Post Reply
1-8 of 8
Surprising average selling prices hike provided upside to forecasts. Revenue was 7% above forecast while net profit was 2.5% above forecast. More upside curbed by A&P costs (now 3.5% of sales versus 2.3% in FY06).
Other welcomed extras. 1-into-2 stock split. 20% dividend payout. Brand-building efforts intensifying. One, CCTV. Two, more frequent commercials. Three, Olympic team sponsorship. Four, www.sohu.com and www.sports.cn tie-ups. But it is money well spent. Other than raising ASPs, higher A&P should also hasten store network expansion, a direct sales driver. 40% growth target for number of new stores in 2008. Debtors, capex, A&P to rise. For now, balance sheet remains highly liquid with more than RMB400m in cash.
KE's target price reduced to reflect market PEs. 2008 forecast is reduced slightly to account for higher A&P assumption. In addition, target PE is reduced from 18x to 15x 2008 EPS to account for higher market risks, leading to their new target price of $1.99. Overall, maintain a BUY call for low valuation and strong growth forecasts.
Citi Investment Research - Initiate at Buy: EPS Growth Not Reflected in Price
Buy/High Risk 1H
Price (27 Nov 07) S$1.70
Target price S$2.35
Expected share price return 38.2%
Expected dividend yield 1.0%
Expected total return 39.3%
Market Cap S$573M
US$397M
Successful transformation to brand owner?CSIL?s transformation from an OEM to a brand owner has sharply improved earnings and margins. Its Yeli footwear is affordably priced at Rmb150-250/pair and targets the mass market segment in third and fourth tier cities. Mass market is an intensely competitive segment, but a strong earnings record suggests management is executing well and investments in its brand profile are paying off.
Sharp EPS acceleration?In 1H07, CSIL's revenue and net profit increased 65% and 118% yoy to Rmb522m and Rmb74m, respectively. Driven by stronger footwear shipments, higher ASP and newly introduced higher-margin apparel. CSIL appears well-positioned to deliver 41% EPS CAGR over the next 3 years, one of the highest growth rates in the global sportswear sector.
Attractively valued? 08E P/E of 14x is in line with that of OEM maker Yue Yuen but at a 45% discount to CHXS, which appears unjustified considering its higher expected earnings growth. Our target price of S$2.35/share is based on an 08EP/E of ~18x, which is set at the mid-point of 08E valuations for Yue Yuen and CHXS and translates to an undemanding 08E PEG of ~0.4x .
Key risks ? 1) Increase in receivable days, which would require higher levels of working capital and strain cash flow, 2) Inability to pass on raw material price increases, and 3) Sharply higher A&P costs, which would hurt operating margins.
DBS Vickers - On track for a strong finish
�� Story: 3Q07 numbers were slightly above expectations, with net earnings growing by 138% yoy to RMB47m on top line growth of 92% yoy to RMB336m.
�� Point: We believe the Group is on track to meet or even exceed our FY07 forecasts and this good set of results has given us more confidence in management to execute and deliver good earnings growth over the next few years, underpinned by rapid points-of-sales expansion and higher A&P activities.
�� Relevance: With FY07 coming to a close, we are rolling over our 12-month target price for China Sports to 15x FY09 earnings to arrive at a revised target price of S$2.66, implying over 50% upside from current levels. Stock is currently trading at undemanding valuations of 13.3x FY08 PER and 10x FY09 PER.
YTD earnings are up by 126% yoy to RMB121m, led by top line growth of 74% yoy to RMB858m. This was led by robust growth in sales of the Group?s in-house YELI brand of products, up by 89% yoy as of 9M07 to RMB654m, accounting for 76% of total Group revenue. This is compared to YELI products accounting for 70% of total group revenue in 9M06. Higher ASPs also helped both turnover growth and margins to expand, with a 25% increase in ASPs for YELI products leading a 4.3ppt increase in overall gross margins to 21.7% as at 9M07 from 17.4% a year ago.
An expanding distribution network, and with higher A&P spending are the key reasons behind the Group?s strong sales growth performance. The Group?s points-of-sales has grown from over 1,350 outlets as at 9M06 to over 1,900 as at 9M07 and is on track to hit 2,000 outlets by the end of 2007. Ambitions to grow its network by 40%-50% in 2008 to over 2,800 outlets should also help support revenue growth over the next few years. A&P spending has also increased significantly (+96% yoy as at 9M07) and the Group has plans to increase A&P spending to 5% of total revenue from the current 2%-3%. This should thus help increase brand awareness and support the sales growth of YELI products.
Higher ASPs should also lead to improved margins for the Group. China Sports has plans to continue increasing the ASP of its products, as its brand value increases with more advertising & promotional activities, and as it introduces new and wider range of products. We believe this will not only help to mitigate higher material costs but also lead to improved margins for the Group, as shown in this latest set of results.
Maintain BUY, TP raised to S$2.66 (15x FY09 earnings). Valuations remain undemanding for China Sports at 13.3x FY08 earnings and 10x FY09 earnings for an Olympics and Chinese consumption growth story; with over 40% EPS CAGR over FY06-FY09F. Our target price of S$2.66 is derived from rolling over our 15x earnings multiple (less than 0.4x PEG) to FY09 earnings, as we approach the close of 2007.
DBS Vickers - On track for a strong finish
China Sports International, Buy S$1.71 Price Target : 12-Month S$ 2.66 (Prev S$ 1.97)
Story: 3Q07 numbers were slightly above expectations, with net earnings growing by 138% yoy to RMB47m on top line growth of 92% yoy to RMB336m.
Point: We believe the Group is on track to meet or even exceed our FY07 forecasts and this good set of results has given us more confidence in management to execute and deliver good earnings growth over the next few years, underpinned by rapid points-of-sales expansion and higher A&P activities.
Relevance: With FY07 coming to a close, we are rolling over our 12-month target price for China Sports to 15x FY09 earnings to arrive at a revised target price of S$2.66, implying over 50% upside from current levels. Stock is currently trading at undemanding valuations of 13.3x FY08 PER and 10x FY09 PER
Anyone know why this counter going down?
heading to $1.80
good run for tis counter...may copy hongxi pattern...
DJ MARKET TALK: DBS Vickers Starts China Sports Intl At Buy
0034 GMT [Dow Jones] STOCK CALL: DBS Vickers starts China Sports International (CP6.SG) at Buy with S$1.97 target price, based on P/E of 15X FY08 earnings. Says sportswear maker can carve out niche in mass-market segment as it builds up its distribution network and brand in China . Forecasts over 40% EPS CAGR from FY06-FH09. Says stock offers cheaper alternative to similar plays like China Hongxing (BR9.SG), Li Ning (2331.HK), which trade at over 20X, 38X FY08 earnings respectively. China Sports off 2.3% at S$1.26 yesterday. (FKH)