PRADA Group (01913): JPMorgan retains Overweight on PRADA Group despite trimming forecasts for a softer Q3 luxury backdrop

Overview

This Q3 2026 sales preview lowers PRADA Group's near-term forecasts for a weaker luxury environment, particularly slower Chinese recovery, while retaining an Overweight rating and HK$62.50 target price. JPMorgan believes the core brands remain relatively well positioned and that the valuation already reflects substantial caution.

Core views

Ahead of the 22 October Q3 trading update, JPMorgan reduced sales forecasts by 3-4% to reflect a tougher luxury backdrop, recent industry data, foreign-exchange movements and discussions with investor relations. The report expects Chinese recovery to be slower into Q4 and the following year. FY26 revenue is reduced to €6,379m from €6,585m, FY27 revenue to €6,814m from €7,107m, and FY28 revenue to €7,279m from €7,596m. FY26 adjusted EBIT is cut from €1,284m to €1,240m and adjusted EPS from €0.31 to €0.30; FY27 adjusted EBIT falls from €1,428m to €1,372m and EPS from €0.36 to €0.34. The HK$62.50 target price is unchanged because the forecast reductions are offset by rolling the DCF valuation forward one year to December 2028. For Q3 2026, the institution forecasts group sales of €1,467m, up 9% at constant exchange rates and 10% reported. The forecast includes approximately 9 percentage points of scope benefit from consolidating Versace, including €96m of retail sales and €125m of total brand sales. On an organic basis, group growth is therefore expected to be approximately flat, slowing from 7% in Q2. Retail sales are forecast at €1,292m, up 8% reported, while wholesale is expected to reach €138m, up 34%, and royalties €37m, up 9%. The report expects growth to slow across the principal brands. Prada brand sales are forecast to grow 1% ex-FX in Q3, versus 6% in Q2, reflecting tougher comparisons, weaker Chinese macro data, slowing sector data in Korea and Japan, easing US credit-card data and volatile European trends. Miu Miu is projected to turn negative for the first time, with Q3 constant-currency growth of -3% after +3% in Q2, despite easier comparisons; its prior-year Q3 comparison was still a demanding +29%, versus +41% in Q2 2025. Regionally, Asia Pacific excluding Japan is expected to see the largest slowdown, at -2% organic growth versus +8% in Q2. The US and Japan are each expected to decelerate by roughly 600-700 basis points sequentially on tougher comparisons, while Europe remains soft. Despite the softer quarter, JPMorgan argues that PRADA Group is better positioned than leather-goods peers. It highlights sustained product newness at Prada, which it believes is producing better conversion than peers, and continued Miu Miu desirability despite several years of difficult comparisons. The report expects these brands to keep extending their presence and improving financial metrics, with core-group earnings growth continuing in double digits. Versace adds near-term execution risk and will require investment to restore desirability and profitability, but JPMorgan continues to view the group as offering attractive luxury-sector fundamentals and valuation. Valuation is central to the retained positive stance. JPMorgan describes the shares as unduly depressed at 11x its 2027E P/E, about a 50% discount to the sector average of 22x. Its December 2028 DCF target uses explicit FY26-FY31 forecasts, 5.5% medium-term growth, 3.5% terminal growth and a 10% WACC.

Analysis framework

JPMorgan combines recent luxury-sector indicators, foreign-exchange movements and investor-relations discussions to revise quarterly and full-year sales, EBIT and EPS estimates. It then assesses sales by channel, brand and region, contrasts expected Q3 trends with Q2 and prior-year comparisons, and supports its valuation view with a DCF and a relative 2027E P/E comparison with the luxury sector.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  December 2028 discounted cash flow valuation

  The target price discounts explicit FY26-FY31 forecasts using 5.5% medium-term growth, 3.5% terminal growth and a 10% WACC.

• Valuation methodsP/E and PEG Valuation

  Relative P/E comparison

  The report compares PRADA's 11x 2027E P/E with a 22x sector average to argue that the shares trade at an unusually large discount.

• Industry AnalysisVolume-price decomposition

  Sales analysis by channel, brand, region, foreign exchange, acquisition scope and organic growth

  JPMorgan separates reported growth from FX, Versace consolidation and organic performance to identify the underlying Q3 slowdown.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• PRADA Group (1913.HK)

  Primary covered company; forecast to face softer Q3 organic sales but retain relative brand and valuation support.

  Strengths

  Sustained Prada product newness, better conversion than peers, Miu Miu desirability, potential to improve financial KPIs and double-digit core-group earnings growth.

  Weaknesses

  Near-term slowdown in core-brand demand and investment needs to restore Versace desirability and profitability.

  Comparison

  The report views PRADA as better placed than leather-goods peers and trading at 11x 2027E P/E versus a 22x sector average.

  Risks

  Macro deterioration, fashion and competitive risks, FX and tourism disruption, and execution risk at Versace.

Key data

• Q3 2026E group sales€1,467m+9% ex-FX and +10% reported
• Q3 2026E organic group sales growthApproximately 0%Versus +7% in Q2; reported growth includes around 9% Versace scope impact
• Q3 2026E Prada brand growth+1% ex-FXVersus +6% in Q2
• Q3 2026E Miu Miu growth-3% ex-FXVersus +3% in Q2
• FY26E revenue€6,379mReduced 3.1% from the prior €6,585m forecast
• FY27E adjusted EPS€0.34Reduced 4.3% from €0.36
• 2027E P/E11xApproximately 50% below the sector average of 22x

Impact & implications

The report expects near-term reported growth to be supported by Versace consolidation while underlying organic demand softens. JPMorgan nevertheless believes Prada's product appeal and Miu Miu's desirability can support relative performance and that the valuation discount supports its retained Overweight view.

Risks

• A deterioration in the macroeconomic environment could weaken luxury demand.
• Sustained heavy investment to support sales momentum could pressure financial performance.
• Pressure on the core leather-goods offering could hurt brand demand.
• The group may fail to capture unforeseen changes in fashion trends.
• Competition could intensify, notably if Gucci recovers faster than expected.
• Foreign-exchange movements and disruption to tourism are risks.
• Versace integration and turnaround execution could disappoint.

What to watch

• The Q3 2026 trading update scheduled for 22 October.
• The pace of Chinese recovery into Q4 and the following year.
• Whether Prada brand growth holds near the forecast +1% ex-FX and Miu Miu demand follows the expected -3% inflection.
• Organic demand trends in Asia Pacific excluding Japan, the US, Japan and Europe.
• Execution progress in restoring Versace brand desirability and profitability.