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

Thematic (Sector/Industry)

<ul>
<li>More policy measures will be rolled out by the Chinese government to support domestic consumption in 2022; and the growing nationalistic trend will benefit leading domestic brands. </li>
<li>Within the consumer discretionary sector, we identify <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>, <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> and <a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home (6690 HK)</a> as the prime beneficiaries of this trend.</li>
<li>All of them are leaders in their respective sub-segment, have exemplary competitive edges against foreign players and are investing heavily in technology and distribution to solidify their moats. </li>
</ul>


More policy measures will be rolled out by the Chinese government to support domestic consumption in 2022; and the growing nationalistic trend will benefit leading domestic brands. 
Within the consumer discretionary sector, we identify Anta Sports Products (2020 HK), Bosideng International Holdings (3998 HK) and Haier Smart Home (6690 HK) as the prime beneficiaries of this trend.
All of them are leaders in their respective sub-segment, have exemplary competitive edges against foreign players and are investing heavily in technology and distribution to solidify their moats. 


China Consumer Discretionary: Beneficiaries of The Nationalistic Trend

<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

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.</li>
<li>We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.</li>
<li>Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.</li>
</ul>


There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.
We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.
Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.


HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect

<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

China

China Lilang Ltd. manufactures men's clothing and accessories.  The company produces suits, jackets, shirts, trousers, sweaters, and accessories.

China Lilang (1234 HK)

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

China Consumer Discretionary: Beneficiaries of The Nationalistic Trend

We identify Anta Sports, Bosideng and Haier Smart Home as the beneficiaries of rising nationalistic trend of China's consumer discretionary sector...

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

HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect

There are 22 adds/ 27 deletes for the HSCI in Sep leading to 22 adds/ 24 deletes for Stock Connect. Since end June, shares held though Southbound...

Brian Freitas

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