Beiersdorf: Robust Sales Growth Leads to Slight Fiscal 2023 Guidance Increase; Shares Expensive

Narrow-moat Beiersdorf BEI reported solid first-quarter sales growth of 12%, ahead of the 8% FactSet consensus estimate. Within this, the brand Nivea and the dermatological segment provided standout performances, posting organic sales growth of 18% and 27%, respectively. Management increased group top-line guidance slightly to mid- to high-single-digit organic sales growth, from mid-single-digit organic sales growth previously, while EBIT margin expectations are unchanged (slightly above the previous year’s level). We don’t expect to make material changes to our full-year forecast at this time (calling for top-line growth of 4.5% and 50 basis points EBIT margin accretion compared with last year). A scenario of slightly higher top-line growth and a slightly lower margin would be broadly neutral to our valuation. We regard shares as expensive at current levels, trading in 2-star territory.

The brand Nivea (around 70% of consumer sales) had an outstanding quarter, growing double-digits across all geographies, supported by both price and volume growth. We believe a large part of the price benefit was the carryover impact from last year’s price hikes. We expect pricing contribution to growth to dwindle in coming quarters as inflation moderates, with management cautious to not take pricing actions too far and harm Nivea’s value-for-money proposition and volumes.

The stellar sales growth in the dermatological segment was broadly in line with peers. We believe this performance is driven by an increased risk aversion from consumers, who, at a time of significant pressure on disposable incomes, are opting for safer, dermatologist-approved products that are more likely to work for their specific skin issues.