Equita, an Italian investment bank controlled by the U.S. private equity fund J.C. Flowers, has revised its forecasts for the two leading players in the international eyewear market, Safilo and Luxottica. Safilo's rating has gone down, while Luxottica's initial positive forecast has been confirmed.
The analysis of Safilo's accounts has led Equita to judge the original estimate of 10 percent growth in sales for the second half of 2011 as too optimistic. Equita's analysts claim they don't see evidence of this rate of growth, after a 5 percent increase recorded on first-half revenues which is expected to be confirmed for the following three months. On the basis of constant exchange rates and comparable structures, Equita is projecting growth of between 6.9 and 6.2 percent for 2011, while the range forecast for 2012 is between 6.5 and 9.1 percent.
The group's Ebitda is also now expected to be lower than the original forecast for 2012, at €121 million instead of €123 million, while gross profit is now forecast at €143 million instead of €152 million. But by 2013, Safilo is expected to see its margins recover. The group's target price has dropped by 12 percent to €12.20 per share. Equita's rating remains “hold,” while at the beginning of this week the group's share price on the Milan stock exchange was down by 3.6 percent to €10.19.
Equita's forecast for Luxottica remains positive. The group's chief executive, Andrea Guerra, stated most recently that the trend for 2011 had remained in line with its 2010 growth of 5-6 percent, with stable profits. The expectation is for consistent growth in the luxury segment and for the group's Ray-Ban and Oakley brands. The rating remains “buy,” with a target price of €25.60, while the stock has been selling at €21.26 in the past few days. Equita estimates that the negative impact of the dollar should be neutralized after the massive investments Luxottica has made on the retail and wholesale market in the emerging countries.