Transferring Coverage of Narrow-Moat Henkel; FVE Reduced to EUR 80

Following a transfer of coverage, we lower our fair value estimate for narrow-moat Henkel to EUR 80 from EUR 98 as we incorporate in our forecast the latest margin outlook and developments related to the war in Ukraine. Henkel reported a stronger than expected 7% preliminary first-quarter organic sales growth, driven by double-digit pricing in the adhesives segment. However, management lowered the full-year margin guidance by a further 250 basis points, as it now expects mid-twenties direct material cost inflation, double the level communicated just two months ago. This is one of the most negative updates in the sector and has led to shares shedding around 8% on the announcement.