Capital Market segments Equity Study Game

 Capital Marketplaces Equity Analysis Game Composition

Berenberg Capital Markets

Collateral Research

Strategy

adidas – Buy (initiation)

Puma – Hold (initiation)

John Man

Analyst

+44 20 3465 2674

david. [email protected] com

Bassel Choughari

Analyst

+44 20 3465 2675

bassel. [email protected] com

Rupert Marcher

Specialist Product sales

+44 twenty 3207 7815

rupert. [email protected] com

twenty-five April 2013

Sporting Goods

Intended for our disclosures in respect of section 34b from the German Investments Trading Work (Wertpapierhandelsgesetz – WpHG) and our palinode please begin to see the end on this document.

Please note that the make use of this analysis report is subject to the conditions and restrictions set forth inside the disclosures as well as the disclaimer by the end of this record.

Sporting Goods

Stand of contents

Game plan

four

Market aspect

5

Tracks to 2015

18

Margin and costs metrics

42

Innovation is essential " epidermis in the game”

45

Product cost pressure or alleviation?

55

Sports events and promote price overall performance

58

Forex

66

Company KPIs

sixty-eight

Valuation

71

adidas

76

Financials

information

Puma

104

Financials

127

Disclosures in respect of section 34b of the A language like german Securities Trading Act (Wertpapierhandelsgesetz – WpHG)

130

Connections: Investment Banking

133

several

Sporting Goods

Strategy

● We all initiate coverage of adidas and The puma corporation. Both businesses are in the

process of implementing 2015 investment tactics. We believe nike is at a sophisticated stage in planning, execution and delivery of their targets in comparison with Puma. However , we acknowledge the

prospect of majority aktionar Kering Group (formerly PPR) acquiring the remaining 17. 6% stake in Puma it does not own at a premium to the current share price, hence Puma's special situation. nike offers investors a three-year (FY12-15E) product sales and EPS CAGR of 5. five per cent and twenty three. 2% correspondingly. We expect adidas to boost its reveal of the global sporting goods market by 560bp, outperforming typical market growth of 1 . 5x global GDP (FY12-15E). We all view FY13 as a transition year with greater working leverage predicted in FY14 and FY15. According to the analysis, nike ought to go over its 2015 sales concentrate on of €17bn by c. 3% to €17. 5bn and outperform its FY15 11% EBIT margin target by 90bp. Our FY15 earnings estimations are c. 13% in front of Bloomberg opinion. We trigger with a Buy rating and a €95 price target, providing 25% upside compared to current amounts. We perspective Puma as being a special condition. Kering currently owns 82. 4% of Puma, that has recently knowledgeable footwear business losses, supervision departures and weak operating performance. Inside our view, Puma's earnings therapy will be faster by Kering's Jean-Francois Palus and a brand new Puma managing team beneath

recently appointed CEO, Bjorn Gulden. However , the essential questions remain: how The puma corporation will arrest declining market share and attract quality senior management? If Kering acquires the excellent 17. 6% of Puma's remaining stocks in order to fully access Puma's balance sheet (FY12 net money: €249m) and increases the 12-year average pay-out ratio of 13. 8% more in accordance with peers (adidas's FY12 pay-out ratio was 35. 7% compared with a 12-year normal of c. 24%), we would expect Kering to pay out a premium pertaining to the excellent shares. nike trades upon FY13E and FY14E P/Es of of sixteen. 1x and 13. two times

compared with their seven-year typical P/E of c. 17x. According to our analysis, nike has the cheapest PEG in the sector at 0. 5x versus each of our market capitalization weighted normal of 1. 3x and Puma's 1 . 7x. Our €95 target value, based on our P/E analysis and motivated by each of our earnings and cash flow predictions implies CY13E and CY14E P/Es of 20. 1x and 16. 6x and is supported by our DCF (€98 assuming 9% WACC and 3% fatal growth). We all expect nike to take 560bp global shoe market share (FY12-15E) and travel robust confident operating influence from FY14 onwards within the back of improved...


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