Bosideng Doubled This Year'S 60% Rise This Year. What Engine Is Driving The Stock Price?

Last year, Bosideng's share price rose 132.8%, becoming a bull stock in the Hong Kong stock market. This year, the company's share price rises seem to be no less than last year, and there are even signs of surmounting.

This year, less than 5 months, the company's share price has risen 59.46% at a stretch, and the company's stock price is HK $2.36, which has reached a new high of 8 years. The last time the stock price reached this price was in February 2011.

So why is capital buying at this time to buy Bosideng, can the fundamentals support its valuation?

The logic behind share price inflation

Since the beginning of this year, the strong rebound in the A share market has attracted a lot of attention. The major indexes have increased by more than 30%, especially the growth trend of the gem.

Comparatively speaking, the trend of the Hong Kong stock market will be a bit plain. Hongkong's Hang Seng Index has risen 17.48% this year.

However, after doubling its share price last year, Bosideng has increased 59.46% this year, ranking 131st in Hong Kong stocks and the top 5.5% in 2378 stocks.

Hong Kong shares ranked second in the entire textile and garment sector, behind Lining's (2331.HK) rise of 68.81% this year.

From the earnings report, the company's profits began to recover in 2016. The key step is to refocus on the core business - down garment business. After that, the company implemented a "subtraction strategy", thus shrinking diversification and focusing on the main channel.

Then, after the successive rise, can the fundamentals of the company support the stock price and will it be sustainable in the future?

We can analyze from the following aspects.

1, the annual conference released the annual core strategy, reform dividends are expected to continue.

In April 17th, 2019 Bosideng Group annual meeting was held at the Changshu International Exhibition Center, and more than 2000 employees participated.

Ms. Medong, executive director of Bosideng group, summarized the 2018 re launch and released the 2019 core strategy.

Looking forward to the next financial year, the company will continue to invest in R & D, supply chain, brand and so on, and continue to consolidate the position of "the world's hot down eider expert".

The company's latest earnings report showed that as of February 25th, the cumulative revenue grew by more than 35% over the same period last year.

It can be seen that since entering the 2019, the company's retail sales environment remained relatively cold, and the product sales continued to grow against the trend, showing a relatively strong sales momentum.

We believe that after the consumer has already had a certain understanding and affirmation of the upgrading of products and brands, the momentum of sales growth tends to be continuous, and the reform dividend is expected to continue in the next few years.

2, executive adjustment helps to inject new vitality into the company's development, and equity incentive ensures enthusiasm.

Boston's latest concern is the adjustment of the top management team.

In April 17th, the company announced that Zhu Gaofeng was appointed chief financial officer and vice president of the group and became effective on that day.

According to public information, Zhu Gaofeng was formerly the group's chief financial officer, and has both the international registered internal auditor and the Chinese certified public accountant qualification.

He joined Bosideng in 2005 and served as audit manager, deputy chief financial officer, chief financial officer and assistant to the president. He has rich experience in internal audit, risk management and financial management.

In addition, Bosideng pays more attention to equity incentive. Since 2016, a total of three equity incentive plans have been implemented since 2016. The first and second phases mainly assess the company's financial performance and the performance of the selected personnel. The third term includes the financial performance of the Bosideng brand and its performance as at the end of 2019, 2020 and March 31, 2021 three.

Among them, the first phase in August 2018 has been attributable to 70%, the company has reached the performance assessment before March 31, 2018.

3, the upgrading of the product brand will help the increase of the gross interest rate.

In 2018, the company's main brand increased by 30% to 40%.

Pat Dorsey, the author of the true rules of the stock market, believes that a key factor in measuring the effectiveness of an enterprise's brand value is whether consumers are willing to pay for its brand premium.

From the current market sales situation, consumers are approved by Bosideng after the upgrading of products.

The gross profit margin of the company declined in 2015 and 2016, and began to pick up in 2017. Future Ltd continues to focus on upgrading its products and brands. The gross profit margin of the company is expected to rebound further.

Is valuations attractive?

Whether the stock price can support the fundamentals depends mainly on the valuation. With the increase of share price, the valuation of the company has risen to a certain extent.

We found that when the company first came public in October 2007, the P / E ratio is much higher than it is now.

From 2008 to 2012, the company's performance grew rapidly. Its operating income increased from 5 billion 279 million yuan in March 31, 2007 2018 to 8 billion 376 million yuan in the fiscal year of 2012, the compound growth rate reached 12.2%, and the peak value reached 9 billion 325 million yuan in 2012.

From 2013 to 2016, the company entered the adjustment period, operating income for three consecutive years of negative growth, to shrink to 5 billion 787 million yuan in 2016.

From the 2016 fiscal year to now, the company has gone back to its upward trajectory through the way of brand burden reduction, closing inefficient stores and cleaning up inventory.

In the fiscal year of 2018, the company's operating income was 8 billion 881 million yuan, an increase of 31.1% over the same period, and its net profit to the parent company was 616 million yuan, an increase of 57.1% over the same period last year.

At present, under the circumstances of brand, channel and supply chain, the company's performance has returned to its peak. And if this momentum is sustained, it will be just around the corner to surpass the peak.

We found that, according to Bosideng's current P / E, multiplied by the net profit expected in 2019, the market value is much larger than the current market value. It is obvious that even after a rapid rise, Bosideng's share price is still not too high, and as the performance continues to rise, market space is also expected to be broadened.

So, in general, after Boston's share price rises, the company's logic of performance growth has been continuously verified after focusing on its main business, and this trend is still in progress.