2008A
61.46%
North America 3,052.03 3,086.79
Reported Growth
Relative Weight
Europe
20.55%
Reported Growth
Relative Weight
17.99%
19.94%
20.55%
21.73%
23.89%
26.93%
30.02%
33.14%
RoW
893.53
1,037.20
1,046.75
1,259.77
1,486.63
1,777.87
2,212.27
2,666.97
16.08%
0.92%
20.35%
18.01%
19.59%
24.43%
20.55%
Reported Growth
Appendix 7: Forecast Summary
Forecast Summary - € M
2009A
2010A
2011E
2012E
2013E
2014E
5,094.32
5,798.03
6,223.10
6,602.10
7,368.60
8,047.92
EBITDA
857.00
1,034.19
1,207.24
1,309.81
1,449.77
1,630.38
Net Income
302.06
386.95
471.61
510.82
570.97
648.35
EPS
0.65
0.88
1.01
1.08
1.20
1.37
DIVIDEND
0.35
0.44
0.52
0.56
0.63
0.71
EV/EBITDA
12.34x
12.16x
11.48x
10.58x
9.56x
8.50x
P/E
27.75x
27.46x
26.30x
23.78x
21.27x
18.73x
NET DEBT/EBITDA
2.73x
2.04x
1.55x
1.35x
1.15x
0.97x
Net Sales
Appendix 8: Quarter Net Sales Seasonality
1.800
9.000
1.600
8.000
1.400
7.000
1.200
6.000
1.000
5.000
800
4.000
600
3.000
400
2.000
200
1.000
0
0
2009
Q1
Source: Company Data
2010
Q2
2011
Q3
Q4
Wholesale Net Sales
Retail Net Sales
Source: Company Data/IBOVESPA estimates
Appendix 9a: WACC Computation
Figure 2: WACC Summary
Figure 1: WACC Computation
Growth
Phase
WACC Assumptions
Beta
Debt/Equity
Ratio
Cost of Debt
Tax Rate
Terminal
Value
0.53
0.83
0.21x
0.15x
5.50%
4.35%
34%
34%
North America
Risk Free Rate
2.76%
4.32%
Risk Premium
8.05%
5.49%
Europe
Risk Free Rate
2.64%
3.91%
Risk Premium
11.10%
5.89%
RoW
Growth
Phase
6.50%
Terminal
Value
7.53%
WACC Europe
7.77%
7.93%
WACC RoW
8.85%
8.27%
Average WACC
7.29%
7.87%
WACC North America
Source: IBOVESPA estimates
Figure 3: Sensitivity Analysis – Terminal Value
g\
WACC
1.56%
7.37%
7.62%
7.87%
8.12%
8.37%
29.46
28.34
27.32
26.36
25.49
1.73%
30.23
29.06
27.96
26.97
26.05
1.90%
31.06
29.81
28.67
27.61
26.65
Risk Free Rate
4.63%
3.94%
2.07%
31.95
30.62
29.41
28.30
27.28
Risk Premium
9.22%
7.00%
2.24%
32.89
31.49
30.20
29.02
27.96
Source: IBOVESPA estimates
Source: IBOVESPA estimates
Appendix 9b: Growth Phase
Growth Phase
WACC
Europe
North
America
7.77%
6.50%
RoW
Description
8.85% IBOVESPA estimates.
Debt/Equity
0.21x
Debt/Equity ratio by the end of 2011.
Cost Of Debt
5.50%
Weighted average of the interest paid on the
debt outstanding.
Tax Rate
34.00%
Marginal tax rate.
Cost Of Equity
8.47%
6.99%
9.74% Estimated using the CAPM.
Risk-Free Rate
2.64%
2.76%
4.63%
Market Risk
Premium
11.10%
8.05%
Beta
0,53
Bloomberg data on average country risk free
rates for 2011.
Bloomberg data on average risk premium for
9.22%
2011.
Resulting from the regression of firm's returns on
the FTSE MIB index using daily data in the period
from 1/1/2011 to 30/12/2011. The short period
used in the computation is consistent with our
intention to have a beta that represents the
current scenario.
Appendix 9c: Terminal Value Phase
Terminal Value
Phase
WACC
Europe
North
America
7.93%
7.53%
Debt/Equity
0.15x
Cost Of Debt
4,35%
Tax Rate
34.00%
Cost Of Equity
Risk-Free Rate
Market Risk
Premium
Beta
8.77%
3.91%
5.89%
RoW
Description
8.27% IBOVEPSA estimates.
Target D/E ratio estimated on the basis of our firm’s long
term perspective
Estimated in accordance with our long-term cost of
debt, using as a proxy interest paid on the newly issued
10 year bond.
Marginal tax rate.
8.85%
9.72% Estimated using the CAPM.
4.32%
They represent the average risk free rate of the different
areas that would prevail under normal market
3.94% conditions. For Europe and North America the estimates
are based on past average value in the period 20032007, while for the RoW we used forward rates.
5.49%
0,83
They represent the average market premiums of the
different areas that would prevail under normal market
7.00% conditions. For Europe and North America the estimates
are based on past average value in the period 20032007, while for the RoW we applied a mark up.
Estimated as the average of the two betas estimates in
the period 2003-2007 and 2007-2011, respectively. It has
been computed in this way in order to represent as
clearly as possible the true beta of the firm under a
''normal scenario''.
Appendix 10: DFCF Summary
Growth
Phase
WACC
Terminal
value
WACC
Growth
Rate
Enterprise
Value - € M
North
America
6.50%
7.53%
2.00%
8,110.51
Europe
7.77%
7.93%
1.00%
5,547.38
RoW
8.85%
8.27%
2.00%
1,505.21
Net Debt
Price
Target
Aggregate
7.29%
7.87%
1.90%
15,163.10
1,763.76
€ 28.67
Source: IBOVESPA estimates
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
FTSE MIB
0,526
0,577
0,769
0,806
0,979
1,124
1,156
0,930
0,847
0,427
Source: IBOVESPA estimates
Appendix 11a: Multiple Analysis
Figure 1: EV/EBITDA Industry Competitors
EV/EBITDA
Essilor
Hoya
Marcolin
Safilo
Fielmann
Average
2007
13.82x
6.92x
33.16x
6.69x
10.59x
15.16x
2008
11.07x
7.17x
5.29x
5.94x
9.27x
7.14x
2009
9.62x
6.05x
8.33x
11.59x
10.29x
9.40x
2010
11.22x
3.98x
9.71x
9.49x
14.42x
8.69x
2011E
12.90x
1.91x
6.43x
4.66x
12.93x
7.77x
Source: Bloomberg/IBOVESPA estimates
Figure 2: EV/EBITDA Global Comparables
EV/EBITDA
2007
2008
2009
2010
2011E
LVMH
Starbuck's
L'Oreal
Swatch
Average
10.55x
18.66x
17.88x
12.18x
13.91x
6.34x
14.14x
11.63x
5.17x
8.15x
10.13x
15.40x
14.12x
11.63x
11.71x
12.27x
13.58x
13.05x
12.26x
11.86x
11.29x
17.65x
11.67x
9.95x
12.64x
Source: Bloomberg/IBOVESPA estimates
Figure 3: EBITDA growth %
EBITDA
growth %
Luxottica
Essilor
Fielmann
Starbucks
L'Oreal
Safilo
Hoya
Marcolin
LVMH
Swatch
2008
-5
9
15
-22
-1
-28
-10
290
5
-1
2009 2010 2011E
-16
8
1
18
-2
-48
-11
-23
-6
-21
21
19
4
40
12
64
71
106
26
48
Source: Bloomberg/IBOVESPA estimates
17
1
11
8
6
11
24
17
15
14
Appendix 11b: Multiple Analysis
Figure 1: P/E Industry Competitors
P/E
Essilor
Hoya
Marcolin
Safilo
Fielmann
2007
2008
25.03x 20.29x
19.53x 11.30x
-22.73x 15.10x
21.87x -16.95x
23.82x 17.68x
2009
18.44x
36.20x
12.42x
-0.41x
19.45x
2010
21.48x
22.00x
7.97x
913.0x
25.41x
2011E
22.35x
14.71x
10.31x
11.30x
24.61x
Average
13.50x
9.48x
17.22x
197.97x
16.66x
Median
21.87x
15.10x
18.44x
22.00x
14.71x
Source: Bloomberg/IBOVESPA estimates
Figure 2: P/E Global Comparables
P/E
2007
2008
2009
2010
2011E
LVMH
19.73x
15.18x
16.19x
15.16x
19.37x
Starbuck's
31.11x
35.07x
30.19x
20.84x
26.33x
L'Oreal
19.68x
21.98x
19.27x
21.23x
19.09x
Swatch
18.76x
15.87x
13.51x
17.52x
16.32x
Average
22.32x
22.03x
19.79x
18.69x
20.28x
Source: Bloomberg/IBOVESPA estimates
Figure 3: P/E Ratio
P/E
2011E
2012E
Essilor
21.57x
19.30x
Fielmann
23.88x
21.94x
L'Oreal
18.96x
17.47x
Average
21.47x
19.57x
Source: Company data/IBOVESPA estimates
Appendix 12: Monte Carlo Simulations – Stock Price
Figure 1: Luxottica Quantile Probabilities
Quantile
1
2
3
4
Probability
24%
21%
27%
28%
Cumulative Prob
24%
45%
72%
100%
Source: IBOVESPA estimates
Figure 3: Boundaries of MC Simulation
Figure 2: Luxottica Mean & Sd
Mean
σ
25,82
6,97%
Source: IBOVESPA estimates
Appendix 13a: Monte Carlo Simulations – FX Risk
Figure 1: €/$ Rate Quantile Probabilities
Quantile
1
2
3
4
Probability Cumulative Prob
24%
24%
23%
47%
26%
74%
26%
100%
Figure 2: €/$ Rate Mean & Sd
Mean
σ
1,4252
19%
Source: IBOVESPA estimates
Source: IBOVESPA estimates
Figure 3: Historical Path – Boundaries of MCS – Probability Distribution
Appendix 13b: Monte Carlo Simulations – FX Risk
Figure 1: Quantile Probs.
€/$
Quantile Probability
Figure 2: Sensitivity Analysis on €/$ Rate
Δ €/$
€/$
Δ EPS
EPS
PRICE
1,5202
3
26%
15%
1,5202
-13,50%
0.93
23.10
1,4541
3
26%
10%
1,4541
-9,00%
0.98
24.73
1,3880
2
23%
5%
1,3880
-4,50%
1.03
26.37
-
1,3219
-
1,08
28,54
1,2558
2
23%
-5%
1,2558
4,50%
1,13
29.63
1,1897
1
24%
-10%
1,1819
9,00%
1.18
31.27
1,1236
1
24%
-15%
1,1236
13,50%
1.22
32.90
Source: IBOVESPA estimates
Data: Bloomberg January 27th, 2012
Source: IBOVESPA estimates
Appendix 14a: KMV Model
Figure 2: KMV Sensitivity Analysis
Figure 1: Distance To Default 2011
4
Δ Asset’s
volatility
Asset’s
volatility
DD
Probability of
default
3
-
21.2%
4,13
0,057%
25%
26.5%
3,30
0,180%
50%
31.8%
2.75
0,740%
75%
37.1%
2,36
1,100%
100%
42.4%
2,06
3,000%
2
1
0
Source: IBOVESPA estimates
DD
Appendix 14b: KMV Model
Figure 1: KMV Score Comparison
4,5
4
3,5
3
2,5
LUX
2
MCL
SFL
1,5
1
0,5
0
0%
25%
Source: IBOVESPA estimates
50%
75%
100%
150%
200%
Appendix 15a: Company Shareholders
Figure 1: Company Shareholders
20%
8%
5%
Share Capital
€ 27,974 M
Number Of Shares
466,248 M
Nominal Value Of Each Share
Sources: Company data
67%
Delfin S.a.r.l.
Giorgio Armani
Deutsche Bank Trust Company Americas
Others shareholders with less than 2%
Source: Company data
Figure 2: Company’s Share Capital
€ 0.06
Appendix 15b: Corporate Governance
AEI is a sustainability rating issued by Standard Ethics, a non-profit sustainability
rating agency based in Brussels. Standard Ethics’ aim is to promote Socially
Responsible Investing and CSR, thus a Corporate Governance in line with
principles and guidelines of United Nations and European Union.
Average
E-
E+
E
Below
Average
EE
E-
EE
EE-
EE
+
EEE
Above
Average
Appendix 15c: Corporate Governance
Corporate Governance Quoted (CGQ) is an index promoted by the Institutional
Shareholder Services; the index is a new measure of a company’s corporate
governance structure and it is composed by two scores:
1. CGQ relative to the company industry;
2. CGQ relative to its market index.
Figure 1: CGQ Index – Luxottica’s results
LAST
2010
2009
2008
2007
CGQ Industry
59,30%
59,30%
59,30%
62,50%
67,30%
CGQ Market
44,80%
44,80%
44,80%
45,40%
60,30%
Source: Bloomberg
Appendix 16: SWOT Analysis
WEAKNESSES
STRENGHT
Complex structure
Well diversified portfolio by brand and by area
Low competition market
Customer satisfaction / stakeholders loyalty
Seasonality
Reliance on third-parties brand perception
Over-reliance on the US market
Logistics and distribution channels
Solid financial structure
SWOT
OPPORTUNITIES
EMs growth and deeper penetration
Higher efficiency in the value chain /
Improvements in lean production
New license contracts
New retail facilities
Value creation through acquisition synergies
THREATS
Economic downturn influencing demand
Fluctuations on the FX market
Swift change in the industry structure
Potential risk connected to bad/failed
acquisition
Possible departure of Andrea Guerra
Appendix 17: Technical Analysis
Appendix 17: Luxottica Stores
Company's Stores 2011
Stores Location 2011
2500
6000
2000
5000
1500
1000
500
0
4000
3000
2000
1000
0
Source: Company data
Source: Company data
Appendix 18: Press Release
15 gennaio 2012
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