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Equity research - Hermès International
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This Equity Research Report on Hermès International follows the research report format recommended by the CFA Institute, reflecting public information available until June 14, 2024. The report begins with a comprehensive business description, including an introduction to Hermès' history, a detailed analysis of each business segment, and the company's future strategies. Additionally, the report highlights Hermès' investments in Environmental, Social, and Governance (ESG) initiatives.
An in-depth industry analysis covers fashion luxury trends, the economic outlook and the supply and demand drivers within the industry. The competitive positioning of Hermès is assessed using a SWOT analysis.
Hermès International, a leading luxury fashion company, is engaged in the design, manufacturing, and marketing of a diverse range of high-end products. This report issues a BUY recommendation for Hermès, with a year-end 2024 price target (PT) of €2,411.03 per share. This target, derived using a Discounted Cash Flow (DCF) model, indicates an upside potential of 14.16% over the next 6.5 months, relative to the closing price of €2,112 per share as of June 14, 2024, and categorizes the investment as Medium Risk.
The recommendation is primarily supported by three key factors: i) Hermès' historical and consistent revenue growth, ii) its competitive advantage over other luxury brands and ii) its outstanding reputation in the market.
The valuation of Hermès was conducted using the Free Cash Flow to Equity (FCFE) model, complemented by other valuation methods including Free Cash Flow to the Firm (FCFF), Dividend Discount Model (DDM), and Relative Valuation.
However, the company's valuation is subject to several risks. Increasing consumer emphasis on sustainability poses significant challenges. Concerns among activist shareholders regarding Hermès’ environmental practices and low ESG scores suggest that the company must enhance its efforts in addressing these areas. Additionally, despite Hermès' strong vertical integration, risks include potential supply chain disruptions and reputation damage.
Descrição
Mestrado Bolonha em Finanças
Palavras-chave
Equity Research Valuation Fashion Luxury ESG Valuation Discounted Cash-Flow Dividend Discount Model Multiples
Contexto Educativo
Citação
Semedo, Outros nomesMélanie Seabra (2024). “Equity research - Hermès International”. Dissertação de Mestrado. Universidade de Lisboa. Instituto Superior de Economia e Gestão
Editora
Instituto Superior de Economia e Gestão