CICC: Maintains Samsonite "Outperform Industry" Rating, Lowers Target Price to HKD 20

According to the Zhitong Finance APP, China International Capital Corporation (CICC) released a research report stating that due to weak consumer sentiment amid uncertainty regarding tariffs in the United States, the firm has lowered its revenue and net profit forecasts for Samsonite (01910) for 2025 by 3% and 12% to USD 3.54 billion and USD 327 million, respectively; it has also reduced its forecasts for 2026 revenue and net profit by 4% and 18% to USD 3.75 billion and USD 348 million. The firm has cut its target price by 20% to HKD 20 (corresponding to a 11.5 times price-to-earnings ratio for 2025, which provides a 30% upside compared to the current stock price). Given the company's ongoing strict cost control, the firm maintains an "outperform" rating. The current stock price corresponds to 8.8 times the 2025 price-to-earnings ratio and 8.3 times the 2026 price-to-earnings ratio. CICC's main points are as follows: 1Q25 sales and profit margins below expectations Samsonite announced its 1Q25 results: Net sales were USD 797 million, a year-on-year decrease of 4.5% at constant exchange rates; adjusted EBITDA was USD 128 million (margin of 16.0%, compared to 18.8% in the same period last year); adjusted net profit was USD 52 million (compared to USD 87.1 million in the same period last year). Both sales and profit margins were below the firm's expectations, mainly due to underperformance in the Asian region and misalignment of order rhythms in the North American wholesale channel, although stable performance in Europe and prudent marketing spending offset some of the impact. In the earnings conference call, management pointed out: 1) The Tumi brand performed strongly in China. 2) Sales growth so far in 2Q25 is similar to that of 1Q25. 3) Management expects gross margins to remain stable in 2Q25, with slight improvement in adjusted EBITDA margins. 4) Management stated that there has been no significant advance stocking behavior in the luggage industry compared to other consumer goods. 5) As of 1Q25, 14% of the products sold by the company in the United States came from China, and management expects this proportion to decrease to 1%-5% by the end of 2025. To address potential tariff increases, the company plans to take several measures. 6) Considering the historical correlation between Samsonite's sales and global passenger volume, management believes that a projected 5% growth in global travelers in 2025 may indicate growth potential for luggage demand. 7) Leverage and dividend policy: As of 1Q25, after returning USD 350 million to shareholders through dividends and buybacks, the company's net leverage ratio was 1.8 times. 8) Dual listing: Management stated that it is continuously advancing the dual listing plan in the United States and closely monitoring the market environment. Risk warnings: Macroeconomic adverse factors; asset impairment losses; intensified external competition and internal brand competition; foreign exchange rate risks; uncertainty regarding the timing of the secondary listing; tariff uncertainties