Henkel Maintained Strong Growth Momentum in Q3 2022 but a Slowdown Looms in 2023

Narrow-moat Henkel maintained its strong top-line growth momentum in late 2022, posting organic sales growth of 11.3% in the third quarter (versus 10.9% in the second quarter). The adhesive technologies business unit was the main contributor to this strong result, delivering organic sales growth of 16.8%. In light of the resilient performance recorded in the quarter, we lift our organic sales growth forecast for 2022 to 8% from a prior 6.8% to reflect the better-than-expected third-quarter result but maintain our adjusted EBIT margin forecast of around 11%. Our revised 2022 financial estimates align with management’s updated full-year 2022 guidance for organic sales growth of 7%-8% (up from 5.5%-7.5% previously) and adjusted EBIT margin of 10%-11% (up from 9%-11% previously). However, we’ve trimmed our 2023 sales growth and profit margin expectations in light of the deteriorating near-term macroeconomic environment in Europe. Still, with our long-term expectations for Henkel unchanged, we make no changes to our fair value estimate of EUR 81.