31 August 2012

Samsonite - Market share gain continues; H1CY12 Result Excerpts: Edelweiss

Samsonite (1910.HK) reported H1CY12 revenue of USD847mn versus USD744mn in H1CY11, up a strong 13.8% on reported basis and 18.2% on constant currency basis. Growth was largely driven by strong traction in North America and Asia, with China and India growing at 30.2% and 17.7%, respectively, on constant currency basis. During the same period, VIP posted ~7.7% top line growth, much lower than Samsonite, leading to loss in formers market share. 
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Strong growth drives market share gain
Samsonite reported revenue of USD847mn in H1CY12 against USD744mn in H1CY11, up a strong 13.8% on reported basis and 18% on constant currency basis. Growth was largely driven by strong traction in North America and Asia, which grew 27.7% and 21.3%, respectively. Within Asia, India top line stood at USD55.4mn in H1CY12 compared to USD54.6mn in H1CY11, up 1.4% on reported basis and 17.7% in constant currency basis. 13.5% devaluation of the INR versus USD led to constant currency sales dipping USD8.9mn. During the same period, VIP’s top line grew 7.7%, much lower than Samsonite, thereby leading to further loss in former’s market share. The company added ~325 touch points in Asia, of which addition in India stood at 162.
Margins to stabilise going forward
The company’s gross margin declined from 55.1% in H1CY11 to 53.8% in H1CY12 primarily due to devaluation of EUR and INR versus USD, and change in product mix in favour of American Tourister. Adjusted EBITDA margin for Asia stood at 17.7% in H1CY12 compared to 18.2% in H1CY11 predominantly due to devaluation of INR against USD. However, management has guided that margin will stabilise in H2CY12 as it has effected price hikes to mitigate the impact of currency movements.
Outlook: Positive over long term
The global travel market continues to be strong despite ups and downs particularly in European countries. Management expects strong growth in H2CY12 driven by strong growth in US and Asia, and also expects gross margins to stabilize going forward.
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