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    Inditex Analysis

    Uploaded by

    arrow6455235rodrigo
    invistment thesis

    Copyright:

    © All Rights Reserved
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    Inditex Analysis

    Uploaded by

    arrow6455235rodrigo
    9 views16 pages
    invistment thesis

    Copyright

    © © All Rights Reserved

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    PPTX, PDF, TXT or read online from Scribd

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    invistment thesis

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    9 views16 pages

    Inditex Analysis

    Uploaded by

    arrow6455235rodrigo
    invistment thesis

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 16

    Inditex Stock Analysis

    BME:ITX

    Confidential. Just for internal purpose


    Investment Summary
    Steady cash generation, growing & trading at attractive multiples

    Catalyst Summary /KPIs Historical Stock Performance

    1 High profitability

    2 High double digit growth rate in last years

    No debt & $7bn cash: Possibility to expand through


    3 M&A

    Current Stock Price Target Price &


    4 ROCE & ROE over 30% with attractive multiples 45.72€ potential upside

    Confidential. Just for internal purpose


    Industry overview I
    Apparel Industry

    Apparel Industry growth is mainly driven by: Market by region: Inditex Sales

    Comments
    Women’s apparel
    Among other segments, women’s apparel is the largest one
    Focused into expanding
    Social Media Advertising business in US in next
    years through massive
    New trends in Social Media Advertising
    stores openings in cities
    Online shopping like LA, Las Vegas
    Currently represents only 25% of total sales

    Industry size and growth Industry fragmentation & key players

    4%
    CAGR
    Industry overview II
    Market Cap & Strategies

    Company’s market cap Competition (based on pricing, volume, etc)

    $154.5Bn Pricing strategy


    Med-High price point, to be perceived as premium brand

    Product range
    Narrow range of trendy styles and rotates its stock frequently

    E-Commerce
    Investing heavily in e-commerce to respond to shifts in
    shopping behaviors

    Entry barriers

    Difficult to compete against big businesses


    It requires pricing at a lower level than the competition and marketing activities at a higher level. Therefore, there may be a
    risk of lowering margins and to a permanent decline in profits

    Confidential. Just for internal purpose


    Business model I
    Clothing empire

    Products & how Inditex makes money Company Milestones

    Clothing 1991: Pull&Bear, Massimo Dutti, Bershka and Stradivarius joined the
    Brands: Zara, Stradivarius, Massimo, Bershka… Inditex Group

    Also with franchises 2003: Creation of ZARA Home

    2007-2017: Worldwide expansion and online adoption


    Home products
    Zara home, with $2.7Bn Revenues in 2023 2021: Oscar García new CEO & Marta Ortega takes over as Chairperson

    Confidential. Just for internal purpose


    Moats of the business
    What makes the company earn money/create value beyond the cost of capital. How these advantages make them earn
    even more money.

    Inditex owns several well-known brands such as Zara, Pull&Bear, and Massimo Dutti. This diversified
    #1 Strong Brand Portfolio & Recognition
    brand portfolio allows the company to cater to different consumer segments and minimize risks

    The company's vertically integrated supply chain allows it to have full control over the production process,
    #2 Efficient supply chain management resulting in shorter lead times and reduced costs. This efficiency helps Inditex to maintain competitive pricing
    while ensuring high-quality products

    Inditex invests in innovative technologies and systems to enhance its operations and improve its efficiency. This
    #3 Innovation & Technology includes the use of data analytics and AI to gather insights about customer preferences and optimize its
    inventory management

    Confidential. Just for internal purpose


    Growth & capital allocation
    Is the growth adding value (only happens when ROCE > cost of capital)?

    Organic growth Inorganic growth (M&A)


    Comments
    A core portion of the Group’s CapEx corresponds to investments
    undertaken in relation with store refurbishments and openings.
    Another significant part of CapEx refers to the construction and
    refurbishment of the Group’s corporate headquarters and logistics
    Major M&A past and expected operations.
    centres. The Company also carries out investments to foster self- Include graph if necessary.
    consumption through the generation of electricity using wind
    power at its own facilities

    Confidential. Just for internal purpose


    Capital Allocation
    Dividend xxxxx. What does the company do with its free cash flow

    Graphic showing use of FCF: dividend/ Price i.e Showing leverage ratios NFD/EBITDA, Debt/Equity,
    Dividend Yield %, buybacks. Also debt repaying, major Solvency, Liquidity… to prove the company can
    balance sheet changes. steadily pay the dividend

    Confidential. Just for internal purpose


    Management
    At least CEO. Recommended CFO, COO, CTO

    Average expereience, general track record (did


    Avera
    they meet their previous guidance on M&A,
    ge
    growth,… ?)

    Position in company, number of shares, recent


    photo
    insider transactions…

    Position in company, number of shares, recent Cheese graphic on % owned by type of institution
    photo
    insider transactions…

    Position in company, number of shares, recent


    photo
    insider transactions…

    Comp
    Compensation based on performance, esg,
    ensati
    growth,…
    on

    Confidential. Just for internal purpose


    Risks & how to tackle them
    Subtitle

    xxxx
    High

    2 xxxx
    3
    Impact

    1
    3 xxxx

    2 4
    4 xxxx
    Low

    Low Probability High

    Confidential. Just for internal purpose


    Financial Analysis
    Subtitle

    Excel chart with historical


    Revenues, EBITDA, FCF,
    Margins, ROE, ROIC, % growth…

    Confidential. Just for internal purpose


    Financial Analysis
    Subtitle

    Excel graphics about Revenues,


    FCF and their drivers

    Confidential. Just for internal purpose


    Financial Analysis
    Subtitle

    Comparing ROE, ROIC, Margins


    to peers

    Confidential. Just for internal purpose


    Valuation
    Comparable Company analysis

    Comparable company analysis of key ratios with peers (EV/Sales, EV/FCF, P/E, EV/EBITDA)

    Confidential. Just for internal purpose


    Valuation
    DCF

    DCF with sensitivity analysis on WACC & g (perpetuity growth), and another with WACC & Exit multiple
    EV/EBITDA or P/E or EV/FCF seen in comparable company analysis

    Confidential. Just for internal purpose


    Valuation
    Football field

    Example:

    Confidential. Just for internal purpose

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