Consumer Brands & Retail Global Luxury Goodschina.pan-european-days.com/wp-content/uploads/... · share gains in a highly fragmented market. Essilor increased its market share in

Essilor remains by far a “captain of industry” in the corrective lenses but also in the optical

instruments market. The expansion in new markets (sun and online) supported by the global

roll-out of direct-to-consumer marketing campaigns (a game changer in our view as it is

targeting directly end consumers and not opticians) is acting as a catalyst for further market

share gains in a highly fragmented market. Essilor increased its market share in volume from

36% in 2012 to 39% in 2014. Ongoing investments in media spending should enable the group

to meet its +4.5% sales growth at constant FX and perimeter target in FY2015. We forecast

+4.6% for FY15e and +5% in Q3 15e due on 22 October.

The optical market is still significantly underpenetrated. The “Growing in a Bigger Playing

Field” strategy presented by Essilor at its June 2014 Investor Day is becoming a reality,

especially with the good execution in terms of expansion in sun and online. The group is now

not only addressing the needs of vision correction of 4.2bn people globally but potentially of

7.2bn in needs of corrective and protective lenses. Whilst the group was mostly involved in

prescription lenses (a cEUR11bn market in FY14e growing at 3-4% p.a), it now intends to

address a larger market which is expected to reach EUR27bn by 2018 growing at +6-7% p.a,

according to Essilor’s own projections, by expanding into the sunglasses market (estimated at

EUR8.5bn by FY18e, growing at +6-7% p.a) and the online market (EUR5.8bn by 2018e,

growing at +14% p.a). Longer-term, we believe Essilor could also decide to expand into

contact lenses, which could be another attractive segment, especially with the increase in

number of people affected by myopia in China.

Retain Buy rating and raise target price to EUR131 (from EUR125) on the back of our

DCF rollover to 2016e, partially offset by our 4%, 3% and 3% EPS cut in FY2015e-17e

respectively due to a higher tax rate. In 2015e, tax rate should increase 200bps to 28% due to a

less favourable geographical mix. Essilor is currently trading at 29.6xPE2015e and

26.2xPE2016e, a 90% premium to the DJ Stoxx 600 (above its 10-year average of 77%) but is

offering superior visibility on continuous earnings growth (23% EPS growth in FY2015e and

13% in FY16e-17e respectively). In addition, in the current market environment, Essilor’s

defensive status should appeal to risk –adverse investors.

Essilor (EI FP)

Buy: Bigger playing field becomes reality

“A captain of industry” in corrective lenses playing in a bigger playing field with the expansion in sun and online, and, we believe, likely also at some stage in contact lenses

We forecast +5% pure organic sales growth for Q3 15 due on 22 October 2015

Retain Buy, raise target price to EUR131 (from EUR125) on DCF rollover to 2016e partially offset by our 2015e-17e EPS cut

Consumer Brands & Retail Global Luxury Goods Equity – France

Company report

Index SBF-120Index level 3,500RIC ESSI.PABloomberg EI FP

Source: HSBC

Buy Target price (EUR) 131.00 Share price (EUR) 108.90 Upside/Downside (%) 20.3

Dec 2014 a 2015 e 2016 e

HSBC EPS 2.99 3.67 4.15 HSBC PE 36.5 29.6 26.2

Performance 1M 3M 12M

Absolute (%) 2.3 1.8 25.3 Relative (%) 6.9 9.7 22.7

Enterprise value (EURm) 25099Free float (%) 92Market cap (USDm) 26,274Market cap (EURm) 23,537

Source: HSBC

2 October 2015

Anne-Laure Jamain * Analyst HSBC Bank plc +44 20 7991 6587 [email protected]

Antoine Belge * Analyst HSBC Bank plc, Paris branch +33 1 56 52 4347 [email protected]

Erwan Rambourg * Analyst The Hongkong and Shanghai Banking Corporation Limited +852 2996 6572 [email protected]

View HSBC Global Research at: http://www.research.hsbc.com

*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations

Issuer of report: HSBC Bank plc

Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it [email protected] Christine Balle 10/02/15 04:25:40 AM Essilor International

http://www.research.hsbc.com/

2

Essilor (EI FP) Global Luxury Goods 2 October 2015

abc

Financials & valuation Financial statements

Year to 12/2014a 12/2015e 12/2016e 12/2017e

Profit & loss summary (EURm)

Revenue 5,670 6,774 7,347 8,005EBITDA 1,440 1,543 1,708 1,893Depreciation & amortisation -451 -332 -360 -392Operating profit/EBIT 989 1,211 1,348 1,501Net interest -32 -24 -19 -14PBT 948 1,187 1,328 1,487HSBC PBT 948 1,187 1,328 1,487Taxation -246 -332 -365 -404Net profit 930 789 892 1,005HSBC net profit 642 789 892 1,005

Cash flow summary (EURm)

Cash flow from operations 1,032 1,037 1,290 1,429Capex -232 -339 -331 -360Cash flow from investment -2,068 -569 -580 -632Dividends -198 -219 -269 -304Change in net debt 1,438 14 -451 -498FCF equity 940 624 879 984

Balance sheet summary (EURm)

Intangible fixed assets 6,200 6,200 6,200 6,200Tangible fixed assets 1,154 1,391 1,612 1,852Current assets 3,162 3,671 4,031 4,755Cash & others 626 675 799 1,252Total assets 10,789 11,535 12,116 13,080Operating liabilities 2,418 2,655 2,777 2,918Gross debt 2,447 2,510 2,183 2,138Net debt 1,821 1,835 1,384 886Shareholders funds 4,915 5,359 6,140 7,003Invested capital 7,472 7,933 8,266 8,636

Ratio, growth and per share analysis

Year to 12/2014a 12/2015e 12/2016e 12/2017e

Y-o-y % change

Revenue 11.9 19.5 8.5 9.0EBITDA 32.1 7.1 10.7 10.9Operating profit 17.3 22.4 11.3 11.4PBT 12.2 25.2 11.9 11.9HSBC EPS 7.3 22.9 13.0 12.6

Ratios (%)

Revenue/IC (x) 1.0 0.9 0.9 0.9ROIC 12.3 11.3 12.1 12.9ROE 14.8 15.4 15.5 15.3ROA 7.9 7.9 8.3 8.7EBITDA margin 25.4 22.8 23.2 23.6Operating profit margin 17.4 17.9 18.3 18.7EBITDA/net interest (x) 45.0 63.4 88.4 132.1Net debt/equity 34.6 32.2 21.3 12.1Net debt/EBITDA (x) 1.3 1.2 0.8 0.5CF from operations/net debt 56.7 56.5 93.2 161.3

Per share data (EUR)

EPS reported (fully diluted) 4.33 3.67 4.15 4.68HSBC EPS (fully diluted) 2.99 3.67 4.15 4.68DPS 1.02 1.25 1.42 1.60Book value 22.88 24.95 28.58 32.60

DCF analysis

HSBC assumptions DCF, comprising

Risk-free rate (%) 3.50 EBIT growth 2015-25e CAGR (%) 8.6Equity premium (%) 5.50 EBIT growth 2025-45e CAGR (%) 4.6Sector beta 0.90 Fade period 2045-53e Specific beta 0.50 WACC (%) 5.88

Sensitivity and valuation range

Cost of capital vs fade period 4 years 8 years 12 years

4.9% 160 168 1695.4% 142 148 1515.9% 126 131 1366.4% 113 117 1226.9% 102 105 110

Valuation data

Year to 12/2014a 12/2015e 12/2016e 12/2017e

EV/sales 4.4 3.7 3.4 3.0EV/EBITDA 17.4 16.3 14.4 12.8EV/IC 3.4 3.2 3.0 2.8PE* 36.5 29.6 26.2 23.3P/Book value 4.8 4.4 3.8 3.3FCF yield (%) 4.0 2.7 3.8 4.2Dividend yield (%) 0.9 1.2 1.3 1.5

Note: * = Based on HSBC EPS (fully diluted)

Price relative

Source: HSBC Note: price at close of 30 Sep 2015

61

71

81

91

101

111

121

61

71

81

91

101

111

121

Oct-13 Apr-14 Oct-14 Apr-15 Oct-15Essilor Rel to SBF-120

[email protected] Christine Balle 10/02/15 04:25:40 AM Essilor International

3


abc

Bigger playing field with the expansion in sun and online

39% volume market share in 2014 (vs 36% in FY2012) of the global lens market

Essilor has the competitive advantage of being “the captain of industry” in corrective lenses as well as in

optical instruments. The group increased its market share in volume to 39% in FY2014 (from 37% in FY13 vs

36% in FY12) with also the largest share of the R&D development, accounting for 75%. However, since 2014,

Essilor had widened its playing field: whilst the group was mostly involved in prescription lenses (a cEUR11bn

market in FY14e growing at +3-4% p.a), it now intends to address a larger market which is expected to reach

EUR27bn by 2018e growing at +6-7% p.a, according to Essilor’s own projections, by expanding into the

sunglasses market (estimated at EUR8.5bn by FY18e, growing at+ 6-7% p.a) and the online market

(EUR5.8bn by 2018e, growing at +14% pa). Longer-term, we believe Essilor could also decide to expand into

contact lenses, which could be another attractive segment, especially in China (6% of the group sales) where

there is a large number of people affected by myopia (estimated at c800m).

Bigger playing field becomes reality

"A captain of industry" in corrective lenses playing in a bigger

playing field with the expansion in sun and online, and, we

believe, likely also at some stage in contact lenses

We forecast +5% pure organic sales growth for Q3 15 due on 22

October 2015

Retain Buy, raise target price to EUR131 (from EUR125) on DCF

rollover to 2016e partially offset by our 2015e-17e EPS cut

Essilor: Share of the global lens market 2014 (volume) Essilor: Share of global eyewear R&D spent 2014

Source: Essilor, HSBC estimates Source: Essilor

Essilor 39%

Hoya11%

Carl Zeiss7%

Others43%

Essilor75%

Other industry players

25%


4


abc

Raising its brands awareness through Direct-to-consumer media campaigns

We continue to believe direct-to-consumer marketing campaigns - targeting directly end consumer and

not opticians - are a game changer. From the synergies derived from the integration of Transitions –

acquired in 2014 - the group has decided to re-invest some in advertising. This strategy boosted organic

sales growth in H1 2015 and should continue to do so going forward by increasing Essilor brand

awareness in lenses and in other categories (i.e sunwear). Management mentioned during the H1 15

conference call that the group was planning to invest EUR215m in FY15e in media campaigns (vs

EUR150m in FY2014). Note that no indications have been shared regarding FY2016.

Sun and online industry segments offer the biggest growth opportunities

At this stage, sun and online are Essilor’s main expansion priorities.

Breakdown of the EUR27bn market targeted by Essilor by 2018e

Source: Essilor

Essilor sales in lenses accounted for 88% of the group sales in FY2014, a market segment in which the

group has by far the most significant share of R&D vs peers with c75% end FY2014. Essilor is now

transferring its know-how in optical lenses to sunglasses, in improving online consumer experience but

also developing affordable innovations dedicated to Fast-Growing markets (23% of the group sales in

FY2014), which are key for the group to capture growth in every market segments. In addition, the

above-mentioned media campaigns are also supporting the growth of the sun and online segments.

Online is well fitted for easily solved visual problems

Essilor online sales are still very small in the group sales mix with cEUR200m in FY2014. The group

plans to reach EUR400-500m in online sales by 2018. Online has the advantage to give access to visual

correction for easily solved problems such as myopia, well fitted for countries where there is a lack of

optometrists. In China, there is a large number of people affected by myopia (c800m), people in need of

visual correction can have a direct access to visual correction through the online channel while there is a

lack of professionals especially in Tier 4 & 5 cities. Note that even if North America accounts for c60%

of Essilor’s total on-line sales due to the weight of the acquisition of Coastal.com, the penetration for the

online business is much higher in China than in Europe and North America, which we take as a positive

for future growth in Europe and North America.

27.0

12.7

8.55.8

0

5

10

15

20

25

30

a EUR27bn market by 2018e Prescription lenses Sunglasses Online


5


abc

Sunwear (12% of the group sales in FY2014)

Sunwear reached 12% of Essilor sales in FY2014. Management expects to reach EUR1.1bn sales by 2018

implying a 10% CAGR. The strategic goal for this division is to innovate beyond fashion by boosting lens

performance, but also to acquire and develop strong regional brands and to have a wide price offering and

channel expertise. In addition, by expanding in sun, the group is addressing a larger market by offering a

visual protection and not only a visual correction to 4.2bn people globally but potentially to 7.2bn in needs

of corrective and protective lenses. Note that corrective lenses only account for 5% of the sun business.

Contact lenses could be another attractive segment for Essilor

We estimate that the contact lenses market value was cEUR6bn in FY2014e growing at a slightly higher

pace (i.e at +5% p.a) than prescription lenses (+3-4% p.a). It could add another cEUR7bn to Essilor’s

EUR27bn targeted market by 2018e. We believe that longer-term, Essilor could also decide to expand into

contact lenses, which could be another attractive segment for the group, especially in China where there is

a large number of people affected by myopia (estimated at c800m). The contact lenses market is highly

concentrated, according to GIA, the global market share of Johnson and Johnson, Ciba Vision, Bausch &

Lomb and Cooper was c90% in 2011 and we do not see any material reason why it should have changed

that much in FY2014. Even if we understand from Essilor that the main priority between now and 2018 is

about expanding in sun and online, we believe there is no structural reason which can explain why Essilor

would not be interested in developing in this market segment. We believe that contact lenses could be

another attractive opportunity for the group. In our view, it would be a good complement to Essilor’s

existing portfolio. Essilor is relatively small in this market, only distributing (not manufacturing) contact

lenses through two channels: (i) the opticians (sales of cEUR113m in FY14e) and (ii) Coastal.com (73% of

its sales).We believe that Essilor could potentially expand in contact lenses through acquisitions either of

small players or larger groups.

Potential merger with Luxottica

M&A will continue to be a significant part of the business model of Essilor. While Essilor is the captain of

the industry in lenses and optical instruments, Luxottica (LUX MI, Hold, EUR62, TP EUR66) is the

captain in framewear. We believe Luxottica’s main focus is likely to be on acquiring retail chains in

emerging markets, with the intention to re-brand the acquired stores into LensCrafters or Sunglass Hut,

Essilor: online regional sales mix in FY2014e

Source: Essilor

North America

60%

Europe20%

Rest of the world20%


6


abc

while Essilor is likely to continue to acquire laboratories, distributors and build its sunwear and online

businesses. Regarding Luxottica, the potential to add new brands or new licence contracts to the existing

portfolio is less significant than in the past, so any possible acquisition in this area would be likely to be an

add-on rather than a strategic deal. During Luxottica’s 1 September 2014 conference call, Luxottica

mentioned that a potential merger had been envisaged with Essilor. During Luxottica’s investor day on

March 3rd 2015 management stressed that each of the two companies had its specific strength (lenses for

Essilor, frames for Luxottica), but did not say anything other than "we will see". In our view, a possible

merger between Luxottica and Essilor would have strategic merit, as it would combine the worldwide

leader in frames with that of lenses and would generate significant distribution synergies. We note that the

two groups have relatively similar market caps (EUR28bn for Luxottica and EUR22bn for Essilor). The

main hurdle in our view would relate to corporate governance, ie what type of involvement in the new

entity the Del Vecchio family (which owns 61% of Luxottica shares) would ask for and which would not

be seen as an issue by Essilor, as was highlighted in the FT press article of 2 September 2014.

Earnings valuation and risks

H1 2015 earnings released on 30 July 2015

H1 2015 “contribution from operations” grew 24% y-o-y to EUR651m, implying a “contribution from

operations” margin up 20bps to 19.1%. Gross margin improvement of 190bps in H1 15 to 59.9% margin

was partially offset by higher operating expenses which increased 170bps as % of sales to 40.8% mainly

due higher media spend.

Q2 2015 sales came in at EUR1,749m up 20% reported and 4.4% at constant FX and perimeter. Sales

growth at constant FX and perimeter in Q2 15 showed a slight acceleration from the +4.0% achieved in

Q1 15, mainly driven by a solid acceleration in Europe boosted by the direct to consumer marketing

campaigns.

Tax rate came in at 29% in H1 15 much higher than in H1 14 due changes in the scope of consolidation

and increased sales in North America. EPS rose 19% y-o-y to EUR1.83

Unchanged FY2015 guidance

Management unchanged its FY2015 guidance of sales growth at constant FX and perimeter in excess of

4.5% and 8-11% sales growth at constant FX. The “contribution from operation margin” is expected to be

at least 18.8% (vs 18.6% in 2014). In FY2015 tax rate should increase to c28% (i.e by 200bps vs FY14,

vs 29% in H1 15), due to a less favourable regional mix. An improvement is expected in FY2016-17, an

update provided in H2 15.

Q3 2015 sales due on 22 October 2015

Essilor will report its Q3 2015 sales on 22 October. We expect organic sales growth at constant FX and

perimeter of 5%, accelerating sequentially from the 4% reported in Q1 15 and 4.4% in Q3 15. By region,

we believe that the performance in Europe should remain solid (HSBCe +4.5% vs +5% in Q2 15) as well

as in North America (HSBCe +3.5% vs +3.7% in Q2 15). Asia-Pacific should improve, our forecast

assumes a +7.2% organic sales growth rate in Q3 15 (vs 5.2% in Q2 15), and +10.5% in Latin America in

line with Q2. Laboratory equipment should remain in negative territory. It should remain impacted by


7


abc

intra-group sales to acquired companies. For FGX we expect growth at constant FX and perimeter of

+6.2% (vs 3.2% in Q2 15).

Essilor: quarterly sales growth at constant Fx and perimeter FY2013-17e

Source: Essilor, HSBC estimates

2015-17 EPS estimates cut by 4%, 3% and 3% respectively

We cut our 2015-17 EPS estimates by 4%, 3% and 3% respectively due to a higher tax rate for

FY15e-18e. For FY2015e, we expect organic sales growth at constant FX and perimeter of 4.6%

implying a 5.0% growth rate in both Q3 and Q4 15e which should remain boosted by the direct-to-

consumer marketing campaigns but also an improved performance in Asia, product innovations and the

ramp-up of new contracts in Europe and in the US (with CVS for instance). Our forecasts assume “a

contribution from operations” of 18.9% (vs 19.1% in H1 2015). Note that the positive impact from FX at

the top line level (10% in FY15e) is only a conversion impact ie no impact on the EBIT margin in

comparison with exporters such as luxury goods companies as Essilor manufactures locally.

For FY16e-17e, we expect organic sales growth at constant FX and perimeter in excess of 5% at

respectively 5.5% and 6.0% and “a contribution from operations” of 19.3% and 19.6% respectively. We

are now 1%, 2% and 4% above Bloomberg consensus estimates.

Essilor: Summary of HSBC sales estimate changes and comparison with Bloomberg consensus

(EURm) _________________ 2015e ________________ _________________ 2016e __________________ __________________ 2017e __________________ ___ HSBC ____ HSBC __ HSBC____ HSBC ___ HSBC ____ HSBC New Old Cons Chg vs Cons New Old Cons Chg vs Cons New Old Cons Chg vs Cons

Sales 6,774 6,789 6,771 0% 0% 7,437 7,363 7,299 0% 1% 8,005 8,023 7,837 0% 2%EBIT* 1,211 1,229 1,227 -1% -1% 1,348 1,356 1,353 -1% 0% 1,501 1,502 1,469 0% 2%EPS* 3.67 3.83 3.67 -4% 0% 4.15 4.28 4.13 -3% 1% 4.68 4.80 4.55 -3% 3%

* Note that our 2015 numbers are on an adjusted basis, ie not affected by the treatment of exceptionals mainly related to Transitions Source: HSBC estimates, Bloomberg consensus

Valuation and risks

We raise our fair value target price to EUR131 (from EUR125) mainly on the back of our DCF roll-over

to 2016e, partially offset by our 2015e-17e EPS cut. The assumptions used in our DCF are detailed on page

2. Our target price of EUR131 implies an upside potential of 20%. Therefore we retain our Buy rating.

Essilor is currently trading at 29.6xPE2015e and 26.2xPE2016e, a 90% premium to the DJ Stoxx 600

(above its 10-year average of 77%) but is offering superior visibility on continuous earnings growth (23%

0.1%

2.3%

3.1% 2.9%

2.1%2.4%

3.5%3.9%

5.0%

3.7%4.0%

4.4%

5.0% 5.0%4.6%

5.5%6.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Q1 13 Q2 13 Q3 13 Q4 13 FY2013 Q1 14 Q2 14 Q3 14 Q4 14 FY2014 Q1 15 Q2 15 Q3 15e Q4 15e FY2015e FY2016eFY 2017e


8


abc

EPS growth in FY2015e and 13% in FY16-17 respectively). In addition, in the current market

environment, Essilor’s defensive status should appeal to risk –adverse investors.

Essilor – Forward PE since 01/01/2002 Essilor – Forward PE rel. to DJStoxx600 since 01/01/2002

Source: Factset Source: Factset

Downside risks to our rating include: (i) lower than-expected “pure” organic sales growth, (ii) lower

contributions from acquisitions, (iii) depreciation of the USD against the EUR. From a share price

perspective, sector rotation out of defensive stocks in favour of cyclical stocks is theoretical downside risks.

12 x

14 x

16 x

18 x

20 x

22 x

24 x

26 x

28 x

30 x

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Average since01/02/04: 21.7x

0.50.70.91.11.31.51.71.92.12.32.52.72.9

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Average since 01/02/14: 1.7

Essilor – P&L

EURm 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015e 2016e 2017e

Revenue 2,690 2,908 3,074 3,268 3,892 4,190 4,989 5,065 5,670 6,774 7,347 8,005Cost of sales -1,123 -1,234 -1,325 -1,435 -1,732 -1,868 -2,205 -2,227 -2,342 -2,720 -2,928 -3,174Gross profit 1,567 1,674 1,749 1,833 2,160 2,321 2,784 2,838 3,328 4,054 4,419 4,831Gross margin 58.2% 57.6% 56.9% 56.1% 55.5% 55.4% 55.8% 56.0% 58.7% 59.9% 60.2% 60.4%Research and development costs 128 138 145 151 151 151 162 164 188 217 238 261Selling and distribution costs 605 643 672 707 860 960 1,140 1,145 1,367 1,687 1,837 1,993Other operating expenses 352 366 381 380 444 462 588 612 717 868 930 1,003Total SG&A 1,084 1,147 1,198 1,238 1,455 1,573 1,889 1,921 2,271 2,772 3,004 3,258SG&A as % of sales 40.3% 39.4% 39.0% 37.9% 37.4% 37.6% 37.9% 37.9% 40.1% 40.9% 40.9% 40.7%Contribution from operations 483 527 551 595 705 748 894 917 1,057 1,282 1,415 1,573Contribution as a % of sales 17.9% 18.1% 17.9% 18.2% 18.1% 17.9% 17.9% 18.1% 18.6% 18.9% 19.3% 19.6%Compensation costs on share-based payments and others -22 -23 -37 -39 -86 -65 -62 -74 -68 -71 -67 -72Operating profit (EBIT) 460 505 514 555 618 683 832 843 989 1,211 1,348 1,501EBIT margin 17.1% 17.4% 16.7% 17.0% 15.9% 16.3% 16.7% 16.6% 17.4% 17.9% 18.3% 18.7%Finance costs -31 -36 -28 -32 -12 -14 -24 -26 -32 -33 -28 -23Income from cash and cash equivalents 20 33 29 19 9 11 17 18 0 9 9 9Other financial income and expenses, net -9 -4 -3 2 -8 -10 -11 -12 -12 0 0 0Profit before taxes 441 498 512 544 608 670 814 823 945 1,187 1,328 1,487Income taxes -138 -156 -149 -168 -167 -179 -207 -199 -246 -332 -365 -404Tax rate 31.2% 31.3% 29.2% 30.9% -27.5% -26.8% -25.5% -24.2% -26.0% -28.0% -27.5% -27.2%Net profit of fully-consolidated companies 303 342 363 376 440 490 607 624 699 854 963 1,082Share of profits of associates 29 29 26 26 32 28 24 22 3 0 0 0Profit for the period 332 371 389 402 472 518 630 646 702 854 963 1,082Attributable to minority interests 3 4 6 8 10 13 46 53 60 65 71 78Adjusted net attributable profit 329 367 382 394 462 506 584 593 642 789 892 1,005EPS (basic) EUR 1.61 1.78 1.85 1.91 2.20 2.44 2.80 2.82 3.05 3.75 4.24 4.77EPS (Diluted) EUR 1.55 1.74 1.81 1.89 2.18 2.41 2.77 2.78 2.99 3.67 4.15 4.68YoY evolution Sales 11.0% 8.1% 5.7% 6.3% 19.1% 7.7% 19.1% 1.5% 11.9% 19.5% 8.5% 9.0%Gross profit 12.7% 6.8% 4.5% 4.8% 17.8% 7.5% 19.9% 2.0% 17.3% 21.8% 9.0% 9.3%SG&A 12.0% 5.8% 4.5% 3.3% 17.5% 8.1% 20.1% 1.7% 18.2% 22.1% 8.4% 8.4%EBIT 16.7% 9.6% 2.0% 7.9% 11.4% 10.4% 21.8% 1.4% 17.3% 22.4% 11.3% 11.4%Adjusted net attributable profit 14.2% 11.6% 4.3% 3.0% 17.3% 9.5% 15.5% 1.5% 8.2% 22.9% 13.0% 12.6%EPS diluted 13.9% 12.2% 4.0% 4.3% 15.3% 10.6% 14.8% 0.6% 7.3% 22.9% 13.0% 12.6%

Note*adjusted for non-recurring items mainly related to the Transitions Optical, Coastal.com and Costa acquisitions Source: company data, HSBC estimates


9


abc

Disclosure appendix Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Anne-Laure Jamain, Antoine Belge and Erwan Rambourg

Important disclosures

Equities: Stock ratings and basis for financial analysis

HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating because research reports contain more complete information concerning the analysts' views and the basis for the rating.

From 23rd March 2015 HSBC has assigned ratings on the following basis:

The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12 months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20% below the current share price, the stock will be classified as a Reduce.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change in target price or estimates).

Upside/Downside is the percentage difference between the target price and the share price.

Prior to this date, HSBC’s rating structure was applied on the following basis:

For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.

*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.


10


abc

Rating distribution for long-term investment opportunities

As of 01 October 2015, the distribution of all ratings published is as follows: Buy 46% (32% of these provided with Investment Banking Services)

Hold 40% (29% of these provided with Investment Banking Services)

Sell 14% (18% of these provided with Investment Banking Services)

For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial analysis” above.

Share price and rating changes for long-term investment opportunities

Essilor (ESSI.PA) Share Price performance EUR Vs HSBC rating history Recommendation & price target history

From To Date

Underweight Overweight 09 January 2013 Overweight Buy 31 March 2015 Target Price Value Date

Price 1 70.00 22 October 2012 Price 2 90.00 09 January 2013 Price 3 94.00 08 March 2013 Price 4 97.00 14 October 2013 Price 5 94.00 17 February 2014 Price 6 100.00 16 June 2014 Price 7 104.00 05 November 2014 Price 8 125.00 31 March 2015

Source: HSBC

Source: HSBC HSBC & Analyst disclosures Disclosure checklist

Company Ticker Recent price Price Date Disclosure

ESSILOR ESSI.PA 108.90 30-Sep-2015 2, 4, 5, 6Source: HSBC

1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next

3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this

company. 4 As of 31 August 2015 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 31 August 2015, this company was a client of HSBC or had during the preceding 12 month period been a client of

and/or paid compensation to HSBC in respect of investment banking services. 6 As of 31 August 2015, this company was a client of HSBC or had during the preceding 12 month period been a client of

and/or paid compensation to HSBC in respect of non-investment banking securities-related services. 7 As of 31 August 2015, this company was a client of HSBC or had during the preceding 12 month period been a client of

and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as

detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this

company, as detailed below.

2636465666768696

106116

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Oct

-14

Oct

-15


11


abc

11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in securities in respect of this company

HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments (including derivatives) of companies covered in HSBC Research on a principal or agency basis.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.

Whether, or in what time frame, an update of this analysis will be published is not determined in advance.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research.

Additional disclosures 1 This report is dated as at 02 October 2015. 2 All market data included in this report are dated as at close 30 September 2015, unless otherwise indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its

Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.


12


abc

Disclaimer * Legal entities as at 30 May 2014 ‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Toronto; HSBC Bank, Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR; The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch

Issuer of report

HSBC Bank plc 8 Canada Square

London, E14 5HQ, United Kingdom

Telephone: +44 20 7991 8888

Fax: +44 20 7992 4880

Website: www.research.hsbc.com

In the UK this document has been issued and approved by HSBC Bank plc (“HSBC”) for the information of its Clients (as defined in the Rules of FCA) and those of its affiliates only. It is not intended for Retail Clients in the UK. If this research is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking Corporation Limited, Singapore Branch" representative in respect of any matters arising from, or in connection with this report. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This publication has been distributed in Japan by HSBC Securities (Japan) Limited. It may not be further distributed, in whole or in part, for any purpose. In Hong Kong, this document has been distributed by The Hongkong and Shanghai Banking Corporation Limited in the conduct of its Hong Kong regulated business for the information of its institutional and professional customers; it is not intended for and should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited makes no representations that the products or services mentioned in this document are available to persons in Hong Kong or are necessarily suitable for any particular person or appropriate in accordance with local law. All inquiries by such recipients must be directed to The Hongkong and Shanghai Banking Corporation Limited. In Korea, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") for the general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act (“FSCMA”). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. HBAP SLS is regulated by the Financial Services Commission and the Financial Supervisory Service of Korea. This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice. Nothing herein excludes or restricts any duty or liability to a customer which HSBC has under the Financial Services and Markets Act 2000 or under the Rules of FCA and PRA. A recipient who chooses to deal with any person who is not a representative of HSBC in the UK will not enjoy the protections afforded by the UK regulatory regime. Past performance is not necessarily a guide to future performance. The value of any investment or income may go down as well as up and you may not get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the research report, changes in the exchange rates may have an adverse effect on the value, price or income of that investment. In case of investments for which there is no recognised market it may be difficult for investors to sell their investments or to obtain reliable information about its value or the extent of the risk to which it is exposed. In Canada, this document has been distributed by HSBC Bank Canada and/or its affiliates. Where this document contains market updates/overviews, or similar materials (collectively deemed “Commentary” in Canada although other affiliate jurisdictions may term “Commentary” as either “macro-research” or “research”), the Commentary is not an offer to sell, or a solicitation of an offer to sell or subscribe for, any financial product or instrument (including, without limitation, any currencies, securities, commodities or other financial instruments). HSBC Bank plc is registered in England No 14259, is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a member of the London Stock Exchange. (070905) © Copyright 2015, HSBC Bank plc, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank plc. MICA (P) 073/06/2015 , MICA (P) 136/02/2015 and MICA (P) 041/01/2015


abc

Europe Consumer Brands & Retail Antoine Belge Head of Consumer Brands and Retail Equity Research +33 1 56 52 43 47 [email protected]

Anne-Laure Jamain Analyst +44 207 991 6587 [email protected]

David McCarthy Head of Consumer Retail, Europe +44 207 992 1326 [email protected]

Andrew Porteous Analyst +44 20 7992 4647 [email protected]

Paul Rossington Analyst +44 20 7991 6734 [email protected]

Jérôme Samuel Analyst +33 1 56 52 44 23 [email protected]

Emmanuelle Vigneron Analyst +33 1 56 52 43 19 [email protected]

Graham Jones Analyst +44 20 7992 5347 [email protected]

Damian McNeela Analyst +44 20 7992 4223 [email protected]

Anthony Bucalo Analyst - Beverages +44 20 7991 9815 [email protected]

CEEMEA Consumer Brands & Retail Bulent Yurdagul Analyst +90 212 3764612 [email protected]

Jeanine Womersley Analyst +27 21 6741082 [email protected]

Ankur P Agarwal Analyst +966 11 299 2103 [email protected]

Yazeed Al Turki Analyst +966 11 299 2260 [email protected]

Specialist Sales David Harrington +44 20 7991 5389 [email protected]

Asia Consumer Brands & Retail Erwan Rambourg Head of Consumer Brands and Retail Equity Research +852 2996 6572 [email protected]

Christopher Leung Analyst +852 2996 6531 [email protected]

Lina Yan Analyst +852 2822 4344 [email protected]

Catherine Chao Analyst +852 2996 6570 [email protected]

Charlene Liu Analyst +65 6658 0615 [email protected]

Scott Chan +852 3941 7005 [email protected]

Karen Choi Analyst +822 3706 8781 [email protected]

Permada (Mada) Darmono Analyst +65 6658 0613 [email protected]

Amit Sachdeva Analyst +91 22 2268 1240 [email protected]

Kuldeep Gangwar Analyst +91 22 3396 0686 [email protected]

Chloe Wu Analyst + 8862 6631 2866 [email protected]

Jenny Chae Associate +822 3706 8774 [email protected]

North & Latin America Consumer & Retail Richard Cathcart Analyst +55 11 2169 4429 [email protected]

Ana C Hernandez Associate +52 55 5721 2745 [email protected]

Mariana Vergueiro Associate +55 11 3847 6066 [email protected]

Food & Beverage Carlos Laboy Global Head of Beverages Research +1 212 525 6972 [email protected]

James Watson, CFA Analyst +1 212 525 4905 [email protected]

Henry Nasser Analyst +55 11 2169 4424 [email protected]

Agricultural Products Alexandre Falcao Analyst +55 11 3371 8203 [email protected]

Ravi Jain Analyst +1 212 525 3442 [email protected]

Gustavo Gregori Analyst +55 11 3847 9881 [email protected]

Global Consumer Brands & Retail Research Team


mailto:[email protected]














Documents

Consumer Brands & Retail Global Luxury Goodschina.pan-european-days.com/wp-content/uploads/... · share gains in a highly fragmented market. Essilor increased its market share in