Rothschild Redburn Starts Coty Inc. (COTY ) at Neutral

Rothschild Redburn analyst Kyriaki Koutta initiates coverage on Coty Inc. (NYSE: COTY ) with a Neutral rating and a price target of $3.60.

The analyst comments: "With a levered balance sheet on 3.5x net debt to EBITDA in FY25, Coty is currently unable to return cash to shareholders either through dividends or buybacks. However, a potential divestment of the Wella stake and the Consumer unit under review could reduce leverage to below 2x. At this point, we would expect the company to explore buybacks and dividends, but for now the timing remains highly uncertain.
Focusing on the organic story we forecast c3% group organic sales growth pa from FY27, broadly in line with consensus expectations which have fallen from 6% over the past year. Given the need for continued investments to reinvigorate brand growth, we see limited scope for operating margin expansion in line with consensus. This leaves our FY26-28 EPS estimates broadly in line with consensus.
On consensus FY27 P/E the shares have derated to 7x one-year forward, which is less than a third of their level at the peak of the fragrance boom in the summer of 2023. This reflects downgraded growth expectations and Coty’s volatile track record. Our DCF-based 12-month price target of $3.60 implies a 11% total shareholder return, driven by earnings growth from a low base with no contribution from dividend yield. While we see some upside to the shares, the risk/reward balance is not compelling enough considering the heightened uncertainty on the category and limited clarity on the strategic review."

For an analyst ratings summary and ratings history on Coty Inc. click here. For more ratings news on Coty Inc. click here.

Shares of Coty Inc. closed at $3.15 yesterday.

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