Prada's Revenue Rebounds Strongly From Pandemic, Margins Improve; Shares Expensive

We are increasing our fair value estimate for narrow-moat Prada to HKD 33.50 to incorporate our better expectations for 2021 sales, following strong first-half results. Like its luxury peers, Prada reported strong recovery in sales in the first half of the year, with revenue up 66% at constant currencies against 2020 levels and down 1% against 2019 levels. Retail revenue was 8% above 2019 levels on a comparable basis, pointing to solid end customer demand. Wholesale was impacted by the company’s actions to curtail channels and was down 37% versus 2019. Retail sales accelerated through the semester reaching double-digit growth against 2019 in the second quarter. The strongest retail sales momentum was seen at Prada brand (+13% against 2019), ready to wear category (+24% against 2019 levels). Geographically, retail sales have been driven by Americas (up 53% from 2019 levels), Asia-Pacific (+35% against 2019 levels), and Middle East (+28% against 2019 levels), while Europe and Japan lagged similar trends as seen at previously reported peers.