HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Bosideng International Holdings / Equity Bottom-Up

<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

Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>The WTR Consumer Stock Index trailed the Small Cap S&amp;P 600 in 2Q, declining 2.4% versus the 1.1% gain in the broader index.</li><li>The underperformance of our index was mostly due to a larger decline in prospective earnings, coupled with a lesser expansion in its prospective P/E ratio.</li><li>Our index saw prospective earnings decline 7.2% in 2Q versus a 5.0% decline in the S&amp;P 600, while its prospective P/E ratio expanded 0.8x in 2Q to 15.7x versus the 0.9x expansion to 15.3x in the S&amp;P 600.</li></ul>

The WTR Consumer Stock Index trailed the Small Cap S&amp;P 600 in 2Q, declining 2.4% versus the 1.1% gain in the broader index.The underperformance of our index was mostly due to a larger decline in prospective earnings, coupled with a lesser expansion in its prospective P/E ratio.Our index saw prospective earnings decline 7.2% in 2Q versus a 5.0% decline in the S&amp;P 600, while its prospective P/E ratio expanded 0.8x in 2Q to 15.7x versus the 0.9x expansion to 15.3x in the S&amp;P 600.

Consumer Products Monthly WTR Consumer Index Lags S&P 600 in 2Q

<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

<ul>
<li>Even China's consumption market is tough, <a href="https://www.smartkarma.com/entities/bosideng-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6537:1" rel="noopener">Bosideng Intl Holdings (3998 HK)</a> has still achieved a 25.1% profit growth. Revenue maintained a healthy trend while gross margin was stable.</li>
<li>Sales trend stayed solid in 2H FY24, and it ranked first in major online channels in various categories of apparel sales during the "double-11" shopping festival.</li>
<li>Store efficiency improved as revenue saw double-digit growth despite a 9.7% YoY fewer retail network. It is encouraging to see its 3-year target is to outperform the last 5 years.</li>
</ul>


Even China's consumption market is tough, Bosideng Intl Holdings (3998 HK) has still achieved a 25.1% profit growth. Revenue maintained a healthy trend while gross margin was stable.
Sales trend stayed solid in 2H FY24, and it ranked first in major online channels in various categories of apparel sales during the "double-11" shopping festival.
Store efficiency improved as revenue saw double-digit growth despite a 9.7% YoY fewer retail network. It is encouraging to see its 3-year target is to outperform the last 5 years.


Bosideng (3998 HK): Never Fail to Deliver

<ul>
<li>While having a slow FY23, <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> is well-positioned to capture the rebound in down apparel sales growth as pent-up demand is released.  </li>
<li>We also expect a recovery in margin, further improvement in channel efficiency and operating leverage from cost control will add to earnings momentum. </li>
<li>Management expects revenue growth will at least sustain at the rate in the last 5 years. The stock's valuations are cheap when compared with growth outlook and global peers. </li>
</ul>


While having a slow FY23, Bosideng International Holdings (3998 HK) is well-positioned to capture the rebound in down apparel sales growth as pent-up demand is released.  
We also expect a recovery in margin, further improvement in channel efficiency and operating leverage from cost control will add to earnings momentum. 
Management expects revenue growth will at least sustain at the rate in the last 5 years. The stock's valuations are cheap when compared with growth outlook and global peers. 


Bosideng (3998 HK): Outlook Stays Promising

Canada

Canada Goose Holdings Inc. operates as a holding company. The Company, through its subsidiaries, designs, manufactures, distributes, and retails outerwear for men, women, and children. Canada Goose Holdings serves customers worldwide.

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Canada Goose Holdings (GOOS CN)

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

Consumer Products Monthly WTR Consumer Index Lags S&P 600 in 2Q

The WTR Consumer Stock Index trailed the Small Cap S&P 600 in 2Q, declining 2.4% versus the 1.1% gain in the broader index.

Water Tower Research

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): Never Fail to Deliver

Bosideng achieved 25.1% profit growth despite tough consumption market. Healthy revenue growth, stable margins, and improved store efficiency are...

Osbert Tang, CFA

Bosideng (3998 HK): Outlook Stays Promising

The release of pent-up demand, recovery in gross margin, further improvement in channel efficiency and operating leverage from cost control will...

Osbert Tang, CFA

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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

Consumer Products Monthly WTR Consumer Index Lags S&P 600 in 2Q

The WTR Consumer Stock Index trailed the Small Cap S&P 600 in 2Q, declining 2.4% versus the 1.1% gain in the broader index.

Water Tower Research

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): Never Fail to Deliver

Bosideng achieved 25.1% profit growth despite tough consumption market. Healthy revenue growth, stable margins, and improved store efficiency are...

Osbert Tang, CFA

Bosideng (3998 HK): Outlook Stays Promising

The release of pent-up demand, recovery in gross margin, further improvement in channel efficiency and operating leverage from cost control will...

Osbert Tang, CFA

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