Bosideng (3998 HK) Company Update Summary
Core Content
Bosideng International Fashion ("BSD") and Willy Bogner GmbH & Co. ("Bogner") have formed a joint venture (JV) to co-develop the Greater China market. The JV will have exclusive rights to market, sell, and distribute products under the BOGNER and FIRE+ICE brands in Mainland China, Hong Kong, Macau, and Taiwan. The JV will consist of two entities: a German JV (owned 45% by BSD and 55% by Bogner) responsible for trademark management, and an Asia JV (owned 55% by BSD and 45% by Bogner) for operations and market development. The partnership plans to open approximately 80 stores and explore the online market in the next five years.
Bogner, a luxury sport fashion brand based in Germany, was founded by Willy Bogner Sr. in 1932 and is now managed by his son, Willy Bogner Jr. In 2020, Bogner generated EUR 163 million in revenue with 70 stores across over 50 countries.
Main Points
- Strategic Partnership: The partnership between BSD and Bogner is seen as a strategic move to expand into the luxury market, leveraging BSD's experience in high-end and multi-brand expansion.
- Marketing Timing: The partnership aligns with the timing of the 2022 Winter Olympics, which is expected to boost brand equity and sales in the first quarter of 2022.
- Growth Potential: The JV is expected to reach RMB 2.2 billion in sales by FY3/26E, with a net profit of RMB 220 million. BSD is projected to receive 50% of the net profit, which would be approximately 2-3% of its group net profit.
- Management Expertise: The JV will be managed by experienced professionals from Amer Sports, LVMH, and Lululemon, indicating strong operational capabilities.
- Market Expansion: The partnership is expected to help Bosideng expand its price range, product categories, and multi-brand strategy, enhancing its market presence.
Key Financials
Earnings Summary (YE 31 Mar)
| FY |
Revenue (RMB mn) |
YoY Growth (%) |
Net Income (RMB mn) |
YoY Growth (%) |
Diluted EPS (RMB) |
| FY20A |
12,191 |
17.4 |
1,203 |
12.8 |
0.111 |
| FY21A |
13,517 |
10.9 |
1,710 |
48.1 |
0.151 |
| FY22E |
15,904 |
17.7 |
2,261 |
34.7 |
0.200 |
| FY23E |
18,137 |
14.0 |
2,726 |
20.6 |
0.241 |
| FY24E |
20,352 |
12.2 |
3,290 |
20.7 |
0.291 |
Valuation Metrics
- Current Price: HK$5.37
- Target Price (TP): HK$6.69 (+24.6% upside)
- P/E (FY23E): 18.4x (Current) vs. 23x (Target)
- P/B (FY23E): 3.6x
- Yield (FY23E): 3.8%
- ROE (FY23E): 20.7%
Shareholding Structure
| Shareholder |
Percentage |
| Mr. Gao Dekang & Family |
70.49% |
| Employee Incentive Scheme |
6.81% |
| Free Float |
22.70% |
Strategic Implications
- Brand Expansion: The partnership is expected to enhance Bosideng's brand equity and sales through the BOGNER and FIRE+ICE brands.
- Diversification: The collaboration allows Bosideng to diversify its product range and explore new segments, including luxury and sport fashion.
- Operational Experience: The involvement of experienced management from top-tier companies is expected to improve operational efficiency and market penetration.
Financial Summary
Income Statement
| FY |
Revenue |
Gross Profit |
Net Profit |
| FY20A |
12,191 |
6,709 |
1,203 |
| FY21A |
13,517 |
7,924 |
1,710 |
| FY22E |
15,904 |
9,694 |
2,261 |
| FY23E |
18,137 |
11,128 |
2,726 |
| FY24E |
20,352 |
12,623 |
3,290 |
Cash Flow Summary
| FY |
Net Cash from Operating |
Net Cash from Investing |
Net Cash from Financing |
Net Change in Cash |
| FY20A |
1,233 |
612 |
-8 |
1,837 |
| FY21A |
3,133 |
-3,863 |
-1,092 |
-1,822 |
| FY22E |
2,005 |
-514 |
-1,476 |
15 |
| FY23E |
3,098 |
-586 |
-1,770 |
743 |
| FY24E |
3,670 |
-657 |
-2,099 |
914 |
Balance Sheet Highlights
| FY |
Total Net Assets |
Shareholders' Equity |
| FY20A |
10,214 |
10,214 |
| FY21A |
11,069 |
11,069 |
| FY22E |
12,041 |
12,041 |
| FY23E |
13,184 |
13,184 |
| FY24E |
14,562 |
14,562 |
Key Ratios
- Gross Margin: Increased from 55.0% (FY20A) to 62.0% (FY23E)
- Operating Margin: Increased from 13.1% (FY20A) to 21.1% (FY23E)
- Net Margin: Increased from 9.9% (FY20A) to 16.2% (FY23E)
- ROE: Increased from 11.8% (FY20A) to 22.6% (FY23E)
- Current Ratio: 2.7x (FY20A) to 2.6x (FY23E)
- Quick Ratio: 2.1x (FY20A) to 2.1x (FY23E)
- Inventory Turnover Days: 181 days (FY20A) to 173 days (FY23E)
Valuation Comparison
| Company |
12m TP (LC) |
Price (LC) |
Upside/Downside |
P/E (FY1E) |
P/E (FY2E) |
P/B (FY1E) |
P/B (FY2E) |
ROE (FY1E) |
3yrs PEG (FY1E) |
Yield (FY1E) |
| Bosideng |
6.69 |
5.37 |
+25% |
23.1 |
19.2 |
4.1 |
3.8 |
17.5 |
0.9 |
3.4 |
| China Lilang |
6.27 |
4.30 |
+46% |
6.1 |
5.2 |
1.1 |
1.0 |
15.6 |
0.3 |
11.1 |
| Jnby Design |
22.84 |
13.82 |
+65% |
8.6 |
7.3 |
3.2 |
2.9 |
40.4 |
0.7 |
8.3 |
Analyst Ratings
- CMBIS Rating: BUY
- Target Price (TP): HK$6.69
- Reasoning: Based on the potential for growth and the strategic advantages of the partnership with Bogner.
Conclusion
The partnership with Bogner is a strategic move for Bosideng, aiming to enhance its market position in the luxury and sport fashion segments. With the timing of the 2022 Winter Olympics and the potential for significant sales and profit growth, the partnership is expected to contribute to the long-term growth of Bosideng. The financial metrics indicate a positive trend in profitability and operational efficiency, supported by a strong management team and favorable valuation ratios.
