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Analyse aandeel Swatch - Aanbevolen Aandeel

De verticale integratie van Swatch bij de productie van horloges geeft de onderneming controle over het ontwerp, onderdeleninkoop en fabricage van horloges. Dat versterkt het imago wat betreft innovatie en kwaliteit. (rapport Engelstalig)

Paul Swinand 24 juli, 2014 | 13:04

INVESTMENT THESIS

Swatch Group has evolved into the world's largest and most diverse manufacturer, marketer, and distributor of timepieces, managing a portfolio of watch brands in addition to its global namesake brand and supplying components to the Swiss watch industry. It has created a vertically integrated structure, controlling each aspect of the design, procurement, manufacture, and assembly of its products. Fashion and engineering drive the firm's culture in equal parts, and continued innovation permeates the entire portfolio of 20 watch brands. We believe that the equity in the brands of Swatch Group is one of the firm's key competitive advantages, with all the aspects of the production and distribution contributing to these powerful intangible assets but also to cost advantages in watch production. Such advantages generate positive economic returns and support our view that the firm has a wide economic moat, signifying our confidence that the firm's high returns on capital should continue over the long term.

In addition to its strong brand portfolio, Swatch also enjoys considerable advantages in manufacturing, where it supplies components and innovative watch parts to an estimated 60% of the Swiss watch industry. Swatch's engineering and manufacturing of precision components are unmatched, and some key parts are difficult for anyone to manufacture to the same quality and precision at the same price.

Today, Swatch brands are found at more than 16,000 points of sale worldwide, ranging from Swatch-branded stores to third-party retailers and wholesalers. We believe owned retail can be attractive for Swatch's brands, where supply is limited and the strategy is to control all aspects of the brand, but we also note that operating retail stores tends to increase leverage. Asia should be one of the company's primary growth drivers, though this is not without risks as there is always the fear of a slowdown from the region's growth engine, China. Yet Swatch has significantly lower owned retail penetration than some competitors, and even moving retail to 35% from 25% of revenue should increase sales by the low single digits before considering same-store increases and wholesale.


VALUATION

Economic Moat   Fair value   Stewardship Rating  
Wide   CHF 640,00   Standard  
Moat Trend   Uncertainty   Sector  
Stable   High  

Consumer cyclical - retail - apparel & specialty


BULLS

  • Swatch's vertical integration allows control over the design, procurement, and manufacturing of timepieces, bolstering its reputation for both innovation and for quality, which should continue to earn a premium for the Swiss Made label.

  • In-house production and electronic systems business provides Swatch Group brands with cutting-edge parts at below-market prices.

  • As Swatch technologies continue to evolve, retail penetration will become both more necessary and more profitable as not just any watchmaker will be able to provide service.

 

 

BEARS

  • Swatch could struggle to expand in its more mature European regions. Relying on Asian markets for the vast majority of its top-line growth exposes the firm to well-known risks linked to China.

  • Swatch has many brands and component makers, as well as a corporate structure of 160 affiliated companies in 30 countries. This structure makes it complicated to understand the drivers of group-level financial results.

  • Sales of micro-electric components have come under pricing pressure, hindering sales growth in the electronic systems segment. Such pressure is likely to continue.

 

 

 

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Effecten genoemd in dit artikel

Naam effectPrijsChange (%)Morningstar Rating
The Swatch Group AG Bearer Shares275,20 CHF1,29

Over de auteur

Paul Swinand  Paul Swinand is an equity analyst on the Consumer Team.

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