Investor Notes - Phillip Securities (HK) Ltd

9 Sep, 2024 (Monday)

CHINA VANKE(2202)
Analysis：
Media reports cite informed sources as saying that China is reportedly considering lowering the interest rates on existing housing loans in two steps to ease the burden on household residents while alleviating the pressure on bank profits. Sources revealed that financial regulatory agencies have proposed a total reduction of around 80 basis points in existing mortgage rates nationwide, to be carried out in two steps. The first rate cut could take place in the coming weeks, with the second adjustment set to take effect early next year. Recent real estate policies across various regions have been continuously strengthened, with news suggesting that foreign banks in Guangzhou are reducing the interest rates on first-home mortgages to 2.9%, while some banks in Guangzhou have already lowered their first-home rates to 2.89%. Shanghai is optimizing the structure of newly released residential land plots, Nanjing is further relaxing its housing provident fund loan policies, and Chongqing is adjusting and optimizing real estate transaction policies by lifting sales restrictions, refining housing unit identification standards, supporting "old-for-new" exchanges, and providing a subsidy equivalent to at least 0.5% of the total housing price for each newly purchased home. China Vanke Co., Ltd., established in 1984, has become a leading urban and rural construction and life service provider in China after nearly forty years of development. The company`s business focuses on the three most dynamic economic circles in the country and key cities in the central and western regions. Despite a certain degree of decline in revenue and profit indicators in the first half of this year due to the profound adjustments in the real estate industry, Vanke has been actively responding to challenges and continuously enhancing its capabilities in its three major businesses, consistently maintaining its position in the industry`s top tier. Financial data shows that Vanke`s collection rate exceeded 100% in the first half of the year, and the net cash flow from operating activities in the second quarter improved significantly to 4.2 billion yuan compared to the first quarter.
Strategy：
Buy-in Price: $4.07, Target Price: $4.50, Cut Loss Price: $3.68

Report Review of August 2024

Sectors:

TMT, Semiconductors, Consumer & Healthcare （Eric Li）

This month I released reports of 361 DEGREES INT. (1361.HK).

During 2023FY, 361 Degrees International Limited (361 Degrees) recorded a revenue of RMB8,423.3mn, increasing 21.0% YoY. Profit attributable to the equity shareholders of the Company was RMB961mn, representing a YoY increase of 28.7%. A total dividend of HK20.4 cents per ordinary share (equivalent to RMB18.7 cents), representing a dividend payout ratio of 40.2%.

In terms of product segment, sales of the company's two core product lines, namely footwear and apparel, increased by 23.0% YoY and 9.8% YoY respectively. For the year under review, the proportions of total revenue of footwear and apparel sales were slightly increased from 41.0% to 41.7% YoY and slightly decreased from 35.2% to 31.9% YoY of the total revenue respectively. This was mainly due to the increase in proportion of sales revenue from 361 Degrees Kids from 20.7% to 23.2% of the total revenue for the year under review, which in turn affected the proportion of sales of various products to total revenue. The average wholesale price (AWP) of footwear and apparel edged up by 3.0% and 0.5% year-on-year respectively. The increase in footwear's and apparel's AWP was mainly due to the upward adjustments of the wholesale prices of the existing products across different product lines in order to cover the increase in cost of production and reflect the continuous brand image enhancement; the upgrade of product mix by launching a variety of new products with a higher AWP; and the increase in proportion of sales revenue generated from the e-commerce business which has a higher AWP than the sales made to distributors, above reasons contributed to increase in AWP as compared to that of last year. In addition, the sales volume of footwear and apparel products increased by 19.4% and 9.4% YoY, respectively.

In recent years, as China's consumer preferences leaned towards specialisation, diversification, and cost effectiveness, the company positions as a "professional, youthful, and internationalised" brand. The company has built a diversified brand matrix based on professional functions and its own-branded IP. With 2024 bringing numerous international and domestic sports events, including the highly anticipated Paris Olympics, which are expected to stimulate a broader participation in sports and increase consumer demand. We expect 2024-2025 EPS to be RMB0.49 and RMB0.53 respectively, with PT of HKD4.02, implies a FY2024E P/E of 7.47x (~2-yrs historical average). Our investment rating is “Accumulate”.

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