On Wednesday, Deutsche Bank (ETR:DBKGn) analysts downgraded shares of Beiersdorf AG (ETR:BEIG) (BEI:GR) (OTC: BDRFY) from Hold to Sell, also reducing the price target from EUR120.00 to EUR105.00. The decision was influenced by several factors indicating potential challenges for the company. The analysts noted that while Beiersdorf has experienced strong growth, its strategy of premiumisation, particularly with its NIVEA brand, could be encountering difficulties.
The downgrade was also prompted by a slowdown in beauty production data and a negative trend in brand searches for Beiersdorf. Furthermore, the analysts expressed skepticism regarding the company's prospects for improvement in the Chinese market. Adjustments to forecasts were made, including a 1.5% reduction in the expected earnings per share (EPS) for the fiscal year 2025 (FY 25e) due to foreign exchange impacts.
Deutsche Bank's revised projections for Beiersdorf's Consumer segment anticipate a 4.0% growth, which is below the consensus of 6.0%. Additionally, they forecast a modest 20 basis points improvement in the margin for FY 25e, half of the consensus estimate of 40 basis points. Despite these changes, the analysts' EPS forecast is only 0.4% below the consensus, largely because of foreign exchange and interest gains.
The analysts concluded that Beiersdorf's valuation, which is approximately 80% above the sector average compared to a median premium of about 55%, may not be sustainable if the company experiences slower top-line growth, potentially leading to a reevaluation of the valuation multiple.
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