20220215-招银国际-波司登-03998.HK-The_negatives_should_have_been_priced_in_7页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Content

This report provides an equity research update on Bosideng (3998 HK), highlighting the company's performance and valuation in the context of the broader China apparel sector. The analysis suggests that the negative factors affecting the stock price, such as warm weather and the impact of the pandemic, have likely been factored into the current valuation. Despite this, the report maintains a BUY rating but adjusts the target price to HK$5.31 due to revised expectations of slower sales growth and lower gross profit margins.

Main Points

• Recent Performance: Bosideng's share price has retreated by 26% since December, but the report believes the negative factors have been largely priced in.
• Sales Trends: The company experienced a slower sales growth in the second half of 2022 compared to the first half, attributed to warmer weather and economic slowdown.
• ASP and Discounts: Average selling prices (ASP) growth was less than expected, and retail discounts widened, affecting gross profit margins.
• Revised Forecasts: The report revised down Bosideng's sales growth and net profit for FY22E, FY23E, and FY24E, with a corresponding decrease in diluted EPS.
• Valuation: Bosideng is currently valued at 15x FY23E P/E, which is considered undemanding compared to the 5-year average of 17x and other peers like Canada Goose (21x), MONC (30x), and Li Ning (36x).

Key Information

• Earnings Summary:

  • Revenue for FY20A to FY24E is projected to grow steadily, with a CAGR of 21% in net profit from FY21 to FY24.
  • The report revised down its estimates, with a 10.4% decrease in diluted EPS for FY22E and 8.8% for FY23E.

• Valuation Comparison:

  • P/E (FY23E): 15.2x
  • P/B (FY23E): 2.8x
  • Yield (FY23E): 4.6%
  • ROE (FY23E): 20.1%

• Target Price:

  • Maintained BUY rating.
  • Target Price: HK$5.31 (from previous HK$6.69).
  • Up/Downside: +31.4% from current price of HK$4.04.

Company Overview

• Shareholding Structure:

  • Mr. Gao Dekang & Family: 70.49%
  • Employee Incentive Scheme: 6.81%
  • Free Float: 22.70%

• Share Performance:

  • 1-month: -8.5%
  • 3-months: -33.0%
  • 6-months: -33.7%
  • 12-months: +6.0% (absolute), +28.4% (relative)

• Market Cap: HK$43,972 million

Peer Valuation

Financial Highlights

• Revenue: Expected to grow from RMB 12,191 million (FY20A) to RMB 19,291 million (FY24E).
• Net Profit: Projected to increase from RMB 1,203 million (FY20A) to RMB 3,010 million (FY24E).
• Diluted EPS: Revised to RMB 0.180 (FY22E), RMB 0.220 (FY23E), RMB 0.267 (FY24E).
• Gross Margin: Expected to increase from 55.0% (FY20A) to 61.8% (FY24E).
• Operating Margin: Projected to rise from 13.1% (FY20A) to 20.4% (FY24E).
• Net Profit Margin: Expected to grow from 9.9% (FY20A) to 15.6% (FY24E).

Key Ratios

Conclusion

Despite a recent decline in share price, the report believes the negatives have been largely priced in, and Bosideng's fundamentals remain strong. The company is expected to benefit from improved weather and promotional activities starting from February 2022. The revised target price reflects a more conservative outlook on sales and margins, but the BUY rating is maintained due to the company's solid growth potential and undemanding valuation.