Nine Hing Holdings: Expansion Shoe Performance Productivity Performance

Goldman Sachs published a research report to maintain the "buy" rating of nine Xing Holdings (1836), the target price was raised from $21.6 to $23.2, and its 2007-09 earnings per share forecast increased 0.5% to 3.4%.

Nine Xinggang announced that the net profit in the third quarter was 41 million dollars, up 35%, higher than Goldman Sachs expected to be 12%, mainly due to the increase in the average selling price so that the gross margin was higher than expected.

The bank believes that the value of nine Xing is seriously underestimated, while the forecast price earnings ratio in 2008 is only 12.6 times, while the dividend yield is 4.4%.

Nine Hing Holdings (1836) increased its turnover in 2007 to 15% to 285 million dollars in the third quarter, and the net profit rose 35% to 41 million dollars.

The increase in turnover is mainly due to the steady growth in sales and average selling price.

In the third quarter of 2007, shoe sales increased by 6.6% to 13 million 100 thousand on average, and the average selling price rose 9.5% to $21.5 per pair.

The average price increase is mainly due to the optimization of the product mix and the increase in the proportion of women's fashion shoes that sell at a higher price.

In addition to the steady growth of turnover, the improvement of profit margins is also one of the reasons for the achievement.

The gross profit margin increased by 3.4 percentage points to 24% in the third quarter of 2007.

Although the company has higher pressure on cost of raw materials and wages, management is confident that this will be offset by the increase in average selling price.

Therefore, we believe that there will be room for expansion in gross margin.

The capacity expansion plan is progressing smoothly, and the total capacity is expected to reach 45 million 800 thousand pairs and 52 million 900 thousand pairs respectively at the end of 2007 and the end of 2008.

The company will also set up more satellite factories for sewing leather shoes to improve productivity.

Driven by the company's strong expansion and good brand awareness, the retail business of nine Xing also grew rapidly, and its turnover increased by 239% to 2 million 600 thousand dollars in the third quarter of 2007.

Nine Hing operates 60 "StellaLuna" and 6 "WhatFor" retail outlets.

The total number of stores is expected to reach 80 and 188 respectively at the end of 2007 and the end of 2008.

Nine Hing's products are of high quality, and its coverage in China's high-end consumer market is growing.

We raised the target price to 19.56 yuan, equivalent to 13.9 times the expected price earnings ratio in 2008.