Puig Brands SA Ordinary Shares - Class B PUIG

Puig Earnings: Profit Fell on One-Time Costs but Underlying Performance Solid on Resilient Demand  

Shares of no-moat beauty product maker Puig slumped 14% on Sept. 6 following its first-half results update, likely due to a 27% drop in reported net profit. However, we think the market correction was too harsh, as the profit decline was mainly driven by one-time costs related to its May IPO. Underlying performance was solid, with 9.6% sales growth led by strength in its fragrance business (73% of sales) and a 7.4% increase in adjusted EBITDA. Our 2024 projections for sales and adjusted EBITDA to grow 10% and 12%, respectively, remain in place. Further, we plan no changes to our 10-year forecasts for high-single-digit percentage sales growth and a 20% average adjusted EBITDA margins, or our EUR 23 per share fair value estimate. Shares look slightly undervalued.