Henkel's Revenue Rebounds but Impending Margin Pressure Will Be Difficult to Offset

Henkel's first-half 2021 report showed that business is bouncing back from COVID-19, with net revenue growth again beating our forecasts. Management raised its full-year sales guidance but maintained its prior earnings guidance, implying margin pressure in the second half of the year. We believe this explains the market's subdued response to the report. Henkel now trades at a moderate discount to our fair value estimate of EUR 98, which remains unchanged. These results show that Henkel is an almost equal split between defensive consumer products and more cyclical adhesives products tied to industrial production. The shares may perform well if the global economy continues to power ahead, while offering something of a natural hedge if the macroeconomic picture slows.