Samsonite Remains on Track for a Strong Year; China Lockdowns Pose Limited Impact

Narrow-moat Samsonite again reported a strong set of results in the first quarter, with a rapid sales recovery and operating leverage. As the effects of COVID-19 on everyday life moderate across most of the world, we expect company sales to continue to recover over the next few quarters. Given Samsonite's limited exposure to China, we expect current lockdowns to have limited impact on Samsonite’s top-line recovery. We made minor adjustments to our model but maintained our fair value estimate at HKD 22.10. We believe the shares are undervalued, trading at a discount of around 30% to our value. Sales momentum continued in the first quarter for Samsonite—the group pulled in 63% revenue growth compared to the same period in 2021. Relative to pre-pandemic periods, sales reached 72% of their levels in the first quarter of 2019. Looking into the second quarter, China will certainly be a drag on sales, but the negative impact is limited to the group's high-single-digit percentage sales exposure to the country. During the first quarter, sales in China were trending at 65% to 70% versus 2019, but lockdown measures imposed in April restricted sales to just 20% of pre-pandemic levels. That said, we believe China sales have rebounded in May, now back to 30%-35% of 2019 levels, according to management.