Derma And Thiamidol Launches Will Expand Global Markets

Key Takeaways

• Strategic expansion into new markets and innovations in products like Epicelline and Thiamidol are expected to drive significant revenue growth for Beiersdorf.
  
• Efforts to modernize and improve operational efficiencies, particularly in higher-margin segments, are aimed at enhancing net margins and future profitability.
  
• Beiersdorf faces short-term revenue challenges from repositioning in China and travel retail issues, with high market dependency risking revenue diversification amidst geopolitical and economic uncertainties.

Catalysts

Manufactures and distributes consumer goods in Europe, the United States, Africa, Asia, and Australia.

• Beiersdorf is expected to achieve significant growth in its Derma business, particularly with Eucerin and Aquaphor, driven by expansion into new markets and the launch of breakthrough innovations like Epicelline. This can positively impact revenue and earnings given the strong consumer acceptance and repurchase rates.
  
• The strategic repositioning and focus in China, particularly the launch plans for the Thiamidol ingredient across multiple brands (such as NIVEA and Eucerin) by 2026, are catalysts for future revenue growth as China is a large and strategic market for Beiersdorf.
  
• The company's push into white space expansion and increased innovation in key markets such as the U.S. and India, with the introduction of new product lines like Thiamidol-based face care products, may enhance revenue growth and market share.
  
• The recovery plan and strategic initiatives to modernize La Prairie, including broadening the price range and enhancing e-commerce strategies, aim to mitigate the current declines and drive future revenue and net margins as market conditions normalize.
  
• The efforts to increase operational efficiencies and focus on higher-margin segments, like the Derma and luxury business, are expected to improve net margins over time, alongside steady organic growth within Consumer Business.

Beiersdorf Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Beiersdorf's revenue will grow by 4.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.3% today to 11.0% in 3 years time.
• Analysts expect earnings to reach €1.2 billion (and earnings per share of €5.55) by about April 2028, up from €912.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.2x on those 2028 earnings, down from 29.4x today. This future PE is greater than the current PE for the GB Personal Products industry at 29.1x.
• Analysts expect the number of shares outstanding to decline by 0.84% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.18%, as per the Simply Wall St company report.

Beiersdorf Future Earnings Per Share Growth

Risks

• Beiersdorf's repositioning efforts in China and destocking activities could negatively impact revenue growth in the short term, particularly in the NIVEA and La Prairie segments.
  
• Challenges in the travel retail market, especially in luxury brands like La Prairie, may continue to affect overall revenue and profit margins.
  
• The high dependency on specific markets, such as the U.S. for Derma brands and China for future innovations, presents a risk to revenue diversification and could impact earnings if these markets face economic or geopolitical issues.
  
• Persistent geopolitical tensions, tariff policies, and economic volatility present uncertainties that could negatively impact consumer confidence and overall revenue growth.
  
• The currency fluctuations and foreign exchange impacts are likely to affect nominal sales growth, potentially influencing overall profitability and margin expectations.

Valuation

• The analysts have a consensus price target of €142.318 for Beiersdorf based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €186.0, and the most bearish reporting a price target of just €99.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €11.2 billion, earnings will come to €1.2 billion, and it would be trading on a PE ratio of 29.2x, assuming you use a discount rate of 5.2%.
  
• Given the current share price of €120.25, the analyst price target of €142.32 is 15.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.