Bosideng (3998 HK) Company Update Summary
Core Content
Bosideng is a leading player in the China apparel sector, with a strong focus on down apparel and OEM management. The company is currently under analysis by CMB International Global Markets (CMBIGM) for its FY3/23E outlook, which includes volume growth, margin improvements, and potential cannibalization issues.
Main Concerns and Views
1. Volume Growth in FY3/23E
- Challenges: Bosideng's previous growth was driven more by average selling price (ASP) than volume. The five-year sales CAGR was 19%, while ASP and volume CAGR were 13% and 6%, respectively.
- Volume Growth Target: The company aims for a 10%+ volume growth in FY3/23E.
- Supporting Factors:
- Product Innovation: Upgrading and renewing designs for existing hot-selling series (GT/Extreme Cold collections).
- New Categories: Launching light down apparel, which is less sensitive to weather and regional differences and is expected to drive 10-15% of sales in FY23E.
- Store Productivity: Revamped stores from the past few years are not yet fully mature, which could lead to faster same-store volume growth.
- Store Expansion: Resuming store expansion, targeting around 300-100 new stores for distributor self-operation.
2. Margin Improvements in FY3/23E
- Headwinds: Rising raw material costs, less ASP increases, limited room for retail discounts, and slightly more favorable rebates and wholesale discounts.
- Potential Improvements:
- MSD Increases: Bosideng is targeting higher ASP through MSD (Minimum Selling Discount) increases.
- Bargaining Power: Improved bargaining power over raw material suppliers and marketing agencies.
- COGS and A&P Leverage: Expected leverage in cost of goods sold (COGS) and advertising & promotion (A&P) expenses, leading to operating margin expansion.
3. Cannibalization Risk
- Concern: Potential cannibalization between light and traditional heavy down apparel.
- Mitigation Strategies:
- Product Launch Timing: Light down apparel will be launched in Sep to Oct, while heavy down apparel in Nov to Jan.
- Regional Differences: Light down apparel targets southern China, where winters are shorter.
- ASP and GP Margin: Light down apparel has a lower ASP (RMB 900-1500) but similar gross profit (GP) margins to the company's average.
Key Financials and Valuation
Earnings Summary (YE 31 Mar)
| Metric |
FY21A |
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) |
25.9 |
21.1 |
17.1 |
14.2 |
12.1 |
| P/B (x) |
3.8 |
3.5 |
3.3 |
3.0 |
2.7 |
| Yield (%) |
2.9 |
4.0 |
4.1 |
4.9 |
5.8 |
| ROE (%) |
15.4 |
17.4 |
20.0 |
21.9 |
23.3 |
Financial Highlights
- Net Profit Growth: From RMB 1,710 million in FY21A to RMB 3,606 million in FY25E.
- EPS Growth: From RMB 0.151 to RMB 0.319.
- P/E Ratio: Decreasing from 25.9 to 12.1, indicating potential undervaluation.
- ROE: Increasing from 15.4% to 23.3%, showing improved profitability.
Valuation Table (Peers' Comparison)
| 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 Intl |
3998 HK |
BUY |
5.89 |
4.64 |
+27.0% |
50,514 |
Mar-22 |
17.1 |
3.3 |
17.7 |
0.8 |
4.2 |
| China Lilang |
1234 HK |
BUY |
4.94 |
3.77 |
+31.0% |
4,515 |
Dec-21 |
6.1 |
1.0 |
12.8 |
0.3 |
11.7 |
| Jnby Design |
3306 HK |
BUY |
14.51 |
7.35 |
+97.0% |
3,813 |
Jun-21 |
5.5 |
1.8 |
37.1 |
0.8 |
13.1 |
| Cosmo Lady |
2298 HK |
NR |
n/a |
0.22 |
n/a |
484 |
Dec-21 |
9.2 |
0.2 |
12.8 |
0.3 |
0.0 |
| Mulsanne Group |
709 HK |
NR |
n/a |
1.85 |
n/a |
2,923 |
Dec-21 |
15.4 |
n/a |
7.8 |
0.9 |
n/a |
| Giordano |
1817 HK |
NR |
n/a |
4.12 |
n/a |
3,914 |
Dec-21 |
n/a |
n/a |
11.6 |
0.0 |
n/a |
| Koradior |
3709 HK |
NR |
n/a |
11.10 |
n/a |
7,815 |
Dec-21 |
9.1 |
1.5 |
15.3 |
0.7 |
4.9 |
| Canada Goose |
GOOS US |
NR |
n/a |
22.18 |
n/a |
18,375 |
Apr-22 |
17.5 |
4.8 |
18.9 |
0.0 |
n/a |
| Moncler Spa |
MONC IM |
NR |
n/a |
49.76 |
n/a |
110,372 |
Dec-21 |
25.1 |
4.7 |
23.6 |
1.9 |
n/a |
| Hugo Boss |
BOSS GR |
NR |
n/a |
57.76 |
n/a |
32,956 |
Dec-21 |
20.4 |
3.8 |
21.1 |
1.0 |
n/a |
| Ted Baker |
TED LN |
NR |
n/a |
86.60 |
n/a |
1,532 |
Jan-22 |
n/a |
n/a |
26.1 |
0.0 |
n/a |
| Next |
NXT LN |
NR |
n/a |
6420.0 |
n/a |
79,534 |
Jan-22 |
11.7 |
7.0 |
81.1 |
8.0 |
n/a |
| Hennes & Mauritz |
HMB SS |
NR |
n/a |
133.00 |
n/a |
171,891 |
Nov-21 |
19.0 |
3.7 |
23.6 |
3.3 |
n/a |
| Industria De Diseno |
ITX SM |
NR |
n/a |
25.37 |
n/a |
640,825 |
Jan-22 |
20.3 |
4.8 |
24.7 |
4.3 |
n/a |
| Ovs Spa |
OVS IM |
NR |
n/a |
1.64 |
n/a |
3,862 |
Jan-22 |
7.5 |
0.5 |
5.8 |
0.5 |
n/a |
| Pvh Corp |
PVH US |
NR |
n/a |
67.80 |
n/a |
35,608 |
Jan-22 |
7.8 |
0.8 |
19.5 |
17.8 |
n/a |
| Marks & Spencer |
MKS LN |
NR |
n/a |
136.25 |
n/a |
25,646 |
Apr-22 |
8.5 |
0.9 |
11.8 |
19.9 |
n/a |
Key Financial Ratios
| Ratio |
FY21A |
FY22A |
FY23E |
FY24E |
FY25E |
| Gross margin (%) |
58.6 |
60.1 |
60.3 |
60.6 |
61.4 |
| Operating margin (%) |
16.5 |
15.8 |
18.5 |
19.4 |
20.5 |
| Pre-tax margin (%) |
16.6 |
16.5 |
18.0 |
19.4 |
21.0 |
| Net margin (%) |
12.6 |
12.7 |
13.5 |
14.5 |
15.5 |
| ROE (%) |
15.4 |
17.4 |
20.0 |
21.9 |
23.3 |
| ROA (%) |
9.0 |
10.1 |
11.5 |
12.8 |
13.9 |
| Diluted EPS (RMB) |
0.151 |
0.183 |
0.225 |
0.272 |
0.319 |
| DPS (RMB) |
0.11 |
0.15 |
0.16 |
0.19 |
0.22 |
| BVPS (RMB) |
1.03 |
1.10 |
1.18 |
1.30 |
1.44 |
Analyst Ratings and Recommendations
- CMBIGM Rating: BUY
- Target Price: HK$5.89
- Current Price: HK$4.64
- Upside: +27.0%
Stock Performance
| Period |
Absolute (%) |
Relative (%) |
| 1-mth |
-11.2 |
-1.6 |
| 3-mth |
19.5 |
19.7 |
| 6-mth |
16.5 |
48.0 |
| 12-mth |
-21.6 |
6.3 |
Shareholding Structure
| Holder |
Percentage (%) |
| Mr. Gao Dekang & Family |
70.49 |
| Employee incentive scheme |
6.81 |
| Free Float |
22.70 |
Market Cap and Stock Data
| Metric |
Value (HK$) |
| Mkt Cap |
50,514 |
| Avg 3 mths t/o |
102.68 |
| 52w High/Low |
6.93/3.11 |
| Total Issued Shares (mn) |
10,886.6 |
Analyst Certification and Disclosures
- The research analyst certifies that the views expressed in the report accurately reflect personal opinions and that there is no direct or indirect compensation linked to the views.
- The analyst confirms no trading or dealing in the stock covered in the report within 30 days prior to the report's release and will not do so within 3 business days after the release.
- The analyst does not serve as an officer of any of the Hong Kong listed companies covered in the report and has no financial interests in them.
CMBIGM Ratings Definitions
- BUY: Stock with potential return of over 15% over next 12 months.
- HOLD: Stock with potential return of +15% to -10% over next 12 months.
- SELL: Stock with potential loss of over 10% over next 12 months.
- NOT RATED: Stock not rated by CMBIGM.
CMB International Global Markets Limited
- Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong.
- Tel: (852) 3900 0888
- Fax: (852) 3900 0800
- Parent Company: CMB International Capital Corporation Limited (a wholly owned subsidiary of China Merchants Bank)
Important Disclosures
- There are risks involved in transacting in any securities, and the report does not constitute investment advice.
