Bosideng International
Strong FY2024 expected thanks to tailwinds
Bosideng expects its FY2024 revenue to grow 30% YoY, far above market expectations. While we reckon Bosideng has done well in providing competitive products, we also believe it has managed to seize the opportunity to boost its sales amid pent-up demand and cold weather in early calendar year 2024. Bosideng is also attempting to further diversify away its reliance on down jackets, as it ramps up its bet on sun-protective clothing and outdoor jackets. Still, we believe it could take some time for Bosideng to prove that the new products could mitigate the seasonality risks, especially when the high base of FY24 is considered.
Key Factors for Rating
FY24 performance a strong beat. Mgmt. of Bosideng expects FY2024 revenue to grow c.30% YoY, while net profit growth could be even higher when one-off items are accounted for. With this guidance considered, FY24 revenue could be 9% above Bloomberg consensus. In our latest revised estimates, this would mean 2HFY24 revenue/NP at RMB14.4bn/2.12bn, +36%/+51% YoY respectively. This could be the strongest 2HFY24 posted by Bosideng. On a full year basis, we now expect Bosideng's revenue/NP to be RMB21.9bn/3.05bn, up 30%/43% YoY respectively.
Weather and pent-up demand boosted sales in FY24. Per mgmt., Bosideng's top 17% winter down jacket products accounted for 70% sales in the fiscal year. We believe this reflects extraordinary sales of winter products in 2HFY24 due to favourable seasonality. While we estimate that Bosideng recorded strong sales during its usual peak season (Nov - Jan), the unusual cold weather in Feb 2024 or weeks after Chinese New Year also brought additional sales. On the other hand, we also believe a base effect was in play, as sales of 2HFY23 (Oct 22 - Mar 23) were negatively impacted by lockdowns and nationwide infections of COVID-19.
Ambitious target for FY25-27 despite a high base of FY24. Mgmt. reiterated its target for FY25-27: revenue CAGR not lower than that during FY20- 24. This would imply revenue CAGR FY25-27 to be 15.7% under our latest forecast. This could be ambitious, in our view, as FY24 has already achieved a 30% top-line growth.
Lowering seasonality risks could take time. Since FY24, Bosideng started to ramp up products other than down jackets. These include sun-protective clothing and outdoor jackets. However, even though sun-protective item achieved strong growth (>300% per mgmt.), we estimate the contribution from this product is only <3% in FY24, and likely mid-S.D. in FY25. This means Bosideng is still relying on down apparels and subject to seasonality risk in FY25 and beyond.