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22 Aug, 2018 (Wednesday)

            
SISRAM MED (1696)
Analysis:
SISRAM MED(1696) is principally engaged in the design, development, manufacture and sale of energy-based aesthetic medical and minimally invasive treatment system. The Group is focusing on three major hot spots : body contouring, dermatology (skin rejuvenation in specific) and feminine health. It started in 2018 implementing its " Go East" strategy, delivering the best of the west to the east by utilizing its technological and operational strengths as an industry leader. For the six months ended 30 June 2018, the Group`s revenue increased 17.9% to US$78.2 million as compared to the corresponding period in 2017 and net profit attributable to shareholders increased 43.9% to US$11.3 million.(I do not hold the above stock)
Strategy:
Buy-in Price: $4.80, Target Price: $5.50, Cut Loss Price: $4.45

ESSEX BIO-TECH(1061)
Analysis:
ESSEX BIO-TECH is a leading ophthalmology and surgical drug manufacturer and promoter in China. Driven by the core patent drug bFGF, the company`s five-year revenue CAGR has increased by more than 20% annually, and the profit CAGR more than 30% annually. Since the launch of the “Enhancement Plan” in 2015, the company has successfully invested in different targets and cooperated in various markets. Recently, the company signed an agreement with Russian Mitotech to obtain the permanent commercialization rights of its third-phase clinical dry eye products in Singapore and Greater China at a price of up to US$37 million, while sharing global benefits. In addition, ESSEX BIO-TECH recently invested 8% stake in the company "Shanggong Yixin", which focuses on fundus screening and chronic disease management and has an AI fundus screening products "Huiyantangwang". In addition, the company recently launched the first single-dose levofloxacin eye drop product without preservatives.
Strategy:
Buy-in Price: $6.56, Target Price: $7.35, Cut Loss Price: $6.00


Anta Sports (2020.HK) - Strong 18H1 Results with FILA Continuing Rapid Growth

Investment Summary

Anta announced interim results and we highlight that 1) Fila performance exceeds expectation; 2) new brands continue improving store network; 3) E-commerce will account for 20%-30% of revenue in future. We expect that the company will leverage on strong distribution channels and store network as well as the launch of new popular products to consolidate its leading position. (Closing price at 17 Aug 2018)

Event

Solid 18H1 results. The company revenue increased by 44% YoY, and gross profit was up by 54% YoY due to effective cost control, while net profit attributable to shareholders climbed by just 34% YoY. By products, sales of footwear/apparel/accessories was up by 21.3%/64.6%/51.3% respectively, with GPM rising by1.9/4.3/4.5ppts.

Comment

Rising expenses dragging down profit margin currently. OPM decreased by 0.4ppts, due to rising expenditures regards to A&P amortization and retail level marketing and promotional activities as well as R&D. We see NPM was down by 1.4ppts, which is because exchange loss and hiking tax rate.

Improving operation efficiency. Although inventory days raised by 15 days to 83 days, which is mainly resulting from higher percentage of Fila sales in topline (after all Fila has higher inventory days around 120 days while Anta around 50~60 days). Mgt emphasized that inventory days of Fila is decreasing while that of Anta is rising for e-commerce hike, which overall indicates a healthy inventory level. Meanwhile, AR days dropped to 35 days while AP days remain unchanged around 49 days.

Net operating cash flow decreased to RMB1.475bn (vs. 2.058bn in 17H1), attributable to inventory hike of Fila and new brands, and mounting account receivables due to advanced purchase of raw materials (mainly eider down) for winner production. Mgt indicated that cash flow condition would be normal throughout the year.

Fila growth higher than expected. Fila biz recorded over 85% YoY growth in 18H1 with extending same store sales (from RMB400k to RMB600k now) and climbing stocks. The company also launches Fila Fusion, a trendy sportswear series which targets youth market, as a new momentum. Therefore, Fila now has complete product lines to cater for different customer demand involving adults, youth and kids.

Development of new brand. Anta operates four relatively new brands for various markets. 1) Descente, focusing on high-end sportswear products for customers aged 25~35, now owns 85 store and expands smoothly in Northeastern China. 2) Sprandi provides fashion and lifestyle footwear products, to focus on mid-end clients with 81 stores in China. 3) Kolon offers outdoor sportswear, located in tier 2-3 cities with 189 stores. 4) Kingkow, positioned into mid- to high-end kidswear market, was acquired in 2017 and operating 63 store in greater China area. The company is adjusting and developing store network of these new brands.

Valuation

We maintain target price to HKD47.3: Forecasted EPS is RMB1.47/1.84 in 18E/19E and target price is maintained as HKD47.3. (Closing price at 17 Aug 2018)

Risks include: Rising selling and R&D expenses; Fierce competition in retail market; Inefficiency resulting from multi-brand operation.

Financials

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Recommendation on 22-8-2018
RecommendationAccumulate
Price on Recommendation Date$ 39.650
Suggested purchase priceN/A
Target Price$ 47.300
Writer Info
Eurus Zhou
(Research Analyst)
Tel: +852 2277 6515
Email:
euruszhou@phillip.com.hk

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