What's new
　　L’Occitane provided a FY4Q20 and FY2020 （April 2019–March 2020）revenue update: FY4Q20 revenue was down 0.7% YoY to EUR338mn（-1.6% in constant rates）； FY20 revenue grew 15.2% YoY toEUR1,644mn （+12.8% in constant rates）。
　　We believe a relatively strong FY4Q20 amid the backdrop ofCOVID-19 was helped by: 1） one-off consolidation of Elemis, whichcontributed 10% revenue during the quarter; 2） strong e-commerce,which grew 41.8% YoY in constant currencies in FY20; and 3）L’Occitane’s Europe, US, and Japan stores stayed fully open untilmid-to-late March, which led to a smaller impact on FY4Q20 （1Q20）。
　　Comments
　　Per management, during the earnings call: 1） ELEMIS’ launch in theChinese mainland is slated for July 2 （not delayed） – 120 Sephorastores located in 52 cities will sell 28 SKUs of ELEMIS products, with24 more SKUs to come in September–October, while other Asianmarkets will see partial （online） launches of ELEMIS in FY21; and 2）the company has about EUR100mn cash and EUR230mn in undrawnrevolving credit as of March 31; its daily opex is around EUR3mn, andwe expect cost savings in coming quarters helped by government aid.
　　To cope with COVID-19, the company has decided to: 1） reduce basecompensation for directors and senior management by 25%; 2）recommend a 25% dividend cut for FY20; and 3） optimizediscretionary spending and renegotiate rental terms.
　　Valuation and recommendation
　　Due to the COVID-19 impact, we lower our FY20e revenue and netprofit forecasts by 3% and 19%, lower FY21e revenue and net profitforecasts by 38% and 82% and introduce a FY22 revenue forecast ofEUR1,523mn and a net profit forecast of EUR128mn.
　　We maintain OUTPERFORM but lower our target price 37.5% toHK$15.0, based on 19x FY22e P/E （forwarded earnings base by oneyear to normalize COVID-19 impact）。 The stock is trading at HK$12.2,implying 16x FY22e P/E. Our TP offers 23.0% upside.
　　Risks
　　Worsening of COVID-19; slower-than-expected ramp-up for Elemis;forex fluctuations; impairment charges.