L’Oreal: Gaining Foothold in Injectable Aesthetics With a 10% Stake in Galderma; Shares Undervalued

Wide-moat beauty product maker L'Oréal announced on Aug. 5 it had taken a 10% stake in newly listed peer narrow-moat Galderma, which generates 52% of 2023 sales from injectable aesthetics and ranks as the number two globally in this market behind wide-moat AbbVie. While the price tag was not disclosed, we estimate the deal is worth roughly $1.9 billion based on Galderma’s closing price last Friday. This is the largest transaction done by L'Oréal, following its $2.5 billion purchase of Australia-based Aesop in 2023. That said, relative to L'Oréal’s $220 billion market cap, the deal is small, and we are maintaining our EUR 410 fair value estimate. Shares look slightly undervalued.