Expect 1Q24 revenue to grow +9% reported YoY
　　We expect Prada Group’s 1Q24 retail revenue to grow +13% YoY at constant exchange rates (CER) and to grow +10% YoY at reported rates to EUR1,046mn, dragged by 3.6ppt currency headwind. After adding up estimated wholesale growth (+3% reported YoY) and royalties growth (+10% reported YoY), we expect Prada Group’s 1Q24 total revenue to reach EUR1,163mn, +13% CER YoY and +9% reported YoY.
　　We believe 1Q24’s overall CER growth (+13%) slowed down vs. 4Q23’s +18% mainly due to a stronger comparison base, i.e. 1Q23 saw the first full quarter of reopening in China and resumption of tourism into Japan and most of Asian destinations.
　　Breaking down retail CER YoY by region in 1Q24, we expect Japan (+25%) to lead, benefited from strong local demand, supplemented by tourists spending. Asia Pacific ex Japan (+20%) could trail behind supported by a robust performance during Chinese New Year, followed by Middle East and Others (+8%) and Europe (+6%). Americas (+5%) could have slightly accelerated from 4Q23’s +4%, helped partly by spending repatriation.
　　We believe Miu Miu brand could have outperformed Prada brand in 1Q24 as the latter had a stronger comparison base.
　　Trends to watch
　　Prada debuted in China its leather Buckle Bag (priced EUR3,300-4,800 depending on size) at Prada Rong Zhai, Shanghai in January 2024. We believe this is a testament to the group’s commitment in further elevating brand positioning and developing leather goods categories. We find a successful leather goods division key to Prada’s future retail density improvement, which drives up margins.
　　We are optimistic in Prada’s ability to further inspire awe and to convert creative prowess into commercial success.
　　Financials and valuation
　　We keep our 2024 and 2025 revenue and earnings forecast largely unchanged. The stock is trading at 24.4x 2024 P/E. We maintain OUTPERFORM rating and target price of HK$70.00, implying 29.0x 2024 P/E. Our TP offers 21.0% upside.
　　Risks
　　Fashion risks; rising costs of competition; geopolitical tensions.