HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Bosideng International Holdings / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bosideng-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6537:1" rel="noopener">Bosideng International Holdings (3998 HK)</a> has another solid 1H, with net profit surging 23% and DPS rose 20%. At 11.3x PER for FY25F, the valuation is not stretched.</li>
<li>The gross margin for branded down apparel has hit the lowest 1H level since 1H FY22, however. Similarly, its OEM management gross margin has come down.</li>
<li>Operating cash outflow rose to Rmb3.5bn, compared with Rmb585m a year ago, and inventory days leaped 29 days. Revenue and profit for ladieswear have plunged.   </li>
</ul>



Bosideng International Holdings (3998 HK) has another solid 1H, with net profit surging 23% and DPS rose 20%. At 11.3x PER for FY25F, the valuation is not stretched.
The gross margin for branded down apparel has hit the lowest 1H level since 1H FY22, however. Similarly, its OEM management gross margin has come down.
Operating cash outflow rose to Rmb3.5bn, compared with Rmb585m a year ago, and inventory days leaped 29 days. Revenue and profit for ladieswear have plunged.   


Bosideng (3998 HK): Good Results, yet There Are Concerns

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>A results beat is good, but positive outlook with solid growth drivers (new products, new categories, ASP hike, solid plan of advertising and channel upgrades) is even better.</li><li>Together with the attractive 6% FY25E yield and a 13x FY25E P/E, we maintain BUY, based on a 15x FY25E P/E.</li><li>FY24 result was a strong beat. In FY24 (ending Mar), Bosideng’s sales has surged by 38% YoY to RMB 23.2bn, better than BBG/ CMBI est. by 6% while its net profit also rocketed by 44% YoY to RMB 3.1bn, beating BBG/ CMBI est. by 7%.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

A results beat is good, but positive outlook with solid growth drivers (new products, new categories, ASP hike, solid plan of advertising and channel upgrades) is even better.Together with the attractive 6% FY25E yield and a 13x FY25E P/E, we maintain BUY, based on a 15x FY25E P/E.FY24 result was a strong beat. In FY24 (ending Mar), Bosideng’s sales has surged by 38% YoY to RMB 23.2bn, better than BBG/ CMBI est. by 6% while its net profit also rocketed by 44% YoY to RMB 3.1bn, beating BBG/ CMBI est. by 7%.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Bosideng (3998 HK) - Beautifully executed the solid strategies

<ul>
<li>Amid the challenging market, <a href="https://www.smartkarma.com/entities/bosideng-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6537:1" rel="noopener">Bosideng International Holdings (3998 HK)</a>'s 15% growth in 1H FY23 profit is decent. Excluding impairments, operating profit would have grown by 31.3%.</li>
<li>It expects FY23 gross margin to expand and further store optimisation to enhance operating margin. The introduction of highly successful ultralight down jackets is an added driver.</li>
<li>With 32% increase in online branded apparel sales, the channel will be Bosideng's key growth impetus. For "double-11", sales have outperformed peers significantly, showcasing its product strengths.</li>
</ul>


Amid the challenging market, Bosideng International Holdings (3998 HK)'s 15% growth in 1H FY23 profit is decent. Excluding impairments, operating profit would have grown by 31.3%.
It expects FY23 gross margin to expand and further store optimisation to enhance operating margin. The introduction of highly successful ultralight down jackets is an added driver.
With 32% increase in online branded apparel sales, the channel will be Bosideng's key growth impetus. For "double-11", sales have outperformed peers significantly, showcasing its product strengths.


Bosideng (3998 HK): Decent Result Distorted by Impairment Losses

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>Hong Kong market quietly broke its downward trend channel last week, however the HSI met strong resistance at 18200 (100 Week Moving Average).</li>
<li>
<a href="https://www.smartkarma.com/entities/picc-property-casualty-h" target="_blank" data-smartkarma-citation="entities:350:1" rel="noopener">PICC Property &amp; Casualty H (2328 HK)</a> and <a href="https://www.smartkarma.com/entities/china-petroleum-chemical-h" target="_blank" data-smartkarma-citation="entities:369:1" rel="noopener">China Petroleum &amp; Chemical (386 HK)</a> broke to new highs relative to MSCI indices.  Sinopec may benefit from stronger RMB in 2H24.
</li>
<li><a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> had a short-term turnaround from its downtrend.  The company reported growth in sales and better margins in 2Q24.</li>
</ul>


Hong Kong market quietly broke its downward trend channel last week, however the HSI met strong resistance at 18200 (100 Week Moving Average).

PICC Property &amp; Casualty H (2328 HK) and China Petroleum &amp; Chemical (386 HK) broke to new highs relative to MSCI indices.  Sinopec may benefit from stronger RMB in 2H24.

Shenzhou Intl Group Holdings (2313 HK) had a short-term turnaround from its downtrend.  The company reported growth in sales and better margins in 2Q24.


Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 3)

President, Vision Research

Robert C Prather Jr

President

Vision Research

Vision Research was formed in 2004 with the vision of generating the best possible fundamental analysis and investment research for smid cap US equities. In 2008, we broadened our coverage to include mid/large cap US stocks.  After researching a  few ideas outside the US each year for a number of years, we launched a dedicated non-US equity product at the end of 2015.  This was followed by the introduction of a product focused on IPOs in mid-2017.

Fundamental Insight

Shenzhou Intl Group Holdings / Equity Bottom-Up

<ul>
<li>Key customers &amp; their retail partners battling excess inventory, waning consumer demand, and market share losses in certain geographies</li>
<li>Plans for capacity expansion amid demand uncertainties and alt data and macro picture may prove aggressive and along with risks of reshoring/nearshoring &amp; friend-shoring may prove margin dilutive</li>
<li>Consensus expectations for 2H23 and 2024 appear overly optimistic and valuation is not cheap given the growth profile</li>
</ul>


Key customers &amp; their retail partners battling excess inventory, waning consumer demand, and market share losses in certain geographies
Plans for capacity expansion amid demand uncertainties and alt data and macro picture may prove aggressive and along with risks of reshoring/nearshoring &amp; friend-shoring may prove margin dilutive
Consensus expectations for 2H23 and 2024 appear overly optimistic and valuation is not cheap given the growth profile


Shenzhou (2313 HK): Contract Mfr for Leading Sportswear Brands Facing Challenging Demand Outlook.

Hong Kong

Bosideng International Holdings Limited develops down apparel products in the Peoples Republic of China. The Company's products include down jackets, vests, and pants which it offers through retail outlets located in multiple cities.

Bosideng International Holdings (3998 HK)

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Bosideng International Holdings (3998 HK)

Bosideng (3998 HK): Good Results, yet There Are Concerns

Bosideng reports strong 1H FY25 results with net profit up 23% and DPS rising 20%, but faces challenges with declining margins and rising...

Osbert Tang, CFA

Bosideng (3998 HK) - Beautifully executed the solid strategies

A results beat is good, but positive outlook with solid growth drivers (new products, new categories, ASP hike, solid plan of advertising and...

CMB International

Bosideng (3998 HK): Decent Result Distorted by Impairment Losses

Bosideng actually has a decent 1H FY23 result and gross margin should expand for full-year FY23. Its efforts on store optimisation, new product...

Osbert Tang, CFA

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 3)

Hong Kong market broke its downtrend however it met strong resistance just above 18k. PICC and Sinopec broke to new highs relative to MSCI...

David Mudd

Shenzhou (2313 HK): Contract Mfr for Leading Sportswear Brands Facing Challenging Demand Outlook.

Consensus estimates do not account for customer, retailer, Asian market share shift, macro, alt data and geopolitical risks.

Robert C Prather Jr

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Bosideng (3998 HK): Good Results, yet There Are Concerns

​Bosideng reports strong 1H FY25 results with net profit up 23% and DPS rising 20%, but faces challenges with declining margins and rising...

Osbert Tang, CFA

Bosideng (3998 HK) - Beautifully executed the solid strategies

A results beat is good, but positive outlook with solid growth drivers (new products, new categories, ASP hike, solid plan of advertising and...

CMB International

Bosideng (3998 HK): Decent Result Distorted by Impairment Losses

Bosideng actually has a decent 1H FY23 result and gross margin should expand for full-year FY23. Its efforts on store optimisation, new product...

Osbert Tang, CFA

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 3)

Hong Kong market broke its downtrend however it met strong resistance just above 18k. PICC and Sinopec broke to new highs relative to MSCI...

David Mudd

Shenzhou (2313 HK): Contract Mfr for Leading Sportswear Brands Facing Challenging Demand Outlook.

Consensus estimates do not account for customer, retailer, Asian market share shift, macro, alt data and geopolitical risks.

Robert C Prather Jr

Bosideng reports strong 1H FY25 results with net profit up 23% and DPS rising 20%, but faces challenges with declining margins and rising...