(BFM Stock Exchange) – The Canadian Bank raised its advice to “outperformance” on the title against “sectoral performance” previously. The Canadian Bank believes that the company has the means to regain growth of 6% in the medium term.

Quality value, L’Oréal has, for a little over a year, alternate the good (the activity of the first quarter) and the less good. The group of perfumes and cosmetics had notably delivered growth below expectations in the third and fourth quarters of 2024.

These disappointments, unusual for the French flagship of beauty, logically resulted in a correction of action, which thus abandons 19.2% over a year.

The recent setbacks have led investors to question the medium -term potential of L’Oréal.

The disappointing figures, therefore, in the third quarter and low visibility on the sector “should arouse a debate on the medium -term perspectives of L’Oréal in terms of organic growth in turnover”, pointed for example UBS last fall.

But Royal Bank of Canada is confident. The Canadian Bank has taken up its advice to “outperformance” against “market performance”, which amounts to “buy” against “neutral” previously. The establishment also enhanced its course target at 420 euros against 390 euros, a target which grants a potential of 18% in the title at the end of Thursday.

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A market leader

“The market has become more and more skeptical of the long -term growth prospects of L’Oréal (…) It is true that the recent results of L’Oréal have not been up to expectations, that innovation has been more discreet in recent years and that the context of consumption is gloomy,” said Royal Bank of Canada.

“However, we believe that this situation is temporary and that the pace of resumption of growth could surprise upwards,” she added.

Royal Bank of Canada recalls that over 60% of its income, around, L’Oréal enjoys a clear situation of market leader. A fortiori in hair care where L’Oréal is twice as large as its closest rival. The group is more competed in luxury perfumes where it boxes alongside heavy goods vehicles such as Lauder, Coty and LVMH.

This enviable market position remains an asset at a time when its exposure to China puts its performance under pressure and its very important activity in the United States could also constitute a brake.

“In an increasingly low context of consumption and uncertainties concerning customs duties in the United States, we are planning an underperformance of growth dynamics in the region,” warns Royal Bank of Canada.

“However, we believe that the company has many levers to overcome uncertainties and accelerate the growth of its turnover,” adds the establishment.

Rebound in the second semester

If Royal Bank of Canada expects zero growth in the first quarter, the bank considers that the activity should bounce back in the second half, which corresponds to the management scenario.

Unlike many companies that share this projection, the rebound anticipated by L’Oréal in the second half is not based on a hypothetical improvement in the economic situation but on clean factors, notes the bank, with a plan of “beauty stimulus” launched by society.

This plan notably includes launching of new products much more important this year than over the last five years. “We believe that this indicates that the company focuses more on innovation and shows greater proactivity to invigorate growth,” said Royal Bank of Canada. The bank also notes, based on the trends in the Google search engine, a good start of the Mela B3, the last serum in La Roche-Posay.

The establishment thinks that L’Oréal still has a field to increase its market share, especially in emerging countries thanks to e-commerce.

Ultimately, Royal Bank of Canada anticipates growth in comparable data of 4.2% in 2025, before acceleration at 5.8% in 2026 and then 6.3% in 2027.

The bank has carried out an in -depth analysis on the hair care and skin care markets, concluding that its categories still have attractive growth profiles in the medium term and that L’Oréal is well placed to seize these opportunities.

The growth of these markets will be supported by mega-tendencies such as urbanization, the aging of the population and the increase in the middle class.

Intensive R&D expenses (more than a billion euros per year), its ability to adopt technological innovations, such as L’Oréal Cell Bioprint, a device that makes it possible to carry out extensive and personalized skin analyzes in five minutes, its ability to look for adjacent markets, are all assets in the English Channel to surf these trends.

Royal Bank of Canada therefore estimates that a return to a medium -term growth of 6%, remains “a realistic aspiration” for the market.

In this context, the valuation of L’Oréal is attractive with a yield/risk profile deemed attractive by the bank.

On the Paris Stock Exchange, this Friday, the L’Oréal action is no exception to the general decline in the market, losing 2.1% around 4:15 p.m., while the CAC 40 yields 0.6% at the same time.