Pandora has experienced mixed financial performance over the past year. While its stock price has declined slightly, the company has countered slowing growth in established markets through expanding into Asia and increasing its product offerings. Pandora remains undervalued relative to competitors due to its strong brand and growth prospects in Asia and new product categories. The analyst recommends a "Buy" rating with a target price of DKK 948 based on Pandora's financial strength and opportunities for further growth.

1. 1 | P a g e
Equity Research
11-11-2016
Pandora A/S (PNDORA DC – Copenhagen)
Pandora has had a mixed year. Its stock price has decreased 5.6% over
the past twelve months. The company’s continued expansion into the
large Asian market along with its increased product offering have
counteracted the slowdown in like-for-like growth and its Disney
charms sales. With positive economic data coming from the United
States and the opportunity to grow both in Asia and through an
expanded product offering, Pandora shares should continue to see
growth in the coming months and years. The financials for Pandora
are also strong. The company boasts a P/E which is below the industry
average, its revenue has grown an average of 32% over the past 4
years and the company has little debt.
Investment Thesis
❖ Growth prospects: Pandora is targeting growth in its
established markets through increasing its range of products.
The company’s success has been built selling on its signature
product, the charm bracelet which encourages the repeat
purchase of charms, in its established markets of the US and
Europe. Recently however the company has successfully
begun to increase its product offering in these markets mainly
through rings and more recently earrings. The company has
also recently been targeting expansion in Asia, the largest
jewellery market globally. Revenue there has grown 50% for
the past 3 years as Pandora has doubled its store openings and
launched its eSTOREs.
❖ Undervalued: Despite strong growth prospects, a strong and
well recognised brand, and management which is highly
competent and focused, Pandora is still relatively cheaper than
its competitors. Its P/E remains below the industry average
and while it has entered a more moderate stage of growth in
its established markets, we believe investors have failed to
take this into account, particularly considering its renewed
growth focus. For these reasons, we believe Pandora is
undervalued and we are targeting a price of DKK 948.
Risks
❖ Increases in raw material prices, particularly gold and silver
❖ Weakening GBP, AUD and JPY v DKK
❖ Disruption to production in Thailand
❖ Slowdown in Asian economies, particularly China
❖ Uncertainty over the spending of US consumer and the
strength of European and Asian consumer
❖ Long lifespan of products
Recommendation
Buy
Target Price DKK 948.43
Price DKK 828
52 Week -0.3%
Market Cap €12.9BN
Shares Out 117M
See index for DCF
Analysts
Tomas Beecham
tomas.beecham@ucdconnect.ie
Stephen Bigger
15200824@ucdconnect.ie
Aisling Byrne
aisling.byrne.6@ucdconnect.ie
Conor Clarke
13379106@ucdconnect.ie
Scott Coen
16384651@ucdconnect.ie
Fiachra Doherty
fiachra.doherty@ucdconnect.ie
Arber Dzaferi
16200722@ucdconnect.ie
Eshrag Elawad
eshrag.elawad@ucdconnect.ie
Dan Lynch
13387466@ucdconnect.ie
Anjali Metha
16201712@ucdconnect.ie
Tommy Monahan
16389483@ucdconnect.ie
Ben Rafter
16348193@ucdconnect.ie
Manager
Philip Spain
philip.spain@ucdconnect.ie
Sector Manager
Harry Brennan
harry.brennan@ucdconnect.ie

2. 2 | P a g e
Business Description
Pandora is a Danish company which designs, manufactures and markets hand-finished and
contemporary jewellery made from high-quality materials at affordable prices. The company offers
bracelets, rings, necklaces and earrings. The company has a strong focus on its signature product, the
charm bracelet, which encourage the repeat purchase of charms. Charms account for 62% of sales
and sales have been boasted in recent years with the signing of a deal with Disney. Pandora is present
in over 100 countries globally. Europe and North America account for 85% of sales but the company
has found success recently in focusing on the Asian market. The company’s aim is to become the
world’s most loved and recognised jewellery brand.
Pandora’s four strategic pillars:
1) Full jewellery product offering with increasing focus on rings and earrings
2) Balanced global business through sustaining strong performance in developed markets and
increasing revenue share in emerging markets
3) Focus on branded retail stores but increasing effort to develop online shopping
4) Maintain one worldwide and globally recognised brand
Global Jewellery market
The graphic above highlights the importance of the Asian market in terms of the global jewellery
market. China is the largest single market and is nearly twice the size of the second biggest market,
the US. However the top 5 markets also include India, Japan and Hong Kong. Pandora therefore has
a huge market to expand into as it continues to concentrate its development on Asia. Pandora’s
success has, up until recently, been built on the sale of its signature product, the charm bracelet.
However wristwear only accounts for 17% of the global jewellery market. Therefore in 2013 Pandora
began to focus on expanding its product range by increasing its offering of rings. This year Pandora
has also begun to focus on the earrings market and has had success with revenue up 67% YoY in Q3
for this product. The jewellery market is also expected to grow by 9% YoY for next 5 years according
to Euromonitor research. Pandora is therefore expanding in the ideal markets and products and at a
time when the industry is experiencing solid growth overall.

3. 3 | P a g e
Industry Overview and Competitive Positioning
Competition within the Industry:
Pandora is positioned within the affordable jewellery segment, meaning that pieces cost less than
1500 USD. The main competitors to Pandora are Tiffany, Swarovski, Cartier, and Bvlgari. Although
the price point for these competitors is at times substantially different from Pandora’s, due to the wide
range of prices offered by Pandora, specifically in charms, it enables the consumer to spend as little
or as much as they desire to fit their budget.
There is a threat that some of the growth could be taken by brands who previously did not specialize
in jewellery, specifically Louis Vuitton, Hermes, and Dior. However Pandora is already positioned
as an affordable, high quality jewellry manufacturer with the second most recognized name in
jewellery.
Due to the economies of scales that Pandora has achieved by establishing solid growth and working
on brand recognition it has positioned itself to capitalize on the projected growth in the sector that
Tiffany & Co. and Cartier may find hard to mirror.
Brand Recognition
Customers:
Pandora is the category leader for charm bracelet sales. The charms alone count for 62% of the
revenues generated. However there are cheaper options to Pandora if consumers are looking to
purchase a charm bracelet or individual charms. Chamilia, Biagi, Soufeel are just a few of the brands
that offer charm bracelets that resemble Pandora but at a more competitive price. Individual charms
are also available at lower prices than those offered from Pandora. However the level of refinement
is lacking due to Pandora’s unique expertise and dedicated craftsmen.
In light of the availability of cheaper options, Pandora’s strategy has been to make itself the most
loved jewellery brand in the world. So far it has succeeded in this by improving brand recognition
since the early 2000s and achieving substantial growth. There have been attempts by other companies
to issue unbranded jewellery alternatives to Pandora, such as Jared (a subsidiary of Signet), which
have failed to work out, illustrating the strength that Pandora has in the charm bracelet market. There
is a lack of awareness of alternatives in Pandora’s niche due to a lack of stores, marketing and
recognition of brands that serve as a substitute to Pandora’s primary products.
Production:
Pandora controls the entire value chain. From the purchase of raw materials right through to sales,
Pandora controls each step. This allows Pandora’s Business Strategy to be adaptable and mobile. As
such, Pandora has retained great pricing power. Its increasing gross margins show that it has the
power to pass on higher input costs to customers.
Pandora produces all of its products in Thailand. Pandora has produced here since 1989 and has 9,000
highly skilled staff. Thailand is one of the world’s largest jewellery exporters and offers many benefits

4. 4 | P a g e
to Pandora such as labour cost advantages and scalable production. Pandora also operates distribution
centres in each of its key markets, US, Europe, Thailand and Australia. Pandora uses Oracle
Investment to distribute in China however it plans to take over this operation in 2019.
Pandora has significant exposure to the price of precious metals, particularly silver and gold which
make up 30% and 11% respectively, of raw material costs. As a result, management policy is to hedge
approximately 100%, 80%, 60% and 40%, respectively, of expected gold and silver consumption in
the following four quarters.
Competitive Advantages:
Pandora has a stable platform in managing threats against potential new entrants into the market due
to a number of points, namely its: strong brand, economies of scale and proprietary technology along
with its partnerships.
- Brand recognition: 7 out of 10 women in Pandora’s target group recognise the brand. This places
Pandora in a unique position within the jewellery market. It offers more affordable jewellery than
its equally recognised competitors and within this price range it maintains the strongest brand.
Pandora also has an online membership of 7.9 Million clients and its site has 124 Million visits
annually.
- Economies of Scale: Pandora has 9500 points of sale, including 1600 branded stores in more than
90 countries and on 6 continents. It manufactures all of its jewellery in-house through its
manufacturing plants in Thailand.
- Pandora owns a patent on its jewellery technology, which it defended successfully against Biagi
Jewelry Florida in 2009. They also have the exclusive rights to reproduce charms based on Disney
films from 2015-2025.
- Pandora has reported a improvement 90% in productivity at its pan-European distribution centre
(DC) since implementing the Accellos warehouse management software from BalloonOne.
- Pandora offers affordable luxury which is key for the growing Asian market. Wages here are not
as high as in Pandora’s established markets and therefore Pandora offers high quality and well-
renowned jewellery at prices below its direct competitors.
- Pandora has strong potential for growth through further expansion into in the large Asian market
and increasing its product offering, notably rings and earrings, globally.

5. 5 | P a g e
Economic outlook
Americas
US:
The US is Pandora’s largest single market, accounting for 29% of Revenue. Steady GDP growth in
last few years is likely to continue despite the uncertainty hanging over president-elect Donald Trump
and his policies. Non-Farm Payroll figures have been strong recently and unemployment has now
reached 5%. A rate hike looks likely in December and we are expecting the stronger dollar to boost
sales. One concern for Pandora is the potential for Trump to introduce protectionist policies
US Real wages continue to grow (see chart) and real disposable income is also rising. 5.7% of
disposable income being save.
Canada:
Heathy domestic economy with disposable income and consumer spending rising consistently. The
proportion of income saved is 4.2% and falling, indicating domestic confidence in the economy and
the future. Retail sales are currently growing at 2% YoY.
Europe:
GDP growing moderately. Currently 1.5% YoY. Unemployment has fallen to 10% but the decline is
gathering momentum. Consumer confidence still near pre crisis levels and Brexit does not appear to
have dented confidence yet. Proportion of income saved is falling and disposable income per person
continues to rise sharply. It has now reached pre-crisis levels (see chart below).
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
09/2011 06/2012 03/2013 12/2013 09/2014 06/2015 03/2016
US Real Wages YoY% Growth
5200
5250
5300
5350
5400
5450
5500
5550
5600
Q1/2006 Q1/2008 Q1/2010 Q1/2012 Q1/2014 Q1/2016
Real Disposable Income Per Capita (EUR)

6. 6 | P a g e
Britain:
Britain accounts for 15% of Pandora’s revenue. The economy has proved more resilient than expected
post Brexit growing by 0.5% qoq in Q3. Retail sales also grew 1.8% last quarter. The recent High
Court decision increases the chances of a softer Brexit. A soft Brexit makes access to the single market
more likely, benefiting Pandora in the longer term. Before Brexit savings were falling and disposable
income was rising strongly. We await Q3 figures to examine whether this trend has changed. The
weak pound is likely to adversely affect sales for Pandora.
Asia Pacific:
Australia:
Australia accounts for half of Pandora’s Asia Pacific Sales. The economy is very health with GDP
growing 3% annually. Unemployment now stands at 5.6% and is continuing to fall. Real wages and
real disposable income are consistently rising (see chart) and consumer confidence has also been
rising solidly over the past 4 years.
China
China is the largest jewellery market in the world and continued growth is expected as the middle
class expands in China. The rise of the middle class, the new generation of freer spenders and an
increasing focus on e-commerce provide great opportunities for Pandora there. Discretionary
products in China are showing the fastest growth and wages are consistently rising strongly as the
country shifts from manufacturing to better paying services and high-tech industries. Pandora recently
launched its eSTORE there and expects to double its number of concept stores this year.
Japan:
Japan has experienced sluggish growth since the 2015 recession however unemployment is now 3%.
Savings are almost non-existent due to negative interest rates and disposable income is on the rise
and being spent. It is the 4th
largest jewellery market in the world
Danish Krone:
The Danish Krone is pegged to the euro via the European Exchange Rate Mechanism at a rate of €1
= DKK 7.45. From an investment point of view, this means that currency risk is not a threat to the
direct value of our company. As the company derives 30% of its revenues from within the Eurozone,
a large section of the company’s sales command no currency risk.
It is to be noted that US sales also constitute 30% of company sales. With our bullish view on a
strengthening dollar, this will positively impact the company moving forward. We are confident that
interest rates will be raised at next month’s meeting of the Fed despite the uncertainty cause by the
116
117
118
119
120
121
122
123
124
03/2011 03/2012 03/2013 03/2014 03/2015 03/2016
Australia Disposable Income (2005=100)

7. 7 | P a g e
election of Donald Trump as the next president. This is on the back of consistently good Non-Farm
Payroll figures in recent months as well as encouraging signs of meaningful reflationary pressure.
Looking further afield, the company has become exposed to the Chinese Renminbi, because of its
strong growth in China. Whilst the Australian dollar and Japanese Yen have performed strongly
against the Danish Krone year to date, they look likely to weaken in light of the protectionist and anti-
trade policies Trump is likely to pursue.
Valuation
Comparable Valuation
Column 1
Market
Cap
(EUR M) P/E
EBITDA
/Net Sales
Revenue
Growth
YoY% ROE ROA
Net Debt/
EBITDA EV/EBITDA
Current
Ratio
Market Avg. 3,355 24.20 18.27 6.23% 13.13% 6.47% 0.43 9.55 2.75
Pandora 12,457 17.22 39.94 17.92% 96.55% 37.69% 0.59 13.13 1.62
Tiffany 9,180 22.01 24.45 -5.95% 15.45% 8.71% 0.40 10.70 4.98
Signet 6,219 12.74 12.09 -2.88% 17.93% 8.34% 1.54 8.23 3.85
Pandora’s P/E of 17.2 is below the market average giving it an attractive relative valuation. Revenue
growth continues to be strong and consistently beat its competitors. Despite taking on debt this year
as part of the share buyback program Pandora maintains its position of relatively low debt. The
company’s current ratio of 1.62 keeps Pandora in a manageable position and demonstrates the
management’s focus on expansion into new products and markets. Due to the share buyback program
EV/EBITDA is slightly distorted and makes Pandora seem relatively over valued. However, we
believe that Pandora continues to offer a very attractive investment, particularly considering its
prospects for future growth.
-20 -15 -10 -5 0 5 10 15 20 25
British Pound
Swedish Krona
Chinese Renminbi
Indian Rupee
United States Dollar
Euro
Canadian Dollar
Swiss Franc
Australian Dollar
New Zealand Dollar
Norwegian Krone
Russian Ruble
Japanese Yen
Brazilian Real
Performance v DKK YTD

8. 8 | P a g e
Discounted Cashflow
- We have applied a conservative growth rate of 2% to balance possible upcoming risks with growth
over next five years
- The target capital structure is based on the market values of the actual capital structure due to a
change in the capital structure last year
- Market risk premium is taken from the EuroStoxx50 which are highly positively correlated with
Danish listed stocks
- Estimation of the return on equity is derived from the historical beta (Pandora/EuroStoxx50)
Financial Analysis
Earnings
Pandora has beaten EPS estimates in every quarter thus far in 2016
Perpetuity Growth
1.0% 1.5% 2.0% 2.5% 3.0%
7.9% 980.68 1042.38 1114.53 1200.04 1303.00
Discount 8.4% 912.00 964.38 1024.94 1095.77 1179.71
Rate 8.9% 852.09 897.01 948.43 1007.89 1077.42
(WACC) 9.4% 799.39 838.24 882.34 932.83 991.21
9.9% 752.68 786.54 824.69 867.99 917.56
1.0% 1.5% 2.0% 2.5% 3.0%
7.9% 24% 31% 41% 51% 64%
8.4% 15% 22% 29% 38% 49%
8.9% 7% 13% 20% 27% 36%
9.4% 1% 6% 11% 18% 25%
9.9% -5% -1% 4% 9% 16%
DCF Estimated Value per Share (DKK)
DCF Estimated Upside
948.43
20%
Perpetuity Growth Method
Current Price (DKK)
Consensus Price Target
793.00
1105.83
0
2
4
6
8
10
12
14
16
18
Q1 Q2 Q3 Q4
EPS 2016
Estimated Actual

9. 9 | P a g e
DKK Millions 2012 2013 2014 2015 2016E 2017E
Revenue 6,652 9,010 11,942 16,737 20,377 23,538
Gross Profit 4,429 5,999 8,423 12,193 15,252 17,418
EBITDA 1,658 2,882 4,298 6,230 7,868 8,794
EBITDA Margin 25% 32% 36% 37% 38% 37%
Net Income 1,204 2,221 3098 3,674 5,716 6,498
Net Debt 158 49 10 2,607 4,770 N/A
EPS 9.22 17.01 24.72 30.80 50.80 58.10
Free Cash Flow 1,172 2,250 4,031 2,764 5,026 5,745
DKK
Millions Q3 2016
Growth
Q3/Q3 3yr Growth Product Q3 2016
Growth
Q3/Q3
Share of
Revenue
Share of
Growth
Americas 1,510 6% 25.44% Charms 2,661 10% 58% 33%
EMEA 2,220 18% 43.73% Bracelets 777 35% 17% 29%
Asia
Pacific 82 46% 49.23% Rings 556 11% 15% 10%
Total 4,612 18% 37% Other 686 67% 11% 28%
Pandora has experienced consistently strong growth over the past 3 years across all its operating
regions. Growth in the Americas and Europe has entered a more mature stage recently however the
company’s focus on an increased product offering and expansion into Asia bodes well for growth.
Growth has slowed in the Americas this year as the sale of Pandora’s Disney charms have slowed in
the US. US is growth driven by like-for-like growth, network expansion and the US eSTORE.
Pandora’s European growth has been hurt by Brexit and the resulting weak pound as Britain accounts
for a third of Pandora’s European revenue. However, the strength of the brand is exemplified by the
company’s ability to produce a year on year growth of 18% in Q3 2016. This has mainly been driven
by like-for-like growth in Germany and increased focus on France and Italy which now account for
12% of European revenue, up from under 10% last year.
0
5,000
10,000
15,000
20,000
25,000
2012 2013 2014 2015 2016E 2017E
Revenue Gross Profit EBITDA

10. 10 | P a g e
In Asia growth continues to be strong as Pandora continues to focus on expansion here. Pandora is
still young in the region and has a number of key eSTOREs to open. This points to continued strong
growth for Pandora in the medium term. Growth has been driven by the large Chinese market where
Pandora opened its eSTORE last year and is doubling the number of concept stores in 2016.
Pandora’s signature product, the charm bracelet, continues to experience strong growth. Pandora has
begun to focus on broadening its product range also. In 2013 it began focusing on rings and continues
to experience reasonable growth there. In 2016 the company began focusing on earrings. The success
with this product is reflected in the “other” group above, which has seen a 67% increase in revenue
on last year.
Despite strong organic growth, Pandora has also experienced solid like-for-like growth in all regions.
The continued broadening of their product offering has resulted in 4% like-for-like growth in concept
stores for the Group. Like-for-like growth was 5% in EMEA, 7% in Asia Pacific and 3% in the US.
Cashflow
Net cash has been negative for the past two years despite increases in cash from operating activities.
This is a result of Pandora’s continued focus on expansion through an increased product offering and
expansion into Asia.
Balance Sheet & Financing
Pandora’s debt has increased this year through loans and borrowings. The increased debt is a result
of the share buyback program initiated by Pandora in 2015. The purpose of this program is to adjust
the capital structure of the company, reduce Pandora’s share capital and to meet obligations from
employee share option programs. Interest payable is relatively strong compared to competitors and
net profit is on a steady growth rate which promises to continue. The continued enhancement of the
product offering is resulting in 4% like-for-like growth in concept stores for the group.
Dividend Policy (DKK)
In Millions of DKK except Per Share FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Last 12M
12 Months Ending 01/07/2009 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 09/30/2016
Cash from Operating Activities 393.4 1,065.7 1,316.0 1,823.0 1,339.0 2,428.0 4,322.0 3,384.0 5,088.0
Cash from Investing Activities -2,971.8 -207.4 -304.0 -364.0 -231.0 -543.0 -632.0 -1,296.0 -1,420.0
Cash from Financing Activities 2,882.9 -342.6 -644.0 -2,502.0 -943.0 -1,524.0 -3,259.0 -2,333.0 -3,778.0
Net Changes in Cash 304.6 519.3 400.0 -1,048.0 165.0 345.0 445.0 -242.0 -110.0
0
2
4
6
8
10
12
14
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
5.5 5.5 6.5 9 13

11. 11 | P a g e
Management aims to increase the nominal dividend annually. Dividend yield has fallen in recent years
due to rate of the company’s expansion. However, analysts expect this trend to reverse in coming
years as the company enters a more mature phase of growth.
Analyst Recommendations
Of the 17 analysts listed on Bloomberg, 15 (88%) have a buy recommendation on the stock and 12%
(2) have a hold recommendation. No analysts have a sell recommendation. The analysts are targetting
a price between DKK 1000 and DKK 1200 with the consensus target price being listed at DKK 1100.
52 Week Share Price Performance
Pandora has had a mixed past 12 months. Continued strong growth through the broadening of its
product range and further expansion into Asia has kept investors reasonably pleased. However Brexit
has had an impact as investors have focused on its potential consequences for Pandora, including a
weaker pound. Further afield the US consumer has proved hesitant to spend and Pandora has also
experienced a decline in its Disney charms sales after a very strong year for this product in 2015.
Investors have also grown concerned about the increases in gold and silver prices this year as investors
have been risk-off, particularly post-Brexit. However, considering the potential for Pandora to
continue to grow, as well as its continually strong like-for-like growth, we believe that Pandora’s
mixed year has made it cheaper and provides an ideal opportunity to invest.