Beiersdorf: Strong Organic Sales Growth for Consumer Division Leads to Guidance Upgrade

We increase our fair value estimate for narrow-moat Beiersdorf by 6% to EUR 106 per share after reflecting in our forecast the strong first-quarter sales growth as well as a small revision to our midterm estimates. The consumer segment continued its positive momentum with organic sales growth of 10%, primarily driven by Nivea and the dermatological brands. La Prairie also returned to modest growth of 1% in the first quarter after a very weak performance last year and measures taken to normalize stock levels at the end of last year. Given these results, management upgraded its guidance for the consumer business to 6%-8% organic sales growth from midsingle digits previously. We believe this is realistic in light of the strong start to the year, even when assuming a substantial slowdown in sales growth in the coming quarters as price contribution to growth dwindles and volume growth normalizes. The Tesa business struggled in the first quarter, with like-for-like sales down 5.4%. Despite this, management confirmed its sales growth guidance of 2%-5% for Tesa for the full year. We believe this will be difficult to achieve as it would imply a very strong recovery in some ailing end markets such as electronics in Asia and North America. Even considering the bump in our fair value estimate, the shares appear overvalued, trading at a premium of around 20%.