We use a sum-of the-parts methodology to value Richemont, but with a hybrid approach. Rather than valuing Richemont by Maisons, we split the group between: 1) the Jewellery Maisons, which we value by product category; and 2) the other business units, which we continue to value independently as Maisons/divisions. This approach better reflects the greater importance of the jewellery category in the overall profit pool, in our view, and the category’s attractive growth prospects, while not underestimating the potential hidden value from a turnaround at the two historical underperforming Maisons – Specialist Watchmakers and Fashion & Accessories.

Within the Jewellery Maisons, the jewellery category represented by Cartier, Van Cleef and, to a much lesser extent, Buccellati, is valued at a ~20% premium to the luxury goods sector long-run average multiple. The branded jewellery segment offers stronger long-term revenue growth prospects, elevated and resilient profitability, and increased polarisation between brands, which should favour strong, established brands with longstanding heritage and control of distribution (eg, Cartier and Van Cleef), a “winner takes all” dynamic that we have seen in leather goods over the past 5 years. Cartier/Van Cleef watches are valued in line with the luxury sector. The jury is out as to whether Cartier watches will return to previous industry-leading growth rates seen a decade ago, but good progress has been made in recent years. While Cartier might be better positioned than other Richemont watch brands, the luxury watches category continues to face volatile demand patterns, structural headwinds, and greater polarisation between brands in this “battle of the wrist,” we value Specialist watchmakers at a 5% discount to the luxury sector’s EV/EBIT multiple, driven by some high-profile brands despite significant market share and margin erosion over the past decade. However, the Swiss watch industry faces a number of issues that have not been yet fully addressed: production overcapacity, slow pace of innovation and limited product newness, reluctance to embrace technology (eg, smart functionalities), unattractive pricing architecture, limited control over distribution, low e-commerce penetration and conservative communication.

We value the Fashion and Accessories (Other) Maisons and Watchfinder at 2x sales. While this does not look overly generous vs. soft luxury segment average (~3x sales) and historical transactions (range of 3x to 4x sales for the vast majority of transactions), this reflects an heterogeneous portfolio of brand and an unusually long track record of revenue underperformance and operating losses. However, following investments and a disciplined approach toward brand desirability, local clientele, leather goods competencies, DTC distribution and operations, F&A returned to profit in FY23 and FY24 but were again loss-making in FY25.

Finally, we value central costs and the valuation adjustments on acquisitions in line with the luxury sector, and financial investments at market value, mainly a 5% stake in a leading global duty-free retail operator and a 33% stake in online luxury retailer LuxExperience..

Our SOTP suggests a fair value of CHF180, which is the basis for our target price and implies a CY27E P/E of ~25x.

Factors that could impede the achievement of our target price:

Changes in luxury goods demand are correlated with the macroeconomic environment and the health of consumer spending patterns, commonly referred to by the company as the “feel good factor.” Thus, any major change in the external political or economic scenario that may directly or indirectly affect consumer confidence is a risk to Richemont's sales results.

Richemont's sales are also exposed to international travel. Any serious geopolitical or pandemic shock could impede travel and hence the company's growth profile.

Currency volatility can be disruptive due to Richemont’s imbalances between its predominantly CHF- and EUR-denominated cost base and its revenues largely generated outside of Europe. Transaction and translation FX impacts are often only a short-term issue, however.

If the impact on the company from any of these factors proves to be greater/less than we anticipate, we believe the stock will likely have difficulty achieving our target price or could outperform it.