L’Occitane Announces Strong Second-Half Results, Increase to Dividend Payout; Shares Undervalued

Narrow-moat L'Occitane posted solid second-half fiscal 2022 results, with its bottom line exceeding PitchBook consensus and our estimate by about 20%. Another surprise was management's proposal to increase the dividend payout ratio to 40% from 35%, translating to about a 5% yield at the current share price. Looking into fiscal 2023, we think the company would continue to drive double-digit sales growth through expansion into new markets while maintaining an operating margin of around 16%. We maintain our fair value estimate at HKD 36.60 and view L'Occitane's shares as undervalued.