Investor Notes - Phillip Securities (HK) Ltd

4 Oct, 2024 (Friday)

CHINACOMSERVICE(552)
Analysis：
In the first half of the year, the China Communications Services Corporation Limited (00552)`s total revenues amounted to RMB74,412 million, representing a year-on-year increase of 1.7%, among which, service revenue amounted to RMB72,855 million, representing a yoy increase of 3.0%. Gross profit amounted to RMB8,116 million, representing a yoy increase of 3.6%. Gross profit margin was 10.9%, representing a yoy increase of 0.2 percentage point. Profit attributable to equity shareholders of the Company amounted to RMB2,125 million, representing a yoy increase of 4.4%, and the net profit growth rate was higher than the revenue growth rate. Net profit margin was 2.9%, representing a yoy increase of 0.1 percentage point. During the period, revenue from the telecommunications infrastructure ("TIS") services amounted to RMB37,666 million, which remained largely stable as compared to the same period of last year, accounting for 50.6% of total revenues. Revenue from business process outsourcing ("BPO") services amounted to RMB22,163 million, representing a yoy increase of 2.0%, accounting for 29.8% of total revenues. Revenue from applications, content and other ("ACO") services amounted to RMB14,583 million, representing a yoy increase of 6.0%, accounting for 19.6% of total revenues, which was the largest contributor to revenue growth by business segment in the first half of the year. The revenue from domestic telecommunications operator market remained stable. Meanwhile, the company actively responded to the needs of digital economy for countries along the "Belt and Road" by strengthening synergistic expansion and ecological cooperation with "Go Abroad" Chinese enterprises. With a focus on key regions, the company provided its customers with digital infrastructure construction, new energy services, smart products and services as well as industry informatization solutions and secured multiple important projects, thus achieving rapid growth in revenue of overseas market.
Strategy：
Buy-in Price: $4.20, Target Price: $4.60, Cut Loss Price: $3.94

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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