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1. Company Snapshot

1.a. Company Description

L'Oréal S.A., through its subsidiaries, manufactures and sells cosmetic products for women and men worldwide.The company operates through four divisions: Consumer Products, L'oréal Luxe, Professional Products, and Active Cosmetics.It offers shampoos, hair care products, shower gels, skin care products, cleansers, hair colors, styling products, deodorants, sun care products, make-up, perfumes, etc.


The company provides its products under the L'Oréal Paris, Garnier, Maybelline New York, NYX Professional Makeup, Essie, Niely, Dark and Lovely, Lancôme, Yves Saint Laurent Beauté, Giorgio Armani Beauty, Kiehl's, Urban Decay, Biotherm, Ralph Lauren, IT Cosmetics, L'Oréal Professionnel, Kérastase, Redken, Matrix, Biolage, Pureology, Decléor, Carita, Vichy, La Roche-Posay, SkinCeuticals, Roger&Gallet, CeraVe, Stylenanda, Mixa, Magic Mask, Prada, Helena Rubinstein, Valentino, Mugler, Shu Uemura, Viktor&Rolf, Azzaro, Diesel, Atelier Cologne, Cacharel, and Yue Sai brands.It sells its products through distribution channels, such as hair salons, mass-market retail channels, perfumeries, department stores, pharmacies, drugstores, medispas, branded retail, travel retail, and e-commerce.L'Oréal S.A. was founded in 1909 and is headquartered in Clichy, France.

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1.b. Last Insights on OR

L'Oréal's recent performance was negatively impacted by a sales miss in Q3, with like-for-like sales growth failing to meet analysts' consensus. The company's third-quarter sales reached $11.98 billion, underwhelming expectations. A $4.7 billion deal with Kering, where L'Oréal acquired the latter's beauty division, also drew attention. Additionally, the company's sales growth accelerated in Q3, rising 4.9 percent on an adjusted basis. This development has sparked investor interest.

1.c. Company Highlights

2. L'Oréal's Solid Half-Year Performance

L'Oréal's 2025 half-year results show a solid performance with like-for-like growth of 3% in a dynamic market. The company's operating margin reached a record 21.1%, up 30 basis points from last year, with an operating net cash flow of EUR 2.7 billion, a 38% increase. Sales grew 1.6%, impacted by a negative 1.9% foreign exchange effect, while the change in scope of consolidation contributed a positive 0.5%. The actual EPS came out at '7.23' relative to estimates at '7.2', beating analyst expectations. With a P/E Ratio of 31.69 and a P/S Ratio of 4.65, the company's valuation seems to be pricing in its strong financial performance.

Publication Date: Aug -04

📋 Highlights
  • Like-for-Like Growth: 3% growth in a dynamic market with a record operating margin of 21.1% (+30bps), and operating net cash flow of EUR 2.7 billion (+38%).
  • Sales Growth: 1.6% sales growth, impacted by -1.9% FX and +0.5% scope changes.
  • Divisional Performance: All divisions grew LFL (Professional +6.5%, Consumer +2.8%, Luxe +2%, Dermatological +3.1%).
  • Emerging Markets: Double-digit growth of 10.4% in emerging markets, driven by SAPMENA-SSA and Latin America.
  • E-commerce Contribution: E-commerce accounts for nearly 29% of sales, growing in the low teens.

Divisional Performance

The company's divisions all grew on a like-for-like basis, with Professional Products advancing 6.5%, Consumer Products progressing 2.8%, Luxe growing 2%, and Dermatological Beauty advancing 3.1%. Emerging markets continued to grow in double digits at 10.4%, with SAPMENA-SSA and Latin America contributing to this growth. As CEO Nicolas Hieronimus stated, the market growth will continue to accelerate, with the global beauty market expected to grow around 4% as predicted at the start of the year. The company expects to outperform the market, driven by its Beauty Stimulus Plan, which will accelerate further in the second half with an increase in the weight of new launches by more than 300 basis points versus last year.

Geographic Performance

In North Asia, sales declined 1.1%, but growth turned positive in the first half driven by Mainland China. The company expects the market to improve in the second half, driven by easier comparables, and has a strong plan for Luxe, including the launch of a new cream from Helena Rubinstein. In North America, the market accelerated in the second quarter, driven by online sales and categories like haircare and fragrance. The company gained share in three divisions, with La Roche-Posay and SkinCeuticals performing well. With a ROE of 20.42% and a ROIC of 14.41%, the company's strong profitability is a testament to its solid geographic performance.

Valuation and Outlook

Analysts estimate next year's revenues growth at 4.6%, which seems achievable given the company's strong half-year performance. With a Dividend Yield of 1.85% and a Free Cash Flow Yield of 3.28%, the company's valuation seems attractive. The company's Net Debt / EBITDA ratio of 0.46 indicates a healthy balance sheet, which will enable it to continue investing in its growth initiatives. As the company continues to execute its Beauty Stimulus Plan and drive innovation, its strong financial performance is likely to continue, making it an attractive investment opportunity.

Growth Drivers

The company's recent acquisitions, including Medik8 and Color Wow, will enhance its long-term growth profile and fill gaps in its portfolio. The company's focus on e-commerce, with online sales accounting for almost 29% of sales in the first half, will continue to drive growth. The company's strong presence in emerging markets, particularly in SAPMENA-SSA and Latin America, will also contribute to its growth. With an EV/EBITDA ratio of 21.44, the company's valuation seems to be pricing in its strong growth prospects.

3. NewsRoom

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L'Oréal (ENXTPA:OR): Assessing Valuation After a Recent Share Price Pullback

Dec -05

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L'Oréal Drives Brand Awareness and Employee Engagement on Social Media with Sprinklr Advocacy

Dec -04

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Etaily lands strategic investment from Japan’s SMBC - bringing total funding to $24M for Social Commerce enablement platform

Dec -04

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Matlantis Selected as an Outstanding Start-up in Research & Innovation Category of L’Oréal’s North Asia BIG BANG Beauty Tech Innovation Program

Dec -03

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European Enterprises Strive for AI Innovation and Compliance, ISG Says

Dec -02

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L’Oréal CEO Nicolas Hieronimus on Why Beauty Is More Important Now Than Ever

Dec -02

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Fairgen Launches Fairgen Check, a Last-Line Quality Firewall for Research Data

Nov -30

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Is L'Oréal's Rising Price Justified After Expansion Into Emerging Markets?

Nov -28

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.75%)

6. Segments

Consumer Products

Expected Growth: 4.2%

Increasing demand for beauty and personal care products driven by an ageing population and increasing awareness of skincare, along with L'Oréal's strong brand portfolio and wide global presence

L'oréal Luxe

Expected Growth: 5.2%

Strong demand for premium beauty products, increasing brand awareness, and strategic partnerships drive growth in L’Oréal Luxe segment.

Dermatological Beauty

Expected Growth: 5.4%

Leveraging dermatological heritage and innovative technology, L’Oréal’s dermatological beauty segment is poised to grow, driven by increasing demand for expert skincare solutions that address specific skin concerns.

Professional Products

Expected Growth: 4.2%

Growing demand for premium beauty products, increasing popularity of salon services, and L’Oréal’s strong brand portfolio drive segment growth.

7. Detailed Products

Hair Care

L'Oréal's hair care products include shampoos, conditioners, hair masks, and styling products for various hair types and needs.

Skin Care

L'Oréal's skin care products include moisturizers, serums, cleansers, and sun care products for various skin types and concerns.

Makeup

L'Oréal's makeup products include foundation, eyeshadow, mascara, lipstick, and other color cosmetics for various skin tones and preferences.

Sun Protection

L'Oréal's sun protection products include sunscreen lotions, sprays, and sticks for various skin types and outdoor activities.

Men's Grooming

L'Oréal's men's grooming products include shaving cream, aftershave, and hair care products specifically designed for men's grooming needs.

Professional Products

L'Oréal's professional products include hair color, hair care, and styling products for salon professionals and at-home use.

8. L'Oréal S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

L'Oréal S.A. has a moderate threat of substitutes due to the presence of natural and organic products, but the company's strong brand portfolio and R&D capabilities mitigate this threat.

Bargaining Power Of Customers

L'Oréal S.A. has a low bargaining power of customers due to its strong brand recognition and wide distribution network, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

L'Oréal S.A. has a moderate bargaining power of suppliers due to its dependence on a few key suppliers, but the company's large scale and diversified supply chain mitigate this risk.

Threat Of New Entrants

L'Oréal S.A. has a low threat of new entrants due to the high barriers to entry in the beauty industry, including significant R&D investments and regulatory hurdles.

Intensity Of Rivalry

L'Oréal S.A. operates in a highly competitive beauty industry, with intense rivalry among established players, but the company's strong brand portfolio and innovation capabilities help it maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 20.06%
Debt Cost 3.95%
Equity Weight 79.94%
Equity Cost 7.44%
WACC 6.74%
Leverage 25.10%

11. Quality Control: L'Oréal S.A. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

372.75$

Current Price

372.75$

Potential

-0.00%

Expected Cash-Flows