20211115-招银国际-波司登-03998.HK-Outstanding_double_11_and_e-commerce_sales_11页_2mb

Bosideng (3998 HK) Company Update Summary

Core Content and Key Insights

Bosideng, a leading Chinese down apparel brand, has demonstrated strong performance in both fiscal year-to-date (FY22E) and during the double 11 shopping festival, with notable growth in e-commerce and overall sales. The company's financial outlook and valuation are highlighted as attractive compared to peers, and the stock recommendation remains "BUY" with an updated target price.

Main Points

• Strong Double 11 Performance: Bosideng's branded down apparel saw a significant increase in online and all-channel retail sales, growing by 50%+ and 45%+ YoY respectively, outperforming the industry and most peers. It ranked No.2 in the apparel industry and No.1 among Chinese brands on Tmall during the double 11.
• Fiscal-YTD E-commerce Growth: The company reported e-commerce sales growth of 50%+ and 40%+ during April 2021 to November 2021, surpassing the CMBI estimate of 30% for FY22E. This growth is attributed to cold weather, effective marketing strategies, new product launches, and live-streaming platform sales.
• Improved Gross Profit Margin: Bosideng's fiscal-YTD gross profit margin is expected to exceed expectations, driven by healthy inventory levels, better control over retail discounts, and a higher average selling price (ASP) from new trench down jackets.
• Positive Outlook for 4Q21E and 1Q22E: The company's performance is expected to continue positively in the next quarters due to ongoing strategies and market conditions.
• Revised Earnings Forecasts: CMBI has revised its diluted EPS forecasts for FY22E, FY23E, and FY24E by 9%, 12%, and 15% respectively, factoring in faster online sales, higher gross profit margins, and operating leverage.
• Valuation: Bosideng is currently trading at 19x FY23E P/E, which is lower than peers like GOOS (34x), MONC (38x), and Li Ning (43x), making it an attractive investment option.

Key Financial Highlights

Target Price and Performance

• Target Price: HK$6.79 (raised from HK$6.13)
• Current Price: HK$5.78
• Up/Downside: +17.5% from current price

Shareholding and Stock Performance

• Shareholding Structure:

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

• Stock Performance (12-month):

  • Absolute: 88.3%
  • Relative: 94.4%

Strategic Highlights

• Marketing and Branding: Bosideng has implemented more in-depth consumer research and precision marketing, along with appointing new brand ambassador Xiao Shan.
• Product Launches: The launch of the new trench down jacket series with a higher ASP (up to RMB 6,000) has contributed to improved sales and margins.
• Live Streaming: Additional sales from live streaming platforms have played a crucial role in boosting online sales.

Peer Comparison and Valuation

• Peer Valuation Comparison:
  • P/E Ratio: Bosideng at 19x vs. GOOS at 34x, MONC at 38x, Li Ning at 43x
  • P/B Ratio: Bosideng at 3.9x vs. peers with higher ratios
  • ROE: Bosideng at 23.9% vs. peers with lower ROE
  • Yield: Bosideng at 4.3% vs. peers with lower yields

Key Assumptions and Earnings Forecast

• Sales Growth by Segment:

  • Down Apparels: 20.1% (FY22E), 15.5% (FY23E)
  • OEM Management: 7.5% (FY22E), 5.0% (FY23E)
  • Ladieswear: 6.4% (FY22E), 5.4% (FY23E)
  • Diversified Apparels: 5.0% (FY22E), 5.0% (FY23E)

• Sales by Channel:

  • Down Apparels - Online: 45% (FY22E), 30% (FY23E)
  • Down Apparels - Offline: 8.3% (FY22E), 6.4% (FY23E)

• Margin Improvements:

  • Gross Margin: 60.0% (FY22E), 60.6% (FY23E)
  • EBIT Margin: 19.5% (FY22E), 20.7% (FY23E)
  • Net Profit Margin: 14.4% (FY22E), 15.3% (FY23E)

• Operating Expenses:

  • Sales & Distribution: 2.8% (FY22E), 2.6% (FY23E)
  • Administration: 7.5% (FY22E), 6.5% (FY23E)
  • Other Operating Expenses: 5.0% (FY22E), 4.4% (FY23E)

Conclusion

Bosideng's strong performance in e-commerce and overall sales, combined with improved gross profit margins and strategic initiatives, supports a "BUY" rating with a raised target price. The company's valuation remains attractive relative to its peers, and its fundamentals are expected to continue improving in the coming quarters.