Beiersdorf: Stellar Consumer Segment Growth Leads to Another Increase in Sales Guidance

Narrow-moat Beiersdorf BEI largely maintained its growth momentum in third-quarter 2023, delivering organic sales growth of 11.2% for the first nine months, compared with 12.3% in the first half. The performance was driven by the consumer segment, with year-to-date organic sales growth of 13.6%, while the Tesa segment’s performance continued to be muted, posting year-to-date organic sales growth of 1.3%. In light of strong growth momentum, its full-year guidance for the consumer segment was increased once again. Management now expects low-double-digit organic sales growth for the segment, compared with a high-single-digit to low-double-digit range previously. Our forecast already called for 13% organic sales growth for the consumer segment in 2023, so we make no changes to our model and confirm our EUR 100 fair value estimate. We believe shares are expensive at current levels.

Sales growth was primarily driven by the Nivea brand (17.5% organic growth year to date) and the dermatological brands (25% organic growth year to date). Nivea’s focus on facial care is paying off, with strong performance from its Luminous product range. As was the case in the first half, all regions continue to grow at a double-digit pace as Nivea’s mass-market portfolio resonates with consumers in a challenging economic environment.

We’re also updating our Morningstar Uncertainty Rating for Beiersdorf from Medium to Low. Although, historically we’ve been concerned about Beiersdorf’s heightened brand risk given its Nivea brand accounts for around two thirds of consumer segment revenue, we now believe other factors, such as the stable and defensive nature of the categories in which the firm operates and its diversified geographical footprint, should be given more weight in our overall assessment. Our Uncertainty Rating change was also informed by a quantitative methodology to help calibrate our fundamentals-based assessment of uncertainty across a broad range of stocks under our coverage.