20150806-Maybank_KERPL-Oversold__an_opportunistic_BUY_14页_599kb

报告摘要

Biostime (1112 HK) Summary

Core Content and Key Information

Share Price: HKD14.64
Target Price: HKD20.60 (+41%)
Market Cap (USD): 1.1B
Average Daily Trading Volume (USD): 8M
Sector: Consumer Staples
Rating: BUY (Upgrade from HOLD)
Reason for Upgrade: Oversold with an attractive risk-to-reward profile (EV/EBITDA ~6x) after a 30% plunge due to a profit alert.

Main Viewpoints

1. Sales and Earnings Performance

Biostime experienced a significant drop in 1H15 sales and net profit, down by 11% and 36% YoY, respectively.
The 2Q drop was attributed to aggressive clearance efforts ahead of the launch of the upgraded SN-2 PLUS Balanced Formula in late June.
The company expects a 28% HoH sales growth in 2H15, aligning with historical trends of 2H sales being 20-50% higher than 1H.
The 1H15 gross margin (GPM) dropped to 58.5%, but is expected to recover to 64.2% in 2H15F due to normalized marketing activity, cheaper milk powder sourcing, and delayed benefits from Euro depreciation.

2. Financial and Valuation Metrics

Revenue: FY12A: CNY3,381.9M, FY13A: CNY4,561.3M, FY14E: CNY4,731.6M, FY15E: CNY4,451.0M, FY16E: CNY4,658.9M
EBITDA: FY12A: CNY1,031.9M, FY13A: CNY1,279.2M, FY14E: CNY1,148.6M, FY15E: CNY1,008.3M, FY16E: CNY1,041.7M
Core Net Profit: FY12A: CNY743.1M, FY13A: CNY983.6M, FY14E: CNY806.8M, FY15E: CNY781.3M, FY16E: CNY809.4M
Core EPS (CNY): FY12A: 1.23, FY13A: 1.63, FY14E: 1.33, FY15E: 1.29, FY16E: 1.33
Core EPS Growth (%): FY12A: 40.9, FY13A: 32.4, FY14E: (18.3), FY15E: (3.5), FY16E: 3.6
Net Dividend Yield (%): FY12A: 7.5, FY13A: 8.2, FY14E: 4.5, FY15E: 4.4, FY16E: 4.5
ROAE (%): FY12A: 34.6, FY13A: 40.7, FY14E: 30.1, FY15E: 25.4, FY16E: 22.7
ROAA (%): FY12A: 24.9, FY13A: 24.1, FY14E: 14.3, FY15E: 11.4, FY16E: 11.1
EV/EBITDA: FY12A: 10.0, FY13A: 24.7, FY14E: 5.4, FY15E: 6.0, FY16E: 5.5
Net Debt/Equity: Net cash in all periods.

3. Valuation Comparison with Peers

EV/Sales: Biostime is significantly lower than its peers in both HK and globally.
Forward PER: Biostime is at 9.1x, while peers such as Yashili Int'l and Mengniu are at 7.2x and 8.8x, respectively.
Forward PBR: Biostime is at 1.9x, while peers like Yashili Int'l and Mengniu are at 2.1x and 1.9x.
EV/EBITDA: Biostime is at 6.0x, while peers such as Yashili Int'l and Mengniu are at 5.4x and 5.5x.

4. Key Arguments for Upgrade

Earnings Forecast: Maybank's revised FY15/16F net profit are 40% and 34% above the Street, respectively.
Restocking and Seasonality: Expected strong restocking in 2H15, which should boost sales.
Gross Margin Recovery: Normalization of GPM due to cheaper milk powder costs and Euro depreciation.
Valuation: The stock is undervalued compared to peers in multiple valuation metrics.
Dividend Payout: Potential for more generous dividends given the company's net cash position and limited capex plans.
Positive Newsflow: Potential introduction of strategic partners for its Mama100 e-commerce platform.

Structural Concerns

Sales Efficiency: Deteriorating sales efficiency per POS due to shifting channel strength (more online sales).
New Birth Growth: Lackluster growth in new births.
Cannibalization Risk: Potential cannibalization between Biostime and Adimil brands.
Online Ambition: Aggressive online strategies may harm relationships with baby store customers.
Execution Risks: Disruptions caused by restructuring of the sales team.

Earnings Forecast Comparison

Street vs. Maybank: Maybank's estimates are significantly higher than the Street's, with a larger net profit forecast for 2H15.
Opex-to-Sales Ratio: Maybank forecasts a 1.9ppt YoY decline, while the Street expects a 3.9ppt YoY increase.

Financial Statements Highlights

Income Statement

Revenue: Declined in FY15E but expected to recover in FY16E.
Gross Profit: Expected to rebound due to cost reductions and improved margins.
EBITDA: Projected to be lower in FY15E but stable in FY16E.
Net Profit: Expected to be lower in FY15E but slightly higher in FY16E.

Balance Sheet

Cash & Short Term Investments: Increased over the years, indicating strong liquidity.
Inventory: Slightly increased, but not excessively.
Property, Plant & Equip (net): Increased significantly, reflecting investment in operations.
Total Assets: Rose over the years, indicating growth.
Total Liabilities: Increased, but not excessively.
Shareholders Equity: Increased, reflecting profitability and retained earnings.

Cash Flow

Free Cash Flow: Increased in FY14E and FY15E, but declined in FY16E.
Dividends Paid: Declined in FY15E but stable in FY16E.
Net Cash Flow: Negative in FY12A but positive in FY13A and FY14E.

Key Figures and Trends

Historical Half-Year Sales Trend: 2H sales typically higher than 1H.
Historical Gross Margin Trend: Expected to normalize in 2H15.
Euro/CNY Trend vs. Milk Powder GPM: Euro depreciation is expected to have a delayed effect on GPM.
Milk Powder Cost Trend: Cheaper sourcing is expected to boost GPM by 2ppt.
Euro Depreciation Savings: Expected to save CNY150m+ in 2H15.
Institutional Shareholdings: Close to lowest point since listing, indicating potential for more institutional interest.
Stock Borrow Utilization: Fully utilized, suggesting high short interest.
Short Interest Ratio Days to Cover: Indicates potential for short covering.
Long Supply as % of Free Float: Indicates potential for more long-term investment.

Conclusion

Biostime's recent performance has been impacted by aggressive clearance efforts and a profit alert, leading to a significant drop in sales and net profit. However, the company is expected to recover in 2H15 with restocking and seasonality, along with improved gross margins due to lower milk powder costs and delayed Euro depreciation benefits. Despite structural challenges such as shifting channel strength and cannibalization risk, the stock is currently undervalued with attractive valuation metrics and potential for higher dividends. The upgrade to BUY reflects the company's improved risk-to-reward profile and the potential for near-term buying opportunities.

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