16 Apr 2020
CMB International Securities | Equity Research | Company Update
Anta Sports (2020 HK) BUY (Maintain) Strong beat in 1Q and likely turnaround in 2Q Target Price HK$77.39 (Previous TP HK$62.26) Maintain BUY and raised TP to HK$ 77.39, based on 33x FY20E P/E (raised from Up/Downside +25.6% 26x as we are expecting a bottom out in 2Q20E). Slight/ strong beat from Anta/ Current Price HK$61.60
FILA in 1Q20 and healthy recovery so far in Apr 2020 are signs of turnaround in 2Q20E, and hence we believe its current valuation of 26x FY20E P/E is still China Sportswear Sector attractive, vs Li Ning/ Nike/ Adidas’s 35x/ 36x/ 28x. Walter Woo Slight beat for Anta in 1Q20, less than expected buybacks. Anta retail (852) 3761 8776 sales fell by 20-25% YoY in 1Q20, better than the Company’s guidance of [email protected] 20-30% YoY decline. We attribute the beat to its robust e-commerce growth
(+ve MSD), especially the boost from Anta.com and Wechat mini program Stock Data (~20% online sales in 1Q20). Also its retail discounts was better than Mkt Cap (HK$ mn) 166,440 expected, which is only slightly more than 30% off and ~4ppt higher than Avg 3 mths t/o (HK$ mn) 728.75 normal. Inventory to sales ratio was 5.5x, slightly above its normal level of 52w High/Low (HK$) 79.9/42.0 4-5x. In fact, amount of buybacks YTD was only RMB 300-500mn (CMBIS Total Issued Shares (mn) 2,702.0 est. 2-3% of 1H20E’s inventory), far better than planned level of 10-15%. Source: Bloomberg
Strong beat for FILA in 1Q20, temporary inventory surge should not be Shareholding Structure a worry. FILA retail sales fell by only MSD YoY in 1Q20, better than the Mr. Ding Shizhong (CEO), Mr. 61.06% Company’s guidance of 10-20% YoY decline (implying a strong rebound in Ding Shijia (V-Chairman), Mr. Lai Shixian (CFO) & Family Mar 2020). We believe the beat was also due to the ramp up of e-commerce Free Float 38.94% growth (+ve 160%), partly due to low base. This speedy recovery, in our view, Source: HKEx was driven by mid-high end buyers whose purchasing power is not much affected by COVID-19 outbreak. Retail discounts was ~28% off, ~2-3ppt Share Performance higher than normal. Inventory to sales ratio was high at 8x, comparing to Absolute Relative 1-mth 3.7% 3.2% normal level of 5-6x, but we are not worried because this effectively indicated 3-mth -20.7% -5.5% the rapid growth planned by the Company. Note that the management is highly 6-mth -15.0% -6.7% confident on its 30% growth target in FY20E, aided by strong e-commerce. 12-mth 12.4% 38.8% Source: Bloomberg Not much pressure for Amer so far. Amer sports was dragged by the virus outbreak in 1H20E but impact should be limited, as the management pointed 12-mth Price Performance (HK$) out that cash flow should not be distorted much, as long as: 1) virus situation Stock HSI can be stabilized by Jun 2020 and 2) overall sales is not dropping by more 90.0 than 20% in FY20E. However, a recurring loss would still be likely in FY20E. 80.0 70.0 Maintain BUY and lifted TP to HK$ 77.39. We cut our FY20E/ 21E/ 22E 60.0 diluted EPS estimates by 2.1%/ 3.3%/ 3.1%, to factor in 1) slightly slower 50.0 Anta’s offline sales, 2) slightly higher losses from Amer but 3) slightly faster 40.0 FILA growth and 4) lower finance costs. We maintain BUY and lifted TP to 30.0 4/2019 6/2019 8/2019 10/2019 12/2019 2/2020 HK$ 77.39, based on 33x FY20E P/E (up from 26x as we are expecting a turnaround in 2Q20E). The valuation is undemanding at 26x FY20E P/E. Source: Bloomberg
Earnings Summary Auditor: KPMG (YE 31 Dec) FY18A FY19A FY20E FY21E FY22E Related Reports Revenue (RMB mn) 24,100 33,928 38,586 46,504 52,698 1. Anta Sports (2020 HK, BUY) - More YoY growth (%) 44.4 40.8 13.7 20.5 13.3 resilient than the industry and NP att. (RMB mn) 4,103 5,344 5,754 8,246 9,845 recovering – 25 Mar 2020 2. Anta Sports (2020 HK, BUY) - EPS (RMB) 1.53 1.92 2.06 2.96 3.53 Impressive 4Q sales and CB was well YoY growth (%) 32.8 25.7 7.7 43.3 19.4 accepted - 15 Jan 2020 Consensus EPS (RMB) n/a n/a 2.15 2.95 3.58 3. Anta Sports (2020 HK, BUY) - Solid FILA growth and operating leverage - P/E (x) 35.5 28.3 26.3 18.3 15.4 16 Oct 2019 P/B (x) 9.2 7.3 6.1 5.2 4.6 Yield (%) 1.3 1.1 1.5 3.8 4.6 ROE (%) 27.8 29.8 26.2 31.5 32.6 Net gearing (%) Net cash Net cash Net cash Net cash Net cash Source: Company data, Bloomberg, CMBIS estimates
PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 1 ACCESS KEY TO OUR REPORTS ON BLOOMBERG: CMBR 16 Apr 2020
Earnings revision
Figure 1: Earnings revision New Old Diff (%) RMB mn FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E Revenue 38,586 46,504 52,698 39,305 47,259 53,462 -1.8% -1.6% -1.4% Gross profit 20,737 25,970 29,812 20,954 26,415 30,267 -1.0% -1.7% -1.5% EBIT 8,825 11,828 13,790 9,062 12,293 14,286 -2.6% -3.8% -3.5% Net profit att. 5,754 8,246 9,845 5,876 8,529 10,155 -2.1% -3.3% -3.1% Diluted EPS (RMB) 2.064 2.958 3.531 2.107 3.059 3.642 -2.1% -3.3% -3.1% Gross margin 53.7% 55.8% 56.6% 53.3% 55.9% 56.6% 0.4ppt -0.1ppt 0ppt EBIT margin 22.9% 25.4% 26.2% 23.1% 26.0% 26.7% -0.2ppt -0.6ppt -0.6ppt Net profit att. margin 14.9% 17.7% 18.7% 14.9% 18.0% 19.0% 0ppt -0.3ppt -0.3ppt Source: Company data, CMBIS estimates
Figure 2: CMBIS estimates vs consensus CMBIS Consensus Diff (%) RMB mn FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E Revenue 38,586 46,504 52,698 36,722 46,266 55,525 5.1% 0.5% -5.1% Gross profit 20,737 25,970 29,812 19,590 25,724 31,192 5.9% 1.0% -4.4% EBIT 8,825 11,828 13,790 8,311 11,543 13,708 6.2% 2.5% 0.6% Net profit att. 5,754 8,246 9,845 5,849 8,096 9,900 -1.6% 1.9% -0.6% Diluted EPS (RMB) 2.064 2.958 3.531 2.152 2.946 3.583 -4.1% 0.4% -1.4% Gross margin 53.7% 55.8% 56.6% 53.3% 55.6% 56.2% 0.4ppt 0.2ppt 0.4ppt EBIT margin 22.9% 25.4% 26.2% 22.6% 24.9% 24.7% 0.2ppt 0.5ppt 1.5ppt Net profit att. margin 14.9% 17.7% 18.7% 15.9% 17.5% 17.8% -1ppt 0.2ppt 0.9ppt Source: Bloomberg, CMBIS estimates
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Focus Charts
Figure 3: Retail sales growth – foreign bands Figure 4: Retail sales growth – domestic bands
90% (yoy growth) Nike 35% (yoy growth) Li Ning, +ve 30- 70% China, 23.0% 35% 20% 50% Adidas Xtep, 30% China, over 20% 15.0% 10% 5% FILA, -10% -5.0% -10% -30% Pou Sheng, Anta,
-25.1% -ve 20-
1Q16 2Q17 1Q19 3Q16 4Q16 1Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 2Q19 3Q19 4Q19 1Q20 2Q16 -25% Xtep's retail sales 25% FILA's retail sales Nike China sales Li Ning group's retail sales Adidas China sales Pou Sheng sales Anta brand's retail sales Source: Company data, CMBIS estimates Source: Company data, CMBIS estimates
Figure 5: Sportswear brands sales growth trend Retail sales growth (Management comments at annual result) Period 4Q19 Jan20E Feb20E Mar20E 1Q20E 2Q20E 1H20E 2H20E FY20E 45%/ 25% drop 90% of budget Li Ning 30-40% Very strong (early/ late Mar) (May) Double digit Mid single Anta 15-20% 20-30% drop 0-10% drop Mid teen drop up digit drop FILA 50-55% 10-20% drop 10-20% up Flat 30% plus 20% plus
Xtep 20% plus 20% plus 80% drop 40% drop 25-30% drop 70% of budget 60%-65% of Pou Sheng 19.0% 25.0% 82% drop 80% of budget (late Mar) budget Retail sales growth (Actual or CMBIS estimates) Period 4Q19 Jan20E Feb20E Mar20E 1Q20E 2Q20E 1H20E 2H20E FY20E Li Ning 35% 28% -70% -25% -17% -5% -11% 26% 7%
Anta 18% 18% -70% -30% -23% -8% -15% 13% -1%
FILA 53% 40% -70% -5% -5% 25% 10% 40% 25%
Xtep 23% 23% -80% -40% -27% -10% -19% 13% -3%
Pou Sheng 19% 25% -82% -35% -25% -8% -16% 15% -1%
Source: Company data, CMBIS estimates
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Figure 6: Sportswear brands sales growth trend Operating numbers 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20E Nike China sales 21.0% 17.0% 15.0% 16.0% 12.0% 15.0% 19.0% 25.0% 20.0% 31.0% 24.0% 22.0% 27.0% 23.0% -20.0% Adidas China sales 25.0% 25.0% 30.3% 27.7% 28.0% 32.0% 26.0% 27.0% 26.0% 23.0% 16.0% 14.0% 11.0% 15.0% -30.0% Anta brand's SSSG +ve Low- +ve 20%- +ve Mid- +ve 20%- +ve 20%- +ve Low- +ve Mid- +ve Mid- +ve Low- +ve Mid- +ve Mid- +ve High- -ve 20%- Anta brand's retail sales +ve LDD +ve HDD teens 30% teens 25% 25% teens teens teens teens teens teens teens 25% +ve Mid- +ve Mid- +ve Mid- +ve Low- +ve Low- +ve Low- -ve 20%- Core brand +ve MSD +ve HSD +ve LSD +ve MSD +ve HSD +ve HSD +ve HSD +ve HSD teens teens teens teens teens teens 25% -ve 20%- Kids over 30% over 30% over 30% 25%-30% over 30% over 40% over 40% over 25% Over 25% Over 25% Over 20% 30% Over 25% 25% 25% +ve Mid- Online over 50% over 100% over 50% over 50% over 50% over 40% over 40% over 25% Over 20% Over 25% 25% 35% Over 40% +ve MSD teens +ve 40%- +ve 50%- +ve 40%- +ve 85%- +ve 80%- +ve 90%- +ve 90%- +ve 80%- +ve 65%- +ve 55%- Non-Anta brands (FILA/ Desecente/over 50% overKolon/ 50% Sprandi/ King Kow) 50% 60% 50% 90% 85% 95% 95% 85% 70% 60% FILA brand's retail sales 50%-55% 50%-55% -ve MSD -ve 20%- Core brand 25% Kids -ve LSD
FILA Fusion +ve MSD
Online 160%
Other brands 30%-35% 25%-30% -ve HSD Mid- +ve Low- +ve Low- +ve Low- +ve Mid- +ve Mid- +ve Mid- +ve High- +ve Low- Li Ning group's SSSG +ve HSD Flat +ve HSD -ve LSD +ve HSD teens teens teens teens teens teens teens teens twenties +ve Low- +ve Low- +ve Low- +ve Low- +ve High- Direct retail +ve LSD +ve HSD -ve MSD Flat -ve MSD +ve HSD +ve HSD +ve MSD +ve HSD teens teens teens teens teens +ve Low- +ve Low- +ve Low- +ve Mid- Wholesales +ve LSD +ve LSD -ve MSD +ve LSD -ve MSD +ve HSD +ve MSD +ve LSD +ve HSD +ve MSD teens teens teens teens +ve High- +ve High +ve Mid- +ve High +ve Mid- +ve High +ve Mid +ve Mid +ve Low E- Commerce Mid-80% Mid-90% Mid-60% Mid-90% Low 30% teens 30% 30% 30% 50% 30% 30% 50% 40% +ve Mid- +ve Low- +ve Mid- +ve High- +ve Low +ve Low +ve Low +ve Mid Li Ning group's retail sales -17.0% teens teens teens teens 20%-25% 20%-25% 30%-35% 30%-40% Low 20%- +ve Mid- +ve Mid- +ve Low- +ve Mid- +ve High- Direct retail +ve HSD +ve HSD 30% teens teens teens teens teens +ve Low- +ve Low- +ve Low +ve Mid- +ve Mid- +ve Low- Wholesales +ve MSD +ve MSD teens teens 20%-25% 20% 30% 40% +ve High +ve High +ve Low +ve Mid- +ve Low +ve High +ve Low +ve Low E- Commerce 30% 30% 30% 50% 40% 20% 50% 40% +ve Low- +ve Mid- +ve Mid- +ve Mid- +ve Low- +ve Low- +ve Low- Xtep's SSSG +ve MSD +ve MSD +ve LSD +ve MSD +ve MSD +ve HSD 10% teens teens teens teens teens teens teens
Xtep's retail sales Over 20% Over 20% 20% Over 20% -27.0%
361 Degrees' SSSG 7.3% 7.5% 7.0% +ve HSD +ve HSD +ve HSD +ve HSD +ve HSD +ve MSD Flat +ve LSD +ve LSD +ve LSD +ve LSD Pou Sheng's SSSG 0.4% 8.6% 1.9% 5.6% 1.5% 12.0% 10.1% 2.2% 8.9% 8.7% 8.4% 4.2% 6.0% 1.9% Pou Sheng's sales 3.5% 10.1% 14.4% 14.5% 13.4% 21.6% 17.7% 17.7% 24.4% 22.0% 19.9% 18.9% 21.9% 19.1% -25.1% +ve Mid -ve Mid +ve Mid +ve Mid Dong Xiang's SSSG Flat -ve LSD -ve MSD +ve LSD +ve MSD +ve LSD -ve LSD +ve MSD to High to High to High to High +ve Low- +ve Low- Direct retail +ve HSD Flat +ve HSD Flat +ve LSD +ve HSD teens teens +ve 35%- +ve 30%- +ve 55%- +ve 40%- E- Commerce 45% 35% 60% 45% Source: Company data, CMBIS estimates, *Nike's year end is at May (e.g. 4Q18 calendar year = 2Q19 fiscal year = Sep-Nov 2018)
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Assumptions
Figure 7: Anta’s key assumptions Major assumptions FY17A FY18A FY19E FY20E FY21E Sales by segment (RMB mn) Shoes 8,631 11,410 12,551 14,559 16,160 Apparels 14,709 21,398 24,758 30,592 35,022 Accessories 759 1,120 1,277 1,354 1,516 Total 24,100 33,928 38,586 46,504 52,698
Sales by segment growth (%) Shoes 22.5% 32.2% 10.0% 16.0% 11.0% Apparels 61.4% 45.5% 15.7% 23.6% 14.5% Accessories 43.9% 47.5% 14.0% 6.0% 12.0% Total 44.4% 40.8% 13.7% 20.5% 13.3%
Sales by brand growth (%) Anta 8.7% 9.2% -15.0% 7.0% 4.0% Anta Kids 29.0% 27.0% -10.0% 25.0% 15.0% FILA 100.0% 73.8% 25.0% 23.0% 15.0% Descente & Others 155.9% 33.3% 0.0% 25.0% 20.0% E-commerce 45.0% 45.0% 45.0% 25.0% 15.0% Total 44.4% 40.8% 13.7% 20.5% 13.3%
Sales network Anta 7,271 7,341 7,191 7,271 7,321 Anta Kids 2,786 3,175 3,100 3,280 3,430 FILA 1,652 1,951 2,051 2,281 2,511 Descente & Others 479 476 521 716 911 Total 12,188 12,943 12,863 13,548 14,173
GP margins 52.6% 55.0% 53.7% 55.8% 56.6%
Opex breakdown A&P Expenses / sales 12.1% 10.6% 11.0% 11.6% 11.6% Labour costs / sales 10.9% 11.7% 12.1% 11.8% 12.0% R &D expenses / sales 5.2% 5.2% 5.3% 5.4% 5.5% Rental expenses/ sales 7.2% 8.8% 10.0% 9.6% 9.6%
Selling & distribution costs / sales 27.1% 28.7% 29.8% 29.6% 29.7% Admin expenses / sales 5.1% 3.9% 4.1% 3.7% 3.7%
OP margin 23.7% 25.6% 23.1% 25.6% 26.3%
Effective tax rate 26.6% 29.8% 29.0% 27.0% 26.0% NP att. margin 17.0% 15.8% 14.9% 17.7% 18.7% NP att. growth (%) 32.9% 30.3% 7.7% 43.3% 19.4% Source: Company data, CMBIS estimates
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Valuation
Figure 8: Peers valuation table 3yrs 12m Up/ ROE Yield Price Mkt. Cap Year P/E (x) P/B (x) PEG TP Down- (%) (%) (x) Company Ticker Rating (LC) (LC) side (HK$mn) End FY1E FY2E FY1E FY2E FY1E FY1E FY1E H shares Sportswear Anta Sports 2020 HK BUY 77.39 61.60 26% 166,440 Dec-19 26.3 18.3 6.1 5.2 26.2 1.2 1.3 Li Ning Co 2331 HK BUY 24.43 24.25 1% 59,680 Dec-19 35.3 25.8 6.4 5.3 23.2 2.0 0.9 Xtep Intl 1368 HK BUY 2.90 2.63 10% 6,608 Dec-19 8.3 6.6 0.8 0.8 11.9 1.1 6.8 361 Degrees Intl 1361 HK NR n/a 1.20 n/a 2,481 Dec-19 5.0 4.3 0.3 0.3 7.2 0.5 8.7 Topsports Intl 6110 HK NR n/a 9.41 n/a 58,353 Feb-19 20.7 17.9 5.3 4.1 76.8 0.0 3.1 Pou Sheng Intl 3813 HK NR n/a 1.70 n/a 9,107 Dec-19 13.8 7.0 1.0 0.9 11.5 0.7 1.5 China DX 3818 HK NR n/a 0.66 n/a 3,885 Mar-19 5.5 n/a n/a n/a n/a 0.0 n/a Avg. 16.4 13.3 3.3 2.7 26.7 0.8 3.7 Med. 13.8 12.5 3.1 2.5 17.5 0.7 2.3 International Sportswear Nike NKE US NR n/a 85.33 n/a 1,028,436 May-19 35.5 30.2 17.0 15.9 48.0 3.5 1.1 Adidas ADS GY NR n/a 214.30 n/a 363,407 Dec-19 27.8 20.0 5.8 5.0 30.0 5.0 1.8 Puma PUM GY NR n/a 56.46 n/a 72,053 Dec-19 43.0 25.9 4.2 3.8 14.7 3.0 0.7 Under Armour UAA US NR n/a 9.69 n/a 32,051 Dec-19 n/a 48.0 2.2 2.1 4.4 0.0 0.0 Lululemon LULU US NR n/a 204.35 n/a 206,155 Feb-20 46.5 34.2 11.2 9.7 38.0 3.8 0.0 Skechers SKX US NR n/a 25.38 n/a 31,027 Dec-19 16.6 11.7 1.6 1.5 15.9 (5.1) 0.0 Vf Corp VFC US NR n/a 56.51 n/a 172,882 Mar-20 18.4 19.8 4.8 4.6 29.1 6.0 3.3 Columbia COLM US NR n/a 71.26 n/a 37,227 Dec-19 20.4 16.0 2.4 2.1 18.8 13.4 1.5 Wolverine WWW US NR n/a 18.32 n/a 11,511 Dec-19 10.3 7.9 1.9 1.7 14.4 0.5 2.2 Mizuno Corp 8022 JP NR n/a 1716.00 n/a 3,292 Mar-19 7.4 6.7 0.4 0.4 6.6 1.3 2.9 Asics Corp 7936 JP NR n/a 914.00 n/a 12,527 Dec-19 30.8 16.1 1.1 1.1 4.5 1.6 3.1 Avg. 25.7 21.5 4.8 4.4 20.4 3.0 1.5 Med. 24.1 19.8 2.4 2.1 15.9 3.0 1.5 Source: Bloomberg, CMBIS estimates
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Financial Summary
Income statement Cash flow summary YE 31 Dec (RMB mn) FY18A FY19A FY20E FY21E FY22E YE 31 Dec (RMB mn) FY18A FY19A FY20E FY21E FY22E Revenue 24,100 33,928 38,586 46,504 52,698 EBIT 5,592 8,752 8,825 11,828 13,790 Footwear 8,631 11,410 12,551 14,559 16,160 D & A 278 331 416 511 588 Apparel 14,70 21,39 24,75 30,59 35,02 Change in working capital 866 1,178 (311) (368) (311) Accessories 7599 1,1208 1,2778 1,3542 1,5162 Income tax paid (1,288) (2,133) (2,480) (3,219) (3,650) Others (1,008) (642) 159 168 212 Cost of goods sold (11,413) (15,269) (17,849) (20,534) (22,886) Net cash from operating 4,440 7,485 6,609 8,921 10,629 Gross profit 12,687 18,659 20,737 25,970 29,812 Other income 652 1,127 1,134 1,311 1,539 Capex & investments (1,319) (11,28 (1,643) (1,515) (1,506) Associated companies - 2)- - - - Operating expenses (7,748) (11,034) (13,047) (15,453) (17,561) Interest received - - - - - D & A (175) (212) (268) (326) (373) Others 118 (1,783) - - - Staff costs (1,238) (1,859) (2,200) (2,878) (3,317) Net cash from investing (1,201) (13,06 (1,643) (1,515) (1,506) S & D costs (ex-staff, D&A) (5,639) (8,441) (9,958) (11,500) (13,019) 5) Admin exp. (ex-staff, D&A) (440) (247) (307) (373) (425) Equity raised 4 709 - - - Other operating expenses (256) (275) (313) (377) (427) Net change in bank loans 1,165 7,733 (5,000) - - EBIT 5,592 8,752 8,825 11,828 13,790 Dividend paid (2,425) (1,417) (1,916) (3,796) (6,099) Others 119 (2,356) (221) (121) (121) Finance costs, net 175 (110) (62) 47 91 Net cash from financing (1,136) 4,670 (7,137) (3,917) (6,220) JVs & associates - (633) (210) 47 158 Exceptional - - - - - Net change in cash 2,102 (910) (2,171) 3,489 2,903 Pre-tax profit 5,767 8,008 8,552 11,921 14,039 Beginning cash balance 6,968 9,284 8,221 6,050 9,539 Exchange difference 214 (153) - - - Income tax (1,533) (2,384) (2,480) (3,219) (3,650) Cash at the end of the year 9,284 8,221 6,050 9,539 12,442 Less: Minority interests 131 280 318 456 544 Net profit att. 4,103 5,344 5,754 8,246 9,845
Balance sheet Key ratios YE 31 Dec (RMB mn) FY18A FY19A FY20E FY21E FY22E YE 31 Dec FY18A FY19A FY20E FY21E FY22E Non-current assets 5,090 17,898 18,914 19,964 21,040 Sales mix (%) Fixed asset 1,787 2,148 2,875 3,271 3,496 Footwear 35.8 33.6 32.5 31.3 30.7 Intangible assets & goodwill 1,170 421 920 1,527 2,220 Apparel 61.0 63.1 64.2 65.8 66.5 Prepaid lease payments 367 53 53 53 53 Accessories 3.2 3.3 3.3 2.9 2.9 Interest in joint ventures - 10,551 10,341 10,387 10,546 Other non-current assets 1,766 4,725 4,725 4,725 4,725 Total 100.0 100.0 100.0 100.0 100.0
Current assets 19,284 23,321 22,761 28,497 33,230 P&L ratios (%) Cash and cash equivalents 9,284 8,221 6,050 9,539 12,442 Gross margin 52.6 55.0 53.7 55.8 56.6 Inventories 2,892 4,405 5,150 5,924 6,603 Operating margin 23.2 25.8 22.9 25.4 26.2 Trade and other receivables 4,638 6,309 7,175 8,647 9,799 Pre-tax margin 23.9 23.6 22.2 25.6 26.6 Prepayments - - - - - Net margin 17.0 15.8 14.9 17.7 18.7 Other current assets 2,470 4,386 4,386 4,386 4,386 Effective tax rate 26.6 27.6 28.3 27.1 26.3
Current liabilities 7,548 12,412 13,711 15,591 17,110 Balance sheet ratios Bank loans 1,244 1,359 1,359 1,359 1,359 Current ratio (x) 2.6 1.9 1.7 1.8 1.9 Trade payables 1,792 2,963 3,463 3,984 4,441 Quick ratio (x) 2.2 1.5 1.3 1.4 1.6 Accruals & other payables 3,841 5,821 6,620 7,978 9,041 Cash ratio (x) 123 66 44 61 73 Tax payables 650 1,225 1,225 1,225 1,225 Inventory turnover days 93 105 105 105 105 Others 21 1,044 1,044 1,044 1,044 Trade receivables days 70 68 68 68 68 Trade payables days 57 71 71 71 71 Non-current liabilities 306 7,746 2,746 2,746 2,746 Total debt / total equity ratio (%) 8 40 13 11 9 Bank loans 70 6,644 1,644 1,644 1,644 Net debt / equity ratio (%) Net cash Net cash Net cash Net cash Net cash Deferred income - - - - - Returns (%) Deferred tax 236 256 256 256 256 ROE 26.0 26.6 24.1 29.1 30.7 Others - 846 846 846 846 ROA 16.8 13.0 13.8 17.0 18.1 Per share Minority Interest 743 979 1,297 1,753 2,297 EPS (RMB) 1.53 1.92 2.06 2.96 3.53 Total net assets 15,777 20,082 23,920 28,371 32,117 DPS (RMB) 0.68 0.61 0.83 2.07 2.47 Shareholders' equity 15,777 20,082 23,920 28,371 32,117 BVPS (RMB) 5.87 7.43 8.85 10.5 11.8 Source: Company data, CMBIS estimates 0 9
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Disclosures & Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report.
Disclosure CMBIS or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months.
CMBIS Ratings BUY : Stock with potential return of over 15% over next 12 months HOLD : Stock with potential return of +15% to -10% over next 12 months SELL : Stock with potential loss of over 10% over next 12 months NOT RATED : Stock is not rated by CMBIS
OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months
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Important Disclosures There are risks involved in transacting in any securities. The information contained in this report may not be suitable for the purposes of all investors. CMBIS does not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives, financial position or special requirements. Past performance has no indication of future performance, and actual events may differ materially from that which is contained in the report. The value of, and returns from, any investments are uncertain and are not guaranteed and may fluctuate as a result of their dependence on the performance of underlying assets or other variable market factors. CMBIS recommends that investors should independently evaluate particular investments and strategies, and encourages investors to consult with a professional financial advisor in order to make their own investment decisions. This report or any information contained herein, have been prepared by the CMBIS, solely for the purpose of supplying information to the clients of CMBIS or its affiliate(s) to whom it is distributed. This report is not and should not be construed as an offer or solicitation to buy or sell any security or any interest in securities or enter into any transaction. Neither CMBIS nor any of its affiliates, shareholders, agents, consultants, directors, officers or employees shall be liable for any loss, damage or expense whatsoever, whether direct or consequential, incurred in relying on the information contained in this report. Anyone making use of the information contained in this report does so entirely at their own risk. The information and contents contained in this report are based on the analyses and interpretations of information believed to be publicly available and reliable. CMBIS has exerted every effort in its capacity to ensure, but not to guarantee, their accuracy, completeness, timeliness or correctness. CMBIS provides the information, advices and forecasts on an "AS IS" basis. The information and contents are subject to change without notice. CMBIS may issue other publications having information and/ or conclusions different from this report. These publications reflect different assumption, point-of-view and analytical methods when compiling. CMBIS may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report. CMBIS may have a position, make markets or act as principal or engage in transactions in securities of companies referred to in this report for itself and/or on behalf of its clients from time to time. Investors should assume that CMBIS does or seeks to have investment banking or other business relationships with the companies in this report. As a result, recipients should be aware that CMBIS may have a conflict of interest that could affect the objectivity of this report and CMBIS will not assume any responsibility in respect thereof. This report is for the use of intended recipients only and this publication, may not be reproduced, reprinted, sold, redistributed or published in whole or in part for any purpose without prior written consent of CMBIS. Additional information on recommended securities is available upon request.
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PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 8