20201130-招银国际-波司登-03998.HK-Stay_confident_on_2H21E_after_strong_beat_8页_1mb

Bosideng (3998 HK) Equity Research Summary

Core Content

Bosideng, listed on the Hong Kong Stock Exchange, has delivered strong performance in the first half of 2021 (1H21), significantly exceeding both CMBI and Bloomberg (BBG) estimates. The company's sales and net profit increased by 5% and 42% year-over-year, respectively, with a 7% and 24% beat against CMBI's previous estimates. The strong results were driven by several factors including a significant increase in gross profit (GP) margin by 4.8ppt, low channel inventories, strong reorders, operating leverage, and effective cost savings. The company also benefited from a low base effect in the second half of 2020, due to the absence of sales in February and March 2020.

Despite the management's relatively conservative guidance, the analyst remains confident in Bosideng's ability to deliver strong results in the second half of 2021 (2H21E), projecting sales and net profit growth of 26% and 39%, respectively. This confidence is supported by the robust performance of the distributor retail segment, which saw strong growth in the first half of 2021, and the improvement in GP margin due to better sell-through rates for old products and increasing average selling prices (ASP) for high-end items.

Key Financial Highlights

• Revenue (RMB mn):

  • FY19A: 10,383
  • FY20A: 12,191
  • FY21E: 14,433
  • FY22E: 16,389
  • FY23E: 18,251
  • YoY growth: 16.9% (FY19A), 17.4% (FY20A), 18.4% (FY21E), 13.6% (FY22E), 11.4% (FY23E)

• Net Profit (RMB mn):

  • FY19A: 981
  • FY20A: 1,203
  • FY21E: 1,681
  • FY22E: 1,881
  • FY23E: 2,181
  • YoY growth: 48.0% (FY19A), 12.8% (FY20A), 35.9% (FY21E), 11.9% (FY22E), 15.9% (FY23E)

• Diluted EPS (RMB):

  • FY19A: 0.092
  • FY20A: 0.111
  • FY21E: 0.150
  • FY22E: 0.168
  • FY23E: 0.195
  • YoY growth: 48.0%, 12.8%, 35.9%, 11.9%, 15.9%

• P/E Ratio (x):

  • FY19A: 31.8
  • FY20A: 28.2
  • FY21E: 20.7
  • FY22E: 18.5
  • FY23E: 16.0

• P/B Ratio (x):

  • FY19A: 3.1
  • FY20A: 3.2
  • FY21E: 3.1
  • FY22E: 2.9
  • FY23E: 2.7

• Yield (%):

  • FY19A: 2.4
  • FY20A: 2.7
  • FY21E: 3.4
  • FY22E: 3.8
  • FY23E: 4.4

• ROE (%):

  • FY19A: 10.1
  • FY20A: 12.0
  • FY21E: 15.9
  • FY22E: 16.7
  • FY23E: 18.1

• Net gearing (%): Net cash for all periods

Analyst Recommendations

• Rating: BUY (Maintain)
• Target Price (HK$): 4.23 (up from previous target of 4.04)
• Up/Downside: +24.2% from current price of 3.41

Valuation Comparison

• Bosideng (3998 HK): 19x FY22E P/E, 1.0x 3-year PEG
• Canada Goose (GOOS US): 29x P/E, 19% NP CAGR
• Moncler Spa (MONC IM): 34x P/E, 15% NP CAGR

Key Assumptions

• Sales by segment (RMB mn):

  • Down apparels: 7,658 (FY19A), 9,513 (FY20A), 12,014 (FY21E), 13,837 (FY22E), 15,568 (FY23E)
  • OEM management: 1,368 (FY19A), 1,611 (FY20A), 1,466 (FY21E), 1,540 (FY22E), 1,617 (FY23E)
  • Ladieswear: 1,194 (FY19A), 983 (FY20A), 885 (FY21E), 942 (FY22E), 992 (FY23E)
  • Diversified apparels: 164 (FY19A), 84 (FY20A), 67 (FY21E), 70 (FY22E), 74 (FY23E)

• Sales by channel growth (%):

  • Down apparels - offline: 30.5% (FY19A), 23.1% (FY20A), 20.5% (FY21E), 9.6% (FY22E), 7.0% (FY23E)
  • Down apparels - online: 55.6% (FY19A), 28.0% (FY20A), 45.0% (FY21E), 30.0% (FY22E), 25.0% (FY23E)
  • OEM management: 46.1% (FY19A), 17.8% (FY20A), -9.0% (FY21E), 5.0% (FY22E), 5.0% (FY23E)

• GP margins by segment:

  • Down apparels: 57.4% (FY19A), 59.8% (FY20A), 61.6% (FY21E), 61.1% (FY22E), 61.5% (FY23E)
  • OEM management: 16.3% (FY19A), 18.5% (FY20A), 17.5% (FY21E), 16.0% (FY22E), 17.0% (FY23E)
  • Ladieswear: 74.0% (FY19A), 74.4% (FY20A), 68.0% (FY21E), 67.0% (FY22E), 63.0% (FY23E)
  • Diversified apparels: 6.9% (FY19A), -16.4% (FY20A), 1.0% (FY21E), 1.0% (FY22E), 1.0% (FY23E)

• Operating Profit (OP) margins:

  • FY19A: 13.2%
  • FY20A: 13.1%
  • FY21E: 16.0%
  • FY22E: 16.1%
  • FY23E: 16.7%

• Net Profit Margin (NP margins):

  • FY19A: 9.5%
  • FY20A: 9.9%
  • FY21E: 11.6%
  • FY22E: 11.5%
  • FY23E: 12.0%

Share Performance

• Market Cap (HK$ mn): 36,723

• Average 3-month turnover (HK$ mn): 140.99

• 52-week High/Low (HK$): 4.00/1.54

• Total Issued Shares (mn): 10,769.3

• Shareholding Structure:

  • Mr. Gao Dekang & Family: 70.49%
  • Employee incentive scheme: 6.81%
  • Free Float: 22.70%

• Share Performance (12-month):

  • Absolute: -3.7%
  • Relative: -3.7%

• 1-month: -3.7%

• 3-month: 44.5%

• 6-month: 75.8%

• 12-month: -3.7%

Related Reports

1. Bosideng (3998 HK, BUY) - Improving fundamentals going into 2H21E - 28 Oct 2020
2. Bosideng (3998 HK, BUY) - Mid-priced, efficiency, online are the focuses - 26 Jun 2020
3. Bosideng (3998 HK, BUY) - Solid 1H20 results, improving 2H20E outlook - 2 Dec 2019

Conclusion

Bosideng's strong performance in 1H21 and the potential for continued growth in 2H21E, despite the conservative guidance, have led to a reiteration of the BUY rating and an increased target price. The company's improved GP margins, effective cost management, and strong demand for high-end products are key drivers of its positive outlook. The current valuation at 19x FY22E P/E is considered highly attractive compared to peers, making Bosideng a compelling investment opportunity.