PEAK Sports Growth Space Clear Positioning, Valuation Attractive

According to Hong Kong media reports, PEAK sports products market positioning is distinct, concentrating on the two or three line cities in the mainland to establish retail network.

Group order growth is ideal and profit visibility is high.

The central line is targeted at 7 yuan.

PEAK sports is mainly engaged in the design, manufacture and retail of sporting goods (including footwear, clothing and accessories). Footwear, clothing and accessories business account for 45.1%, 51.9% and 3% of marketing, respectively.

Domestic basketball shoe market leader

PEAK has concentrated on the development of the two or three tier cities in the mainland, with more than 6000 retail outlets.

The group is the leader of basketball shoes Market in China, with a market share of nearly 20%. At present, 12 NBA stars have been appointed as spokesmen.

Last year, PEAK's turnover amounted to 3 billion 100 million yuan (RMB. The same below), an annual growth of 51.6%. It earned 630 million yuan a year, an annual increase of 67%, and a 37.5% gross profit margin for the period, representing 4.8 percentage points year-on-year.

This year, there are many major sports events. Besides the upcoming World Cup, the Asian Games will be held in Guangzhou in November. With the support of the residents' awareness of sports awareness and the government's stimulating domestic demand, sporting goods sales continue to be strong.

From this year's operation figures released by the major sporting goods enterprises, we can see that the Quarterly Orders and sales have increased significantly (see table), among which the growth of one of the two or three line brands is the most ideal.

Take PEAK as an example. In the first 3 quarters of this year, the amount increased by more than 30%, while in the fourth quarter, there was an increase of 31%, of which footwear and clothing orders increased by 35.6% and 28.6% respectively.

{page_break} composite annual growth rate of more than 20%

Credit Suisse's earlier report pointed out that the adjustment of mainland sporting goods shares in the next three years will be adjusted in terms of brand and market resources, capacity differences, market penetration, financial management and control, and expects PEAK's composite earnings growth of 22.5% from 2010 to 2013.

According to Bloomberg's comprehensive forecast, sales volume of PEAK will reach 4 billion 158 million this year, an annual growth of 34.3%, and its profit will increase by 32.8% to 834 million annually.

PEAK's profit growth is ideal, judging from its forecast of PE of about 12.8 times this year. If it is compared with the two or three line brand shares of XTEP and 360 degrees, PEAK's valuation is only reasonable.

XTEP and 31st degree forecast PE this year are 14.8 times and 11.4 times respectively.

However, compared with this year's sales growth and profit growth rate, PEAK valuation is more attractive.

Cost rising and competition intensifying

First of all, PEAK's Quarterly Orders grew by an average of 33.75% this year, while XTEP and 22.75% were only 28.5%.

Moreover, according to Bloomberg forecast, PEAK's profit has increased by 33% this year, which is also higher than that of XTEP's 23% and 31%, which shows that PEAK's current valuation is more attractive than similar shares.

On the other hand, as PEAK went public last September, its financial position was quite robust.

Up to the end of last year, the group's time deposits and cash holdings totaled 1 billion 932 million, with no other liabilities and 1 billion 565 million net cash in addition to 340 million and 27 million spot tax.

However, rising costs will be one of the risk factors for PEAK.

At present, the proportion of PEAK footwear self production is about 39.1%, and clothing is about 19.6%. With the rising cost of labor in the mainland, if the group fails to pass the cost, the gross profit will be adversely affected.

In addition, the competition in the mainland sporting goods industry continues. Enterprises must continue to invest in the promotion to maintain popularity. If the sales growth rate can not catch up with the growth of the expenditure, the net interest rate will be reduced.

There is ample space for the development of sports goods market in the mainland. The market expects sales to maintain a 20% growth rate in the next few years.

PEAK's business strategy is clear. It is committed to shaping the professional image of basketball and improving the layout of retail networks.

The target is $7 below 5.5 yuan.

On strategy, it is recommended that 5.5 yuan be collected downstairs, with a forecast rate close to 3%, with a certain defensive force. The central line will aim at 7 yuan, and the forecast PE will be only 15 times, with a price drop of 4.1 yuan.