On Wednesday, Citi maintained a Neutral stance on Henkel AG (OTC:HENKY) & Co KGaA (HEN3:GR) (OTC: HENOY), with a consistent stock price target of EUR72.00. The firm's expectations for the fiscal year 2023 include an Organic Sales Growth (OSG) of approximately 2.7%, with volume growth contributing marginally at 0.6%.
This modest increase is partly attributed to a decline in Consumer volumes by 0.4%, which is impacted by lingering challenges from the discontinuation of certain laundry products.
For the upcoming year, Citi anticipates that Henkel's pricing strategies will remain favorable, although they predict a decrease in the fourth quarter to about 0.7%. This forecast is set against a backdrop of stable raw material costs and anticipated higher savings in the Consumer business segment.
These factors have led to an upgraded margin forecast for fiscal year 2024, with the overall company margin projected to reach 13.2%. The Consumer and Adhesives business sectors are expected to achieve margins of 12.3% and 15.8%, respectively.
The revised margin outlook has prompted an increase in the fiscal year 2024 Earnings Per Share (EPS) estimate by 0.6%. When adjusted for constant foreign exchange rates, the EPS is projected to rise by approximately 12%.
Citi's analysis suggests that any potential re-rating of Henkel's valuation would likely require an improvement in Consumer volumes before the third quarter of the year, assuming all other conditions remain constant.
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