20260327-招银国际-Heading_towards_strong_medium-term_profitability_target_with_solid_execution_7页_673kb

Baozun (BZUN US) Summary

Core Content and Key Highlights

Baozun reported its fourth-quarter 2025 results, showcasing improved financial performance and a clear path toward medium-term profitability. The company's revenue reached RMB3.2bn, marking a $5.9%$ YoY increase, with non-GAAP net profit attributable to ordinary shareholders rising to RMB159.6mn from RMB45.7mn in the same period of the previous year. This growth was driven by solid improvements in operating profitability across both Baozun E-commerce (BEC) and Baozun Brand Management (BBM).

• BEC reported revenue of RMB2.6bn, up $2.5%$ YoY, with non-GAAP operating profit (OP) increasing $43%$ YoY to RMB196mn. Its non-GAAP OPM improved to $7.6%$ in 4Q25 from $5.5%$ in 4Q24, supported by a 760bps increase in gross margin (GPM) to $18.4%$.
• BBM delivered revenue of RMB664mn, up $24%$ YoY, with non-GAAP OP of RMB1.8mn, reversing a RMB34.2mn loss in 4Q24. The GPM for BBM improved by 170bps YoY to $52.1%$, driven by effective merchandising and marketing initiatives, as well as improved operating efficiency.

2025 Performance Overview

Baozun's 2025 financial results reflect a strong improvement in operating profitability, with:

• BEC OP growing $22%$ YoY to RMB269mn.
• BBM loss narrowing to RMB93mn from RMB169mn in 2024.

The company has set a 2028 non-GAAP OP target of at least RMB550mn, implying a compound annual growth rate (CAGR) of over $64%$ from 2025 to 2028. This is supported by margin expansion in BEC, scaling and operating leverage in BBM, and deeper strategic synergies between the two segments.

2026E Outlook

Baozun's 2026E outlook indicates continued profitability improvement despite investments in new growth opportunities:

• BEC revenue is expected to grow by $2.5%$ YoY.
• BBM revenue is forecasted to grow by $17.5%$ YoY.
• The company is expected to focus on operating efficiency for BEC and scalable expansion for BBM.
• The strategy of introducing more brands into BEC under a franchise model is expected to further unlock synergies between the two segments.

Target Price and Valuation

The target price for Baozun has been raised to US$3.98 from US$3.81, based on a SOTP valuation of RMB1.63bn (US$233mn), which includes:

1. RMB1.35bn for BEC, based on a 5.0x 2026E EV/EBIT multiple.
2. RMB759mn for BBM, based on a 0.4x 2026E EV/sales multiple.
3. RMB2.0bn in net cash, with a $60%$ holding discount applied to the group-level valuation.

Financial Performance (Selected Metrics)

Metric	FY24A	FY25A	FY26E	FY27E	FY28E
Revenue (RMB mn)	9,422	9,945	10,475	11,003	11,433
Operating Profit (RMB mn)	(114.8)	56.6	181.0	357.0	502.2
Adjusted Net Profit (RMB mn)	(40.4)	44.2	148.4	298.1	397.9
P/E (x)	ns	ns	7.9	3.4	2.4
ROE (%)	(3.3)	(5.2)	2.8	6.0	7.6

Shareholding and Market Data

• Market Cap: US$127.3mn
• Avg 3 mths t/o: US$0.7mn
• 52w High/Low: US$4.77 / US$2.13
• Total Issued Shares: 58.4mn
• Shareholding Structure:
  • Jun Wang: 16.5%
  • Schroders: 7.4%

Share Performance (12-Month)

Period	Absolute Return (%)	Relative Return (%)
1-mth	-13.1	-8.0
3-mth	-19.3	-11.0
6-mth	-46.3	-43.6

Key Forecast Changes

• 2026E revenue forecast was increased by $3%$ to reflect better-than-expected BBM growth.
• 2026E OP forecast was cut by $6%$ due to additional investments in niche brands like Hunter and Sweaty Betty.
• 2027E OP forecast was raised by $46%$, reflecting management's guidance on profitability improvement.
• 2028E forecast was introduced to align with the long-term profitability target.

Analyst Ratings and Recommendations

• CMBIGM Rating: BUY
• Target Price: US$3.98
• Current Price: US$2.18
• Up/Downside: 82.6%

Conclusion

Baozun is on track to achieve its 2028 profitability target, driven by improved operating efficiency in BEC, scalable expansion in BBM, and strategic synergies. The company's improved financials, including a significant increase in net cash and a more optimistic revenue growth outlook, support the revised target price and a BUY recommendation. Continued execution and capital allocation are expected to drive a valuation re-rating.