PRADA Group delivers healthy results; J.P. Morgan maintains Overweight

Overview

J.P. Morgan believes PRADA Group delivered high-quality H1 26 results. Group Q2 sales and H1 EBIT both exceeded market and the firm’s expectations, with the Prada brand emerging as the core driver of accelerating growth, while Miu Miu still achieved positive growth on an exceptionally high base. The report highlights the Group’s continued progress in product novelty, assortment, customer management, and retail execution, supporting strong resilience in leather goods.

Core views

The core view is that PRADA Group continues to offer an attractive combination of fundamentals and valuation within the luxury sector. The Prada brand has improved significantly, Miu Miu still has a long-term 5%-10% growth opportunity, and core Group earnings retain double-digit growth potential. Although Versace consolidation will dilute margins and create execution risks in the short term, the current 13x 2027E P/E, approximately 40% below the sector average of around 20x, does not fully reflect earnings resilience in the firm’s view.

Analysis framework

The report analyzes the company using the earnings release, brand and regional breakdowns, margin bridge, forecast adjustments, DCF valuation, and relative P/E valuation, while comparing the company’s performance with Q2 trends in the luxury sector and the pace of improvement at competing brands such as Gucci.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The Dec-27 target price is based on explicit FY26-FY30 forecasts, 5.5% medium-term growth, 3.5% terminal growth, and a 9.5% WACC.

• Relative valuationP/E comparison

  P/E discount

  PRADA Group trades at approximately 13x J.P. Morgan’s 2027E earnings, representing an approximately 40% discount to the sector average of around 20x, excluding certain companies.

• Earnings forecastsForecast upgrade

  Model adjustment following an earnings beat

  The firm raised its forecasts by approximately 2%, mainly reflecting the H1 earnings beat; its current FY26 net profit forecast is 2% above consensus, with forward-year forecasts 6%-7% higher.

Asset mapping & comparison

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

• PRADA Group (1913.HK)

  Core covered security

  Strengths

  Prada brand acceleration, Miu Miu growth on a high base, full-price sales contribution to gross profit, strong core Group earnings growth, and a significant valuation discount.

  Weaknesses

  Versace consolidation dilutes margins, FY26 adjusted EPS is expected to decline year over year, and travel retail consumption and performance in certain regions remain volatile.

  Comparison

  The company’s Q2 organic growth exceeded the firm’s expectations and was also better than the sector’s average sequential improvement of approximately 3%-4%; 2027E P/E is approximately 40% below the sector average of around 20x.

  Risks

  Macroeconomic deterioration, sustained high investment, pressure on core leather goods products, changes in fashion trends, intensifying competition, foreign exchange, travel disruptions, and Versace execution risks.

Key data

• Q2 sales growth+16% reported to €1.6bn, +18% ex-FX, +7% organicAbove J.P. Morgan’s expectations of +13% ex-FX and +3% organic.
• H1 adjusted EBIT€530m9% above J.P. Morgan’s forecast and 6% above BBG consensus.
• H1 EBIT margin17.2%, down 500bps year over yearVersace consolidation diluted the margin by approximately 350bps, less than the firm’s expected 590bps decline.
• Prada brand retail sales+6% ex-FXA significant improvement from being flat in Q1 and above the firm’s expectation of approximately +2.5% to +3%.
• Miu Miu growth+3%, or +6% excluding the Middle East dragGrowth was achieved despite a high base of 40% growth in Q2 25 and 175% growth over two years.
• FY26E revenue forecast€6,585mRaised 1.8% from €6,466m.
• FY27E revenue forecast€7,107mRaised 2.5% from €6,936m.
• FY27E adjusted EPS0.36Raised 3.2% from 0.35.
• Valuation13x 2027E P/EApproximately 40% below the sector average of 20x.
• Target price and current priceTarget price HK$62.50; current price HK$37.90The current price is as of July 30, 2026.

Impact & implications

The report implies a positive investment outlook for 1913.HK: near-term results could receive a positive market response, while the medium-term valuation discount has room to recover. Brand momentum is gradually expanding from Miu Miu’s standalone high growth to improvement in the core Prada brand, helping strengthen market confidence in the Group’s growth quality and earnings resilience.

Risks

• A deterioration in the macroeconomic environment could suppress luxury goods demand.
• Continued heavy investment to maintain revenue momentum could weigh on margins.
• Pressure on core leather goods products could affect the quality of brand growth.
• The Group may fail to capture unexpected changes in fashion trends.
• The competitive landscape could intensify, particularly if Gucci recovers faster than expected.
• Foreign-exchange volatility could affect revenue and earnings performance.
• Disruptions to travel consumption could affect markets such as Europe and Japan.
• Versace integration and brand-rebuilding involve execution risks.

What to watch

• Whether Group organic sales in Q3 26 reach the firm’s forecast of +7%.
• Whether Prada brand retail sales can sustain the improvement pace of approximately +6% ex-FX.
• Whether Miu Miu can achieve sustainable long-term growth of 5%-10% on a high base.
• Whether Versace’s margin dilution remains around 350bps in H2.
• Whether FY26 marketing expenses as a percentage of sales remain stable or increase only slightly.
• The sustainability of Chinese consumer demand, North American demand, European travel consumption, and domestic and tourist demand in Japan.