Nomura and Banco Sabadell back Inditex

The Japanese bank Nomura has shown its trust in Spanish Inditex, reiterating its neutral recommendation price target of €66 (Rs 5,324) for Spanish fashion retail firm, ahead of the company’s earnings presentation to be held on 14 December.

According to trade media, analysts at the Japanese brokerage expect Inditex to present solid results and showcase its strength in the Spanish market. They expect sales to grow 5.6per cent and earnings per share to grow 5.5per cent year-on-year to €0.93 (Rs 75) for the third quarter. Additionally, Nomura believes that the Spanish company will maintain its gross margin.

Last week, Credit Suisse maintained its overweight recommendation for the textile company with a price target of €77 (Rs 6,212). The Swiss bank expects 9.1per cent sales growth and 2.6per cent EBIT growth to €754 m (about Rs 100 crores). UBS, on the other hand, downgraded Inditex from buy to neutral and lowered the price target to €68 (Rs 5,485) from €72.50 (Rs 5,848) in order to reflect the impact of austerity measures in European markets to which the company is exposed. Meanwhile, analaysts at Banco Sabadell issued a buy recommendation for Spanish fashion retail group Inditex with a price target of €73.70 (Rs 5,945).

The broker expects the group to report lower comparable sales growth in the third quarter than in the first half of the year as a result of the abnormally high temperatures in Europe during the months of September and October.

Comparable sales grew 6per cent in the first half of 2011 thanks to an exceptionally positive second quarter. Banco Sabadell expects 1.5per cent growth in the third quarter for an aggregate nine-month growth rate of 4.4per cent.

"Inditex is doing a very good job of controlling its gross margins, which we believe is one of the main issues for business performance (...). We do not expect a significant impact to the bottom line," explain these analysts.

Angela Gonzalez-Rodriguez