BELLE International Received Credit Ratings Soaring Sharply And Target Price Soaring

Belle International Holdings Ltd (1880.HK) gained the highest level of HK $9.4% to HK $5.60 in the intraday market on Tuesday, the 21 week after the CreditSuisseGroupAG (VTX:CSGN) Credit Suisse raised its rating and target price sharply, closing to the 52 week high of 5.79 Hong Kong dollars.

Credit Suisse said in its latest research report that BELLE international footwear business will hit bottom, resulting in a profit improvement that will trigger a market revaluation. Therefore, it raised the rating by two level from "big market" to "big win". The target price also increased from 57.5% to HK $6.3 from the original HK $4, which is 23% higher than that of HK $5.12 on Monday, 20.

BELLE international today closed 8.6% HK $5.54, a 13.7% increase from HK $6.3. According to Credit Suisse, BELLE's current international valuation is equivalent to 11 times forecast earnings in the 2018 fiscal year, with a dividend yield of 5%, and the valuation is attractive. The stock traded 90 million 400 thousand shares today, with a turnover of HK $499 million.

Under the influence of domestic economy and retail environment, the weakness of BELLE's international footwear business, the largest footwear group in China, has led to a decline in overall performance. According to statistics, in the three quarter of the last 2017 fiscal year (2016, 9-11), the group's footwear sales in mainland China decreased by 13.4% compared with the same period last year. The double-digit decline has been maintained for 5 quarters, and the downtrend has also extended to the twelfth quarter. Sports and clothing businesses including Nike Nike, Adidas Adidas, Converse CONVERSE and Puma Puma and other sports brand agency businesses and joint venture Japanese women's clothing brands Moussy and SLY also grew by only 4.6%. Although the growth is still in the middle of a single digit, it is the first time since the three quarter of fiscal 2014 (as at the end of September 2013), it has fallen below 5% for the first time.

During the period, the group continued to reorganize the sales network of the footwear business in spanition. As of November 30th, the number of footwear retail outlets was 13145, which closed 239 compared with 13384 as of August 31st. The sports and apparel businesses that kept up with this trend continued to expand, with the net sales of 269 retail outlets to 7485 in the three quarter. The total number of direct outlets in the group did not rise, rising from 20600 at the end of August to 20630.

Now, Credit Suisse expects that the same store sales of footwear will benefit from the base effect, and inflation will also drive up the average selling price, and cut costs and close down the loss stores and other measures will help ease the pressure on the footwear business. Therefore, BELLE international can narrow the profit decline in the footwear business in the 2018 fiscal year ended February 2018, and the group's overall profit is expected to end in the 2016 fiscal year and the 2017 fiscal year with the support of sports and clothing business rebounded against the pressure of the footwear business. The decline is 10% and 20% respectively, and the annual growth rate will be 5% in the 2019 fiscal year. The bank raised BELLE's current earnings forecasts for the 2017 fiscal year to 2019 fiscal year by 5%, 15% and 22% to reflect the strong prospects for sales and gross margins.

According to the data, in the 2017 half year of fiscal year ended August 2016, the net profit of BELLE international decreased by 19.7% yuan to 1 billion 732 million 600 thousand yuan per year, and the turnover days of footwear inventory increased to 261 days.