Essay on External Environment

7693 Words Sep 25th, 2013 31 Pages
HONG KONG/CHINA

Bosideng International
A warm and cosy stock
A dominant brand with household recognition
We initiate coverage on Bosideng with an Outperform, with 35% upside to our target price. Bosideng dominates China’s down jacket market with an estimated 37% market share in CY10. Its top brand is ranked the 13th most valuable consumer brand in China. We expect core revenue CAGR of 13% in FY12-14 on the back of continued penetration of down jackets in China. Additionally, Bosideng is building out a menswear business. While this makes up only 10% of revenues in FY12E, we expect it to generate organic revenue CAGR of 33% with the potential for further upside from acquisitions.

High free cash flow and dividend yield
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Seasonality is very high with 74% of revenues historically coming in the 2H but this should gradually improve as the Men’s line gets built out. Finally, the market assumes weather can have a major impact but over the past four years, GM has only fluctuated from 45% to 50%. We project 48% for FY12.

GICS sector Consumer Durables & Apparel Market cap HK$m 30-day avg turnover US$m Market cap US$m Number shares on issue m Investment fundamentals
Year end 31 Mar

16,088 3.9 2,070 7,772

2011A 2012E 2013E 2014E

m 7,038 8,119 9,018 10,108 Revenue m 1,386 1,595 1,771 1,986 EBIT % 6.0 15.1 11.1 12.1 EBIT growth m 1,276 1,339 1,370 1,533 Reported profit m 1,290 1,339 1,370 1,533 Adjusted profit Rmb 0.16 0.17 0.18 0.20 EPS rep % 8.3 4.9 2.3 11.9 EPS rep growth Rmb 0.17 0.17 0.18 0.20 EPS adj % 9.3 3.8 2.3 11.9 EPS adj growth x 10.3 9.8 9.6 8.6 PER rep x 10.2 9.8 9.6 8.6 PER adj Rmb 0.19 0.13 0.13 0.15 Total DPS % 11.4 7.6 7.8 8.7 Total div yield % 15.8 17.1 18.1 19.2 ROA % 18.9 19.0 18.6 19.8 ROE x 7.1 6.1 5.4 4.8 EV/EBITDA % -41.5 -38.1 -39.7 -41.1 Net debt/equity x 1.9 1.8 1.7 1.7 P/BV Source: FactSet, Macquarie Research, October 2011 (all figures in Rmb unless noted)

Heading into the high season
November through February is Bosideng’s high season. Our recent channel checks have indicated strong growth YTD, suggesting the brand is set for a good year (its

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