CMB International Global Markets | Equity Research | Company Update Summary
Core Company Overview
Company: Bosideng (3998 HK)
Stock Recommendation: BUY
Target Price: HK$5.89 (+34.8% upside from current price HK$4.37)
Valuation: 13x FY24E P/E, below the 5-year average of 16x
Key Highlights: Healthy inventory, upbeat guidance, dividend increase
Financial Performance
Earnings Summary (YE 31 Mar)
| Metric |
FY20A |
FY22A |
FY23E |
FY24E |
FY25E |
| Revenue (RMB mn) |
13,517 |
16,214 |
18,862 |
21,114 |
23,277 |
| YoY growth (%) |
10.9 |
20.0 |
16.3 |
11.9 |
10.2 |
| Net income (RMB mn) |
1,710 |
2,062 |
2,538 |
3,067 |
3,606 |
| Diluted EPS (RMB) |
0.151 |
0.183 |
0.225 |
0.272 |
0.319 |
| YoY growth (%) |
48.1 |
22.8 |
23.1 |
20.8 |
17.6 |
| P/E (x) |
24.4 |
19.9 |
16.1 |
13.4 |
11.4 |
| P/B (x) |
3.6 |
3.3 |
3.1 |
2.8 |
2.5 |
| Yield (%) |
3.1 |
4.3 |
4.3 |
5.2 |
6.2 |
| ROE (%) |
15.4 |
17.4 |
20.0 |
21.9 |
23.3 |
| Net gearing (%) |
1.8 |
Net cash |
Net cash |
Net cash |
Net cash |
Earnings Review - Half Year
| Metric |
1H21 |
2H21 |
1H22 |
2H22 |
1H21 YoY |
2H21 YoY |
1H22 YoY |
2H22 YoY |
2H22E CMBI |
Actual vs CMBI |
| Revenue |
4,661 |
8,855 |
5,390 |
10,824 |
5% |
14% |
16% |
22% |
9,705 |
12% |
| COGS |
(2,434) |
(3,158) |
(2,669) |
(3,808) |
- |
- |
- |
- |
(3,366) |
- |
| Gross profit |
2,227 |
5,697 |
2,721 |
7,016 |
- |
- |
- |
- |
6,339 |
11% |
| GP margins |
47.8% |
64.3% |
50.5% |
64.8% |
- |
- |
- |
- |
65.3% |
- |
| Other income & gains |
46 |
158 |
143 |
131 |
- |
- |
- |
- |
53 |
- |
| S & D expenses |
(1,209) |
(3,598) |
(1,614) |
(4,557) |
8% |
14% |
34% |
27% |
(3,776) |
21% |
| Admin expenses |
(390) |
(636) |
(453) |
(750) |
16% |
23% |
16% |
18% |
(651) |
15% |
| Operating profit (EBIT) |
666 |
1,604 |
797 |
1,812 |
27% |
37% |
20% |
13% |
1,919 |
-6% |
| OP margins |
14.3% |
18.1% |
14.8% |
16.7% |
- |
- |
- |
- |
19.8% |
- |
| Net profit att. |
486 |
1,224 |
638 |
1,424 |
42.1% |
20.6% |
23.1% |
20.8% |
1,388 |
3% |
Guidance and Outlook
FY23E Guidance
- Sales Growth: $15% - 20%$ for down apparel (positive volume/ASP growth), double-digit for OEM, flat to slight increase for womenswear, rapid growth for school uniforms.
- Net Profit Growth: $10% + / 10% +$.
- GP Margin: Expected to stay at least flattish, at $60.3%$.
- OP Margin: Expected to improve by $+2.6ppt$ to $18.5%$, due to lower A&P expenses and better marketing terms.
Drivers for Positive Guidance
- Upgrades to existing collections: "light down apparel", "high-end outdoor", "high-end extreme cold".
- Introduction of new categories and products: "trench-style down apparel".
- Expansion of mid-range product lines (RMB 900-1500) and e-commerce focus (Snow Flying).
- Resumption of store expansion (approx. 300 new stores for wholesale, 100 for self-operated).
- Store upgrades with "experience" stores and better inventory management.
Earnings Revision and Comparison
CMBIGM Estimates vs Consensus
| Metric |
CMBIGM |
Consensus |
Diff (%) |
| Revenue |
18,862 |
18,877 |
-0.1% |
| Gross profit |
11,378 |
11,393 |
-0.1% |
| EBIT |
3,482 |
3,294 |
+5.7% |
| Net profit att. |
2,538 |
2,562 |
-0.9% |
| Diluted EPS (RMB) |
0.225 |
0.231 |
-2.7% |
| Gross margin |
60.3% |
60.4% |
-0.1ppt |
| EBIT margin |
18.5% |
17.4% |
+1ppt |
| Net profit att. margin |
13.5% |
13.6% |
-0.1ppt |
Valuation and Peer Comparison
Peers' Valuation
| Company |
Ticker |
Rating |
12m TP (LC) |
Price (LC) |
Up/Downside |
Mkt. Cap (HK$mn) |
Year End |
P/E (x) |
P/B (x) |
ROE (%) |
3yrs PEG (x) |
Yield (%) |
| Bosideng |
3998 HK |
BUY |
5.89 |
4.37 |
+34.8% |
47,571 |
Mar-22 |
16.1 |
3.1 |
17.7 |
0.8 |
4.2 |
| China Lilang |
1234 HK |
BUY |
4.94 |
3.87 |
+28% |
4,634 |
Dec-21 |
6.2 |
1.0 |
12.8 |
0.3 |
11.5 |
| Jnby Design |
3306 HK |
BUY |
14.51 |
9.14 |
+59% |
4,741 |
Jun-21 |
6.8 |
2.2 |
37.1 |
1.0 |
10.6 |
| Canada Goose |
GOOS US |
NR |
N/A |
19.85 |
N/A |
16,410 |
Apr-22 |
15.0 |
4.2 |
18.9 |
0.0 |
n/a |
| Moncler Spa |
MONC IM |
NR |
N/A |
39.70 |
N/A |
89,947 |
Dec-21 |
21.2 |
3.8 |
19.1 |
1.5 |
1.8 |
| Hugo Boss |
BOSS GR |
NR |
N/A |
49.40 |
N/A |
28,790 |
Dec-21 |
19.8 |
3.3 |
19.9 |
1.0 |
1.9 |
| H&M |
HMB SS |
NR |
N/A |
121.48 |
N/A |
155,855 |
Nov-21 |
18.0 |
3.4 |
21.6 |
2.6 |
5.6 |
| Marks & Spencer |
MKS LN |
NR |
N/A |
144.00 |
N/A |
27,166 |
Apr-22 |
8.5 |
1.0 |
11.8 |
4.5 |
4.2 |
Valuation Summary
- Current P/E (FY24E): 13x
- 5-year average P/E: 16x
- GOOS's P/E: 12x
- MONC's P/E: 18x
- Li Ning's P/E: 25x
- Valuation: Undemanding
Key Assumptions
Sales by Segment
| Segment |
FY21A |
FY22A |
FY23E |
FY24E |
FY25E |
| Down apparels |
10,889 |
13,223 |
15,557 |
17,650 |
19,656 |
| OEM management |
1,536 |
1,901 |
2,129 |
2,236 |
2,348 |
| Ladieswear |
947 |
904 |
953 |
994 |
1,028 |
| Diversified apparels |
145 |
186 |
223 |
234 |
246 |
| Total |
13,517 |
16,214 |
18,862 |
21,114 |
23,277 |
Sales Growth by Segment
| Segment |
FY21A |
FY22A |
FY23E |
FY24E |
FY25E |
| Down apparels |
14.5% |
21.4% |
17.7% |
13.5% |
11.4% |
| OEM management |
-4.7% |
23.8% |
12.0% |
5.0% |
5.0% |
| Ladieswear |
-3.7% |
-4.5% |
5.4% |
4.4% |
3.4% |
| Diversified apparels |
72.6% |
28.3% |
20.0% |
5.0% |
5.0% |
| Total |
10.9% |
20.0% |
16.3% |
11.9% |
10.2% |
Sales by Channel
| Channel |
FY21A |
FY22A |
FY23E |
FY24E |
FY25E |
| Down Apparls - offline |
2.1% |
25.6% |
16.7% |
8.4% |
7.0% |
| Down Apparls - online |
54.3% |
12.7% |
20.0% |
25.0% |
20.0% |
| OEM management |
-4.7% |
23.8% |
12.0% |
5.0% |
5.0% |
| Non-down apparels - offline |
1.1% |
-1.1% |
7.3% |
4.5% |
3.9% |
| Non-down apparels - online |
21.8% |
11.3% |
15.0% |
5.0% |
2.0% |
| Total |
10.9% |
20.0% |
16.3% |
11.9% |
10.2% |
Conclusion
Bosideng has delivered a strong FY22E result with healthy inventory control and an upbeat guidance for FY23E. The company is focusing on premiumization and mass market expansion, with a forecasted increase in operating profit margins due to cost optimization. The stock is undervalued at 13x FY24E P/E, with a target price of HK$5.89. The company is expected to maintain a BUY rating due to its strong performance and strategic initiatives.
