Investor Notes - Phillip Securities (HK) Ltd

27 Sep, 2024 (Friday)

CHABAIDAO(2555)
Analysis：
Recently, Chabaida officially opened a new store in Seoul, South Korea. Since the beginning of 2024 when it opened its first store in Gangnam District, Seoul, Chabaida has quickly sparked a trend of Chinese-style milk tea among young people in South Korea, especially gaining enthusiastic support from consumers aged 18-30. According to Wang Huan, the person in charge of Chabaida`s Korean market, the brand`s share of local consumers in the Korean market has exceeded 80%, with a user repurchase rate of up to 45%. On August 26, Chabaida released its first semi-annual report after going public. The financial results show that in the first half of 2024, Chabaida achieved a revenue of 2.396 billion yuan, a 10% decrease compared to the same period last year, with an adjusted net profit of approximately 395 million yuan. The company currently holds nearly 3.9 billion yuan in cash, bank financial products, and deposits. In terms of the number of stores, Chabaida`s nationwide stores increased from 6,954 on June 30, 2023, to 8,385, a 20.6% year-on-year growth. Among them, there are 9 directly operated stores. In addition to maintaining the number of stores in first-tier and new second-tier cities, Chabaida has also been expanding into lower-tier markets. The distribution of stores in first-tier, new second-tier, second-tier, third-tier, and below cities is 10.7%, 28.2%, 20.9%, and 40.2%, respectively. In the second half of 2024, Chabaida will continue to expand its store network, further penetrate the domestic market, and strengthen its expansion in overseas markets.
Strategy：
Buy-in Price: $8.16, Target Price: $9.02, Cut Loss Price: $7.25

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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