Swatch Earnings: Hit by Weakness in China, Shares Remain Attractive

We are reducing our fair value estimate for narrow-moat Swatch to CHF 333, as the company reported decline in the first half of 2024 revenue and profits when sales in Greater China took a hit. We still view shares as very attractively valued, as luxury consumption goes through a cyclical downturn, which historically hasn't lasted more than one to two years. We believe the current downturn presents an opportunity to build positions in the sector for patient investors.