消费-服装行业

Sector Report: Consumer-Apparel Sector Jerry Peng 彭港祥 

行业报告:消费-服装行业 +86 755 23976722 

penggangxiang@gtjas.com 

The Industry is Still Experiencing a Very Difficult Time 

行业仍然很困难 

We went to Fujian to visit Peak (1968 HK), China Lilang (1234 HK), 361 

degrees (1361 HK), Active Group (1096 HK) and Flyke (1998 HK). The 

industry is still experiencing a very difficult time. The retail sales for 

sportswear products, menswear and casual footwear are all very weak. 

We have seen very scarce customer traffic during our channel check at one of 

the major walking streets in Jinjiang, even on a Wednesday night. People 

seem not to be buying sportswear products or not entering the stores after the 

long price war in the industry. We found that most of the L2 stores in Fujian 

were actually losing money as the brand has high price but lower brand 

recognition at the moment. The development of L2 brand is expected to be 

very difficult. Our discussion with China Lilang (1234 HK) also supports our 

view that there is strong pressure for China Lilang (1234 HK). Given the 

weak sales performance in 3Q12 and early 4Q12, we can’t be optimistic 

for the 3-4Q13 order book growth. 

We prefer direct sales model to catch up the apparel sales rebound following 

the bottoming out of GDP. The weak retail sales this year is expected to lead 

to the unfavorable sales performance for Fujian companies due to the nature 

of wholesale business model. We maintain Belle (1880 HK) as our top pick 

for the Consumer-Apparel sector. We prefer to short Anta (2020 HK), 

Xtep (1368 HK) and China Lilang (1234 HK) as the whole industry is not 

ready for a rebound. 

我们去福建拜访了匹克(1968 HK),利郎(1234 HK),361 度(1361 HK),动感集团 

(1096 HK)和飞克(1998 HK)。行业仍然经历着非常困难的时期。体育用品、男装和 

休闲鞋的零售销售非常疲弱。 

在星期三晚上我们在晋江一条主要的步行街调研显示整体的人流量稀少。长时间的价格战 

之后,顾客似乎并没有意愿购买体育用品或者进入店铺。我们也发现目前福建大多数的 L2 

零售店铺是亏损的,主因零售价格高但是品牌知名度目前较低。L2 的发展预期比较困难。 

我们和利郎(1234 HK)的交流也显示公司目前面临较大压力。由于目前三季度和四季度 

初零售销售不好,我们对明年三四季度的订单增长不乐观。 

我们倾向于直接做零售的公司以把握 GDP 见底之后的服装销售反弹。而由于批发模式的 

特点,今年疲弱的零售销售将使福建上市公司明年的销售不乐观。我们维持百丽(1880 HK) 

作为我们的行业首选。整个行业销售的反弹还没有来,我们倾向于卖出安踏(2020 HK)、 

特步(1368 HK)和利郎(1234 HK)。 

Company Name 

公司名称 

Code 

编号 

Price 

股价 

(HK$) 

Rating 

投资评级 

12 PER 

市盈率 

(x) 

20 November 2012 

Rating: Outperform 

Maintained 

评级: 跑赢大市 (维持) 

Stock Performance 

股价表现 

HSI Anta Li Ning 

Xtep 

China Dongxiang 

Source: Bloomberg. 

Peak 361 degree 

See the last page for disclaimer Page 1 of 25 

13 PER 

市盈率 

(x) 

14 PER 

市盈率 

(x) 

12 ROE 

净资产收益率 

(%) 

Belle International 1880 HK 14.80 Buy 21.1 18.0 15.4 22.4 4.5 1.5 

Daphne International 210 HK 9.04 Accumulate 15.6 12.6 10.8 22.7 3.2 2.0 

China Lilang Ltd 1234 HK 4.22 Reduce 6.0 5.9 5.3 28.1 1.6 9.4 

Bosideng Intl Hldgs Ltd 3998 HK 2.32 Accumulate 10.5 10.2 9.8 19.9 2.1 6.9 

Ports Design Ltd 589 HK 5.86 Neutral 6.6 5.9 6.1 20.3 1.3 9.3 

Active Group 1096 HK 0.93 Accumulate 10.8 8.6 6.8 14.4 1.5 2.8 

Anta Sports 2020 HK 5.98 Reduce 8.7 11.1 10.7 20.9 1.8 7.4 

Li Ning 2331 HK 4.14 Reduce n.a. 25.0 12.4 0.6 1.0 0.7 

Xtep 1368 HK 3.15 Reduce 6.1 7.6 7.3 21.7 1.3 7.9 

Peak Sport 1968 HK 1.36 Accumulate 5.4 5.5 4.9 10.9 0.5 5.9 

Weighted Average.市值加权平均 16.8 15.4 13.2 21.5 3.5 3.1 

Source‥Bloomberg, Guotai Junan International. 

50 

40 

30 

20 

10 

0 

-10 

-20 

-30 

-40 

-50 

-60 

80 

60 

40 

20 

‐20 

‐40 

‐60 

‐80 

% of return 

Dec-11 Feb-12 Mar-12 May-12 Jun-12 Aug-12 Sep-12 Nov-12 

HSI Active Group China Lilang 

Belle 

Daphne 

Bosideng Ports 

0 

% of retun 

Dec‐11 Mar‐12 Jun‐12 Sep‐12 

12 P/B 

市净率 

(x) 

12 Yield 

股息率 

(%) 

GTJA Research 国泰君安研究 

Consumer-Apparel Sector 消费-服装行业 

Sector Report

Table of Contents 

Sector Consumer Apparel Sector………………………………………………………………………………...3 

Company Report: Peak (1968 HK)………………………………………………….……………………………11 

Company Report: China Lialng (1234 HK).……………………………………….……………………………16 

Company Report: Active Group (1096 HK).……………………………………………………………………21 

Disclaimer……………………………………….……………………………………………………………………25 




Sector Report

The industry is still experiencing a very difficult time. We went to Fujian to visit Peak (1968 HK), China Lilang (1234 HK), 

361 degree (1361 HK), Active Group (1096 HK) and Flyke (1998 HK) last week. Also Anta (2020 HK) held a conference call to 

discuss its 3Q12 retail operational data and 2Q13 order book growth last Friday. The industry is still experiencing a very 

difficult time. The retail sales for sportswear products, menswear and casual footwear are all very weak. The weak retail sales 

this year is expected to lead to the unfavorable sales performance for listed companies due to the nature of wholesale 

business model. Moreover, the aggressive credit period policy may result high provision for bad debts due to the deteriorated 

profitability and cash position of distributors. Finally, the listed companies is busy with revising down of wholesale discount and 

increasing subsidy to support distributors, which we believe to be permanent to relocate the profits along the value chain. 

Table-1: Peers’ Trade Fair Order Book Value Growths (yoy) 

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 

Li Ning mid-single digit% Flat -mid single digit% 

-high 

teens% 

n.a. n.a. 

Anta low single digit% low single digit% -high single digit% -low teens% -(20%-30%) -(15%-25%) 

China Dongxiang n.a. n.a. n.a. n.a. n.a. n.a. 

Xtep 9.0% 5.0% 0.0% 0.0% -(15%-20%) n.a. 

361 Degree 23.0% 23.0% 6.0% 2.0% -23.0% -23.0% 

Peak ~-25% ~-25% ~-25% ~-25% 0% ~-30% 

China Lilang 28.5% 28.5% 16.0% 11.5% -9.0% -9.0% 

Source: the Companies, Guotai Junan International. 

Not yet over for the sportswear industry. The industry consolidation is longer than expected and the recovery may not be in 

near term. We have seen very scarce customer traffic during our channel check at one of the major walking streets in 

Jinjiang,Fujian, even on a Wednesday night. We have also seen very scarce customer traffic during our channel check in 

Shenzhen during weekend in October. We find not many people in the stores although we take these photos randomly if you 

pay attention to the pictures that we took. People seem not to be buying sportswear products or not entering the stores after 

the long price war in the industry. Given the weak sales performance in 3Q12 and early 4Q12, we can’t be optimistic for the 

3-4Q13 order book growth. The excessive channel inventory burns distributors’ cash and hurts distributors’ confidence. The 

inventory accumulated for past years is not easy to clear out as the prolonged price war has bored the consumers. The life is 

much tougher for lots of unlisted brands due to the lack of brand recognition and rising price competition. Some companies 

have left the sportswear industry in this price war but their products are still affecting the retail market. 

Figure-1: Sportswear shoes in the street in Jinjiang Figure-2: Deerway store in Jinjiang 

Source: Guotai Junan International. Source: Guotai Junan International. 




Sector Report

Figure-3: Not many customers in the store in Jinjiang Figure-4: Lining store in Jinjiang 


Figure-5: Anta store in Jinjiang Figure-6: Xtep store in Jinjiang 


Figure-7: Guirenniao store in Jinjiang 

Source: Guotai Junan International. 




Sector Report

Figure-8: 361 degree store in Shenzhen Figure-9: Piled up inventories in the store 


Figure-10: Erke store in Shenzhen Figure-11: Piled up inventories in the store 


Figure-12: Anta store in Shenzhen Figure-13: Anta store in Shenzhen 





Sector Report

Figure-14: Lining store in Shenzhen Figure-15: Xtep store in Shenzhen 


Figure-16: Peak store in Shenzhen 


Strong pressure for China Lilang. We have seen very scarce customer traffic in Lilanz and L2 stores during our channel 

check in Jinjiang,Fujian in Wednesday night. We found that most of the L2 stores in Fujian were actually losing money as the 

brand has high price but lower brand recognition at the moment. The development of L2 brand is expected to be very difficult 

at the moment. Our discussion with China Lilang in Jinjiang also supports our view that there is strong pressure for China 

Lilang (1234 HK). 

Figure-17: Lilanz store in Jinjiang Figure-18: Lilanz store in Jinjiang 





Sector Report

Figure-19: L2 store in Jinjiang 


Key takeaways from Peak (1968 HK) 

2Q13 order book growth significantly worse than 1Q13 due to the unsatisfactory 2Q12 retail sales and wholesale 

discount was revised down from 61% off to 65% off starting 2Q13. 

Will not set target for 3-4Q13 order book for distributors due to the weak retail sales and unfavorable macroeconomic. 

No improvement in 3Q12 SSSG although the base was low for 3Q11. 

Current inventory to sales ratio is 5x. 

The number of retail stores is expected to be around 6500 stores at the end of 2012. Expect to maintain around 6000 

stores in the future. The wholesale discount was revised down from 61% off to 65% off starting 2Q13 to support 

distributors. But gross profit margin is expected to be dragged down to 35-37% in 2013. 

It’s now the most difficult time for distributors as same store sales is not deteriorating further and retail inventory is not 

increasing so it is not expected to be worse. The recovery may depend on the macro environment. 

Inventory at the end of 2012 is expected to be similar as the RMB650 mn as at the end of June 2012. Around 20-30% 

inventory is resulted from the cancellation of order from distributors. 

The amount of accounts receivable is expected to be similar as the RMB1,151 mn as at the end of June 2012. The 

Company is negotiating with auditors to make reasonable provision for this year. 

Major guidance for 2013: A&P 15%, operating profit margin 16-18%, net profit margin 10-12%. 

Key takeaways from 361 degree (1361 HK) 

3Q12: SSSG 4.1%, which was better than peers as most stores are in western and central China with better economic 

growth. Inventory to sales 4.1x 

No. of stores in 3Q12: open 160, closed 140, net 20 

Move the trade fair one month ahead starting next year: say 3Q in November this year, but will be in Oct next year. 

FY12 earnings will be much lower than FY11 earnings: Turnover –(11%-13%); Increase subsidy around 3% of total sales 

to distributors for shelves; OP margin 15-16%; effective tax rate 18%. 

Expect 3Q13 order flat or low single digit decline. 

Expect 4Q13 to be much better than the -26% last year. Industry is cutting production. Early winter this year to have 

better winter sales. Expect turn around in 2014. 

AR days: try to lower AR but can’t as the unsatisfactory profitability of distributors. Expect AR to be more or less the same 

as the 2.2 bn RMB at the end of June 2012. Discussing with auditor to make impairment in AR. Negotiating around 2-3% 

on the amount of AR for impairment (around RMB44 mn to RMB66 mn). Try to reflect this in P&L. 

The retail discount of 361 degree is around 25% to 30% off. The industry recovery must wait for the industry retail 

discount to be 25% to 30% off. There is no clear turnaround at the moment. 




Sector Report

It’s now the most difficult time for the industry but it’s hard to say how long this situation will last 

Key takeaways from Anta (2020 HK) 

Inventory of apparel to be quite serious at retail level. 

3Q12 SSSG: negative single digit percentage. 

Retail discount: 3Q 30% off; 1Q 25% off, 2Q 30% off. 

ASP and volume are dropping for 2Q13 order book but the main driver is volume drop. 

Inventory level in 3Q13 is still 5 times. The whole inventory of the industry is still high in retail channel. 

Discount policy in 2Q13 is similar as in 1Q13. 

2Q12 order was cut more in the order adjustment in 1H12, so the comparable bas is lower. 

Potential not too strict on renovation subsidy for distributors: the decoration subsidy will be more flexible in 2H this year. 

And it’s still not clear for 2013 policy 

Expect stable A&P ratio next year 

Key takeaways from China Lilang (1234 HK) 

The SSSG: 1H 12.4%; 3Q 10%; Flat in September and October. 

The retail inventory is more than 20% for 2012 spring/summer products and around 10% for 2011 fall/winter products. 

But the 2012 fall products are only sold out more than 30%. So the Company is expecting the 2013 fall order book growth 

be lower than the -9% for the 2013 spring/summer order book growth. 

The 6% ASP increase for 2013 spring/summer products mainly results from the change of product mix. The cost is 

expected to be relatively stable as slight decrease in raw material but no significantly increase in labor cost as well as the 

salary for management and sales staffs. 

A&P ratio is expected to be 9% for 2012. 

The replenishment order was good in previous years but there is no significant replenishment order this year. The total 

sales are expected to be flat or single digit percentage increase for 2012. 

The total amount of accounts receivable is expected to be similar as the RMB700 mn as at the end of June 2012. 

The long term worry of Lilanz brand is that the current 35 to 45 years old customer group is getting older but the early 

30-year–old consumer group may not buy the Lilanz brand products when they are getting older. 

Key takeaways from Active Group (1096 HK) 

The macro environment is getting worse starting the second half last year and getting even worse this year. The 

consumers seem to buy shoes quite conservatively. Also the group purchasing power is quite weak this year. Group 

purchasing accounted for more than 10% of branded business in the previous years. 

The production capacity is expected to double after the production expansion in Jiangsu. 

The Company opened one flagship store in Xiamen. 

Current cash position: around RMB80 mn. 

Expect number of retail sales point to be 2500 as at the end of 2012. 

The trade fair is held 4 times a year and the orders placed in trade fair normally accounts for 50% of total sales. The order 

book increase 5-10% in 1-2Q13. 

Total sales increase around 5% this year. The OEM sales are expected to account for 18-19% of total sales this year. 

Sales targets are RMB600 mn for 2012 and RMB600 mn to RMB700 mn for 2013. 

The accounts receivable is expect to increase slightly compared to the RMB580 mn as at the end of June 2012. The 

accounts receivable turnover days is expected to increase further as major clients (including department stores) is 

requiring longer credit period. 

The gross profit margin declined from the 36.5% in 2011 to the 26.1% in 1H2012. The Company expects the gross profit 

margin to improve by 1 to 2 percentage points in 2012 compared to the 26.1% in 1H2012 due to the higher gross profit 

margin for fall and winter products. But the gross profit margin is expected to be relatively stable in 2013. 




Sector Report

The selling and administrative cost is increasing substantially due to some new senior management joined the Company 

in late 2011 as well as more cost was incurred for trade fairs and more advertisements. 

Operating profit margin is expected to be 15-16%. 

Key takeaways from Flyke (1998 HK) 

The price war between major sportswear companies started to affect the Company in 3Q12. The Company decided not 

to open originally proposed flagship stores. 

Expect to close 200-300 retail stores (around 10% of total stores) this year. A lot of retail stores are closed after the peak 

sales on May 1 holiday this year. The Company found that it was very difficult to look for sub distributors at the end of last 

year. 

The whole sportswear industry is over supply. Sales of sportswear products were in the peak of a long business cycle 

during 2003 and 2007 and the 2008 Beijing Olympic helps to extend the peak sales for 2 more years. The consumer 

group is switching to manufacturing labors and waiters or waitresses due to the prolong price war. 

The capital market blew up the whole sportswear industry bubble and the industry development was not expected to be 

so fast without the injection of capital from capital market. The industry is not expected to go back to the peak in the 

foreseeable future. 

The ODM business for Fila, Kappa, Guess and Tommy provides a stable cash flow for the company. 

Newly established an American style casual menswear brand. Retail ASP was 800-1,000 for winter products. The 

number of retail stores was 15 stores at the end of September 2012 and is expected to be 25 as at the end of 2012. 

Maintain Belle (1880 HK) as our top pick for the Consumer-Apparel sector, short Anta (2020 HK), Xtep (1368 HK) and 

China Lilang (1234 HK). We prefer direct sales model to catch up the apparel sales rebound following the bottoming out 

of.GDP. The weak retail sales this year is expected to lead to the unfavorable sales performance for Fujian companies due to 

the nature of wholesale business model. We maintain Belle (1880 HK) as our top pick for the Consumer-Apparel sector. We 

maintain our ‘Buy’ rating and Target Price of HKD16.74, representing 23.8x 2012 forward PE or 20.7x 2013 forward PE. We 

prefer to short Anta (2020 HK), Xtep (1368 HK) and China Lilang (1234 HK) as the whole industry is not ready for a rebound. 

Table-2: Peers’ valuation 

PE PB ROE(%) Market Cap 

Company Stock Code Currency Last price 

11A 12F 13F 11A 12F 13F 12F HKD 

Belle International Holdings 1880 HK HKD 14.80 21.8 21.1 18.0 4.8 4.5 3.8 22.4 124,827 

Daphne International Holding 210 HK HKD 9.04 15.2 15.6 12.6 3.5 3.2 2.7 22.7 14,892 

China Lilang Ltd 1234 HK HKD 4.22 10.6 6.0 5.9 3.0 1.6 1.4 28.1 5,067 

Bosideng Intl Hldgs Ltd 3998 HK HKD 2.32 11.8 10.5 10.2 2.2 2.1 2.0 19.9 18,577 

Ports Design Ltd 589 HK HKD 5.86 12.5 6.6 5.9 3.0 1.3 1.2 20.3 3,247 

Active Group Holdings Ltd 1096 HK HKD 0.93 7.4 10.8 8.6 2.0 1.5 1.3 14.4 1,116 

Esprit Holdings Ltd 330 HK HKD 12.36 403.3 25.9 37.1 1.9 1.0 1.1 5.0 23,957 

Trinity Ltd 891 HK HKD 5.36 18.5 15.9 13.5 2.9 2.7 2.5 16.4 9,215 

C.Banner International Holdi 1028 HK HKD 2.67 9.7 13.4 10.5 2.3 n.a. n.a. n.a. 5,340 

Evergreen International Hold 238 HK HKD 1.59 7.2 6.6 5.9 0.9 0.8 0.8 11.5 1,509 

63.4 19.1 18.1 3.9 3.4 3.0 19.3 

Anta Sports Products Ltd 2020 HK HKD 5.98 10.8 8.7 11.1 2.9 1.8 1.7 20.9 14,915 

Li Ning Co Ltd 2331 HK HKD 4.14 13.6 n.a. 25.0 1.5 1.0 1.0 0.6 4,371 

Xtep International Holdings 1368 HK HKD 3.15 4.5 6.1 7.6 1.1 1.3 1.2 21.7 6,855 

Peak Sport Products Ltd 1968 HK HKD 1.36 4.5 5.4 5.5 0.9 0.5 0.5 10.9 2,853 

361 Degrees International 1361 HK HKD 2.11 6.8 4.1 4.3 1.9 0.7 n.a. 18.2 4,363 

China Dongxiang Group Co 3818 HK HKD 0.99 58.8 17.3 15.6 0.9 0.6 0.6 3.4 5,481 

15.9 7.7 11.5 1.9 1.2 1.1 15.2 

Golden Eagle Retail Group 3308 HK HKD 17.76 21.4 22.2 18.8 5.7 5.1 4.3 24.9 34,358 

Intime Department Store 1833 HK HKD 8.91 15.0 16.1 13.5 2.0 2.0 1.8 12.9 17,837 

Maoye International Hldgs 848 HK HKD 1.51 10.7 8.9 7.9 1.3 1.0 1.0 11.4 8,109 




Sector Report

Parkson Retail Group Ltd 3368 HK HKD 5.92 19.3 13.3 12.1 4.1 2.3 2.1 18.0 16,638 

Springland International Hol 1700 HK HKD 3.81 18.0 12.0 10.3 2.5 1.7 1.5 14.7 9,525 

Lifestyle Intl Hldgs Ltd 1212 HK HKD 16.42 15.2 14.5 13.0 3.4 2.9 2.5 21.1 27,331 

New World Dept Store China 825 HK HKD 4.68 12.0 13.6 12.3 1.9 1.3 1.2 10.0 7,891 

17.2 16.1 14.0 3.6 3.0 2.6 18.7 

Source: Bloomberg, Guotai Junan International; as of 19 November 2012. 




Sector Report

Company Report: Peak Sport (01968 HK) Jerry Peng 彭港祥 

公司报告:匹克体育 (01968 HK) +86 755 23976722 


2013 is Still Difficult 

2013年仍然困难 

The industry is still experiencing a very difficult time. The retail sales for 

sportswear products, menswear and casual footwear are all very weak. We 

have seen very scarce customer traffic during our channel check at one of the 

major walking streets in Jinjiang, even on a Wednesday night. People seem 

not to be buying sportswear products or not entering the stores after the 

long price war in the industry. 

2Q13 order book growth is significantly worse than 1Q13 due to the 

unsatisfactory 2Q12 retail sales and wholesale discount was revised down 

from 61% off to 65% off starting 2Q13. Thus gross profit margin is 

expected to be dragged down to 35-37% in 2013. The amount of accounts 

receivable is expected to be similar as the RMB1,151 mn as at the end of 

June 2012. The Company is negotiating with auditors to make reasonable 

provisions for bad debts this year. 

We cut our FY12/13/14 net profit forecasts by 0.4/23.2/22.5%, 

respectively, given lower sales and gross profit margin forecasts. The 

Company has strong balance sheet position and we expect Peak to survive in 

this industry consolidation. We believe the downside risk is limited. We 

maintain our ‘Accumulate’ rating of the Company and Target Price of 

HKD1.65, corresponding to 6.7x FY12 forward PE or 0.7x FY12 PB. 

行业仍然经历着非常困难的时期。体育用品、男装和休闲鞋的零售销售非常疲弱。在星期 

三晚上我们在晋江一条主要的步行街调研显示整体的人流量稀少。长时间的价格战之后, 

顾客似乎并没有意愿购买体育用品或者进入店铺。 

公司 2013 年二季度的订货会显著低于一季度主要是由于今年二季度的零售销售不好和批 

发折扣从二季度开始从 3.9 折下调到 3.5 折。因此 2013 年的毛利率预期将下降至 35-37%。 

年底的应收账款预期将与 6 月底的 11.51 亿人民币相若。公司正在和审计师探讨今年做合 

理的坏账拨备。 

因应更低的销售和毛利率预测,我们把 2012-14 年的净利润预测分别下调了 

0.4/23.2/22.5%。公司资产负债表强劲,我们预期公司能在这轮行业整合中存活。我们认 

为下行风险有限。我们维持公司的‘收集’评级和目标价 1.65 港元,对应 6.6 倍 2012 年 

预测市盈率。 

Year End 

年结 

Turnover 

收入 

Net Profit 

股东净利 

EPS 

每股净利 

EPS 

每股净利变动 


Rating: Accumulate 

Maintained 

评级: 收集 (维持) 

6-18m TP 目标价: HK$1.65 

Revised from 原目标价: HK$1.65 

Share price 股价: HK$1.360 

Stock performance 

股价表现 


PER 

市盈率 

BPS 

每股净资产 

50.0 

25.0 

0.0 

-25.0 

-50.0 

% of return 

Nov-11 Feb-12 May-12 Aug-12 Nov-12 

Change in Share Price 

股价变动 

HSI Peak 

1 M 

1 个月 

3 M 

3 个月 

1 Y 

1 年 

Abs. % 

绝对变动 % 

(15.0) (0.7) (25.6) 

Rel. % to HS index 

相对恒指变动 % 

(13.7) (6.4) (42.2) 

Avg. share price(HK$) 

1.5 1.4 

平均股价(港元) 

Source: Bloomberg, Guotai Junan International. 

1.5 

PBR 

市净率 

DPS 

每股股息 

Yield 

股息率 

ROE 


12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%) 

2010A 4,249 822 0.392 8.9 2.8 1.660 0.7 0.170 12.5 25.4 

2011A 4,647 778 0.371 (5.4) 2.9 1.927 0.6 0.140 10.3 20.7 

2012F 3,346 416 0.198 (46.6) 5.5 2.016 0.5 0.059 4.4 10.0 

2013F 2,825 307 0.147 (26.1) 7.4 2.109 0.5 0.044 3.2 7.1 

2014F 3,030 340 0.162 10.8 6.7 2.225 0.5 0.049 3.6 7.5 

Shares in issue (m) 总股数 (m) 2,098.0 Major shareholder 大股东 Xu family 60.9% 

Market cap. (HK$ m) 市值 (HK$ m) 2,853.1 Free float (%) 自由流通比率 (%) 39.1% 

3 month average vol. 3 个月平均成交股数 (‘000) 2,991.4 FY12 Net gearing (%) FY12净负债/股东资金 (%) 11.8% 

52 Weeks high/low (HK$) 52 周高/低 2.630 / 1.100 11-14 PEG (X) 市盈率/增长率 n.a. 

Source‥the Company, Guotai Junan International. 


Peak Sport 匹克体育 (01968 HK) 

Company Report

The industry is still experiencing a very difficult time. We went to Fujian to visit Peak (1968 HK), China Lilang (1234 HK), 

361 degree (1361 HK), Active Group (1096 HK) and Flyke (1998 HK) last week. Also Anta (2020 HK) held a conference call to 

discuss its 3Q12 retail operational data and 2Q13 order book growth last Friday. The industry is still experiencing a very 

difficult time. The retail sales for sportswear products, menswear and casual footwear are all very weak. The weak retail sales 

this year is expected to lead to the unfavorable sales performance for listed companies due to the nature of wholesale 

business model. Moreover, the aggressive credit period policy may result high provision for bad debts due to the deteriorated 

profitability and cash position of distributors. Finally, the listed companies is busy with revising down of wholesale discount and 

increasing subsidy to support distributors, which we believe to be permanent to relocate the profits along the value chain. 

Table-1: Peers’ Trade Fair Order Book Value Growths (yoy) 

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 

Li Ning mid-single digit% Flat -mid single digit% 

-high 

teens% 

n.a. n.a. 

Anta low single digit% low single digit% -high single digit% -low teens% -(20%-30%) -(15%-25%) 

China Dongxiang n.a. n.a. n.a. n.a. n.a. n.a. 

Xtep 9.0% 5.0% 0.0% 0.0% -(15%-20%) n.a. 

361 Degree 23.0% 23.0% 6.0% 2.0% -23.0% -23.0% 

Peak ~-25% ~-25% ~-25% ~-25% 0% ~-30% 

China Lilang 28.5% 28.5% 16.0% 11.5% -9.0% -9.0% 

Source: the Companies, Guotai Junan International. 

Not yet over for the sportswear industry. The industry consolidation is longer than expected and the recovery may not be in 

near term. We have seen very scarce customer traffic during our channel check at one of the major walking streets in 

Jinjiang,Fujian, even on a Wednesday night. We have also seen very scarce customer traffic during our channel check in 

Shenzhen during weekend in October. We find not many people in the stores although we take these photos randomly if you 

pay attention to the pictures that we took. People seem not buying sportswear products or not entering the stores after the long 

price war in the industry. Given the weak sales performance in 3Q12 and early 4Q12, we can’t be optimistic for the 3-4Q13 

order book growth. The excessive channel inventory burns distributors’ cash and hurts distributors’ confidence. The inventory 

accumulated for past years is not easy to clear out as the prolonged price war has bored the consumers. The life is much 

tougher for lots of unlisted brands due to the lack of brand recognition and rising price competition. Some companies have left 

the sportswear industry in this price war but their products are still affecting the retail market. 

Key takeaways from Peak (1968 HK) 

2Q13 order book growth significantly worse than 1Q13 due to the unsatisfactory 2Q12 retail sales and wholesale 

discount was revised down from 61% off to 65% off starting 2Q13. 

Will not set target for 3-4Q13 order book for distributors due to the weak retail sales and unfavorable macroeconomic. 

No improvement in 3Q12 SSSG although the base was low for 3Q11. 

Current inventory to sales ratio is 5x. 

The number of retail stores is expected to be around 6500 stores at the end of 2012. Expect to maintain around 6000 

stores in the future. The wholesale discount was revised down from 61% off to 65% off starting 2Q13 to support 

distributors. But gross profit margin is expected to be dragged down to 35-37% in 2013. 

It’s now the most difficult time for distributors as same store sales is not deteriorating further and retail inventory is not 

increasing so it is not expected to be worse. The recovery may depend on the macro environment. 

Inventory at the end of 2012 is expected to be similar as the RMB650 mn as at the end of June 2012. Around 20-30% 

inventory is resulted from the cancellation of order from distributors. 

The amount of accounts receivable is expected to be similar as the RMB1,151 mn as at the end of June 2012. The 

Company is negotiating with auditors to make reasonable provision for this year. 

Major guidance for 2013: A&P 15%, operating profit margin 16-18%, net profit margin 10-12%. 




Company Report

Cut FY12/13/14 net profit forecasts by 0.4/23.2/22.5%, respectively. We cut our sales and gross profit margin forecasts 

according to the lower than expected 1H2013 order book and new wholesale discount leading to the gross profit margin 

decline. As a result, we cut our FY12/13/14 net profit forecasts by 0.4/23.2/22.5%, respectively. Now we expect the basic EPS 

to be RMB0.190, 0.147 and 0.162, respectively, in FY12-14. 

Table-3: Major assumptions 

New Old Changes 

RMB mn FY12F FY13F FY14F FY12F FY13F FY14F FY12F FY13F FY14F 

Total Revenue 3,346 2,825 3,030 3,346 3,368 3,612 0.0% -16.1% -16.1% 

Gross Profit 1,261 1,017 1,088 1,261 1,265 1,354 0.0% -19.6% -19.6% 

Operating Profit 534 422 466 537 546 598 -0.4% -22.7% -22.0% 

Net Profit 416 307 340 417 400 439 -0.4% -23.2% -22.5% 

EPS RMB) 0.198 0.147 0.162 0.199 0.191 0.209 -0.4% -23.2% -22.5% 

Gross Profit Margin 37.7% 36.0% 35.9% 37.7% 37.6% 37.5% 0.0 

Changes (ppt) 

-1.6 -1.6 

Operating profit margin 16.0% 14.9% 15.4% 16.0% 16.2% 16.6% -0.1 -1.3 -1.2 

A&P to turnover ratio 15.0% 15.0% 14.5% 15.0% 14.5% 14.0% 0.0 0.5 0.5 

Effective tax rate 21.0% 25.0% 25.0% 21.0% 25.0% 25.0% 0.0 0.0 0.0 

Net profit margin 12.4% 10.9% 11.2% 12.5% 11.9% 12.2% -0.1 -1.0 -0.9 

Source: the Company, Guotai Junan International. 

Maintain ‘Accumulate’ rating and Target Price of HKD1.65. The industry consolidation is longer than expected. The life is 

much tougher for lots of unlisted brands due to the lack of brand recognition and rising price competition. Some companies 

have left the sportswear industry in this price war. So the competition is expected to be softer after the industry consolidation 

and rentals are expected to be more reasonable due to the easing competition. Peak is now trading at 5.5x FY12 forward PE 

and 7.4x FY12 forward PE based on our earnings forecasts. The Company has strong balance sheet position and we expect 

Peak to survive in this industry consolidation. We believe the downside risk is limited. We maintain our ‘Accumulate’ rating of 

the Company and Target Price of HKD1.65, corresponding to 6.7x FY12 forward PE or 0.7x FY12 PB. 




Company Report

Income Statement 

Yr end 31 Dec (RMB m) 2010A 2011A 2012F 2013F 2014F 

Turnover 4,249 4,647 3,346 2,825 3,030 

Cost of sales -2,633 -2,814 -2,086 -1,808 -1,942 

Gross profit 1,616 1,832 1,261 1,017 1,088 

Other income 13 31 34 36 41 

Distribution costs -505 -713 -543 -462 -483 

Administrative and general expenses -126 -213 -217 -169 -179 

Operating profit 998 938 534 422 466 

Finance cost 0 -2 -8 -13 -13 

Profit before tax 998 937 526 410 454 

Income tax -176 -159 -110 -102 -113 

Profit after tax 822 778 416 307 340 

Net profit 822 778 416 307 340 

EPS (RMB) 0.392 0.371 0.198 0.147 0.162 


Balance Sheet 


PP&E 342 439 442 427 407 

Prepaid land lease payments 16 16 15 15 15 

Intangible asset 14 16 16 15 15 

Other assets 88 201 254 312 390 

Non-current assets 459 672 727 769 827 

Inventory 335 421 501 379 346 

Trade and Bill receivables 744 1,089 1,119 849 790 

Pledged deposits 54 82 82 82 82 

Cash balance 2,566 2,503 2,852 3,273 3,527 

Current assets 3,741 4,208 4,666 4,695 4,857 

Trade and bill payables 608 562 549 427 402 

Bank loans 0 161 500 500 500 

Total Current liabilities 671 777 1,104 981 956 

Total Non-current liabilities 47 59 59 59 59 

Shareholders' equities 3,482 4,044 4,230 4,424 4,669 

Book value per share (RMB) 


1.660 1.927 2.016 2.109 2.225 

Cash Flow Statement 



Depreciation and amortisation 22 32 44 52 56 

Others 6 -8 -17 -16 -20 

Working capital change 270 -472 -122 270 66 

Tax paid -130 -178 -110 -102 -113 

Operating cash flow 1,166 311 321 614 442 

Purchase of PP&E -74 -73 -46 -36 -36 

Other investing activities 415 -238 -28 -30 -45 

Investing cash flow 342 -311 -73 -66 -81 

Dividend paid -349 -227 -229 -114 -96 

Other Financing activities 0 160 331 -13 -13 

Financing cash flow -349 -67 102 -126 -108 

Change in cash and cash equivalent 1,159 -68 349 422 253 

Cash balance at year end 


2,566 2,503 2,852 3,273 3,527 




Company Report

Financial Ratios 

Yr end 31 Dec 2010A 2011A 2012F 2013F 2014F 

Gross margin (%) 38.0 39.4 37.7 36.0 35.9 

Operating margin (%) 23.5 20.2 16.0 14.9 15.4 

Net profit margin (%) 19.4 16.7 12.4 10.9 11.2 

ROE (%) 25.4 20.7 10.0 7.1 7.5 

ROA (%) 21.6 17.1 8.1 5.7 6.1 

Inventory turnover days 37.8 49.0 80.7 88.9 68.1 

Account receivable days 69.0 72.0 120.4 127.1 98.7 

Account payable days 65.7 75.9 97.2 98.5 77.8 

Current ratio (x) 5.6 5.4 4.2 4.8 5.1 

Payout ratio (%) 37.2 30.7 30.0 30.0 30.0 





Company Report

Company Report: China Lilang (01234 HK) Jerry Peng 彭港祥 

公司报告:利郎 (01234 HK) +86 755 23976722 


Tough 2013, Maintain ‘Reduce’ 

2013年严峻,维持“减持” 

We have seen very scarce customer traffic during our channel check at one of 

the major walking street in Jinjiang, even on a Wednesday night. We found 

that most of the L2 stores in Fujian were actually losing money as the 

brand products have high prices but lower brand recognition at the 

moment. The development of L2 brand is expected to be very difficult. Our 

discussion with China Lilang (1234 HK) also supports our view that there is 

strong pressure for China Lilang (1234 HK). 

The replenishment order was good in previous years but there is no 

significant replenishment order this year. The total sales are expected to be 

flat or single digit percentage increase for 2012. The 2012 fall products 

are only sold out more than 30%. So the Company is expecting the 2013 

fall order book growth be lower than the -9% for the 2013 spring/summer 

order book growth. 

We cut our FY12/13/14 basic EPS forecasts by 10.2%/16.6%/22.1%, 

respectively, to factor in the limited replenishment order for fall and 

winter products this year and the potential drop of 2013 fall order book 

due to the excessive 2012 fall inventory at retail level. We maintain the 

Company rating at ‘Reduce’ and Target Price of HKD4.17, representing 6.6x 

2012 forward PE or 7.2x 2013 forward PE. 

在星期三晚上我们在晋江一条主要的步行街调研显示整体的人流量稀少。我们也发现目前 

福建大多数的 L2 零售店铺是亏损的,主因零售价格高但是品牌知名度目前较低。L2 的发 

展预期比较困难。我们和利郎(1234 HK)的交流也显示公司目前面临较大压力。 

往年的补单不错而今年没有什么补单,公司预计 2012 年的整体销售持平或者只有单位数 

百分比的增长。2012 年秋季产品售罄率只有 30%几,公司预期 2013 年的秋季订单增长可 

能比春夏季的-9%低。 

由于今年的秋冬季补单少而今年秋季的过量库存预期导致明年秋季订单下降,我们分别下 

调了分别下调了 2012/13/14 年基本每股盈利预测 10.2%/16.6%/22.1%。我们维持公司的 

“减持”评级和目标价 4.17 港元,对应 6.6 倍 2012 年预测市盈率和 7.2 倍 2013 年预测 

市盈率。 

Year End 

年结 

Turnover 

收入 

Net Profit 

股东净利 

EPS 

每股净利 

EPS 



Rating: Reduce 

Maintained 

评级: 减持 (维持) 

6-18m TP 目标价: HK$4.17 




股价表现 


PER 

市盈率 

BPS 


50.0 

25.0 

0.0 

(25.0) 

(50.0) 

% of return 

Nov-11 Feb-12 May-12 Aug-12 Nov-12 

HSI China Lilang 


股价变动 

1 M 

1 个月 

3 M 

3 个月 

1 Y 

1 年 

Abs. % 


(10.2) (28.9) (39.4) 



(8.9) (34.6) (54.4) 


4.4 4.7 



5.9 

PBR 

市净率 

DPS 

每股股息 

Yield 

股息率 

ROE 



2010A 2,053 419 0.349 13.0 9.7 1.550 2.2 0.170 4.0 23.9 

2011A 2,708 623 0.519 48.7 6.5 1.813 1.9 0.410 9.7 30.9 

2012F 2,849 604 0.503 (3.0) 6.7 2.064 1.6 0.151 3.6 26.0 

2013F 2,728 557 0.463 (7.9) 7.3 2.380 1.4 0.139 3.3 20.9 

2014F 2,816 585 0.487 5.1 6.9 2.726 1.2 0.146 3.5 19.1 

Shares in issue (m) 总股数 (m) 1,200.7 Major shareholder 大股东 

Xiao Sheng and Ming L 

ang 60.8% 

Market cap. (HK$ m) 市值 (HK$ m) 5,067.0 Free float (%) 自由流通比率 (%) 39.2 

3 month average vol. 3 个月平均成交股数 (‘000) 5,048.2 FY12 Net gearing (%) FY12 净负债/股东资金 (%) Net cash 

52 Weeks high/low (HK$) 52 周高/低 9.252 / 3.850 11-14 PEG (X) FY12 市盈率/增长率 n.a. 



China Lilang 利郎 (01234 HK) 

Company Report

Tough 2013. We have seen very scarce customer traffic during our channel check at one of the major walking street in 

Jinjiang, even on a Wednesday night. We found that most of the L2 stores in Fujian were actually losing money as the brand 

products have high prices but lower brand recognition at the moment. The development of L2 brand is expected to be very 

difficult. Our discussion with China Lilang (1234 HK) also supports our view that there is strong pressure for China Lilang 

(1234 HK). Given the weak sales performance in 3Q12 and early 4Q12, we can’t be optimistic for the 3-4Q13 order book 

growth. 

Key takeaways from China Lilang (1234 HK) 

The SSSG: 1H 12.4%; 3Q 10%; Flat in September and October. 

The retail inventory is more than 20% for 2012 spring/summer products and around 10% for 2011 fall/winter products. 

But the 2012 fall products are only sold out more than 30%. So the Company is expecting the 2013 fall order book growth 

be lower than the -9% for the 2013 spring/summer order book growth. 

The 6% ASP increase for 2013 spring/summer products mainly results from the change of product mix. The cost is 

expected to be relatively stable as slight decrease in raw material but no significantly increase in labor cost as well as the 

salary for management and sales staffs. 

A&P ratio is expected to be 9% for 2012. 

The replenishment order was good in previous years but there is no significant replenishment order this year. The total 

sales are expected to be flat or single digit percentage increase for 2012. 

The total amount of accounts receivable is expected to be similar as the RMB700 mn as at the end of June 2012. 

The long term worry of Lilanz brand is that the current 35 to 45 years old customer group is getting older but the early 

30-year–old consumer group may not buy the Lilanz brand products when they are getting older. 

Figure-1: Lilanz brand order book growths Figure-2: L2 brand order book growths 

40% 

35% 

33.0% 

34% 

30% 

25% 

28% 28.5% 

20% 

25.0% 25.0% 26.5% 

15% 

16% 

10% 

5% 

0% 

11.5% 

-5% 1-2Q10 3Q10 4Q10 1-2Q11 3Q11 4Q11 1-2Q12 3Q12 4Q12 1-2Q13 

-10% 

-15% 

-9% 

120% 

100% 


80% 

60% 

40% 

20% 

0% 

100.0% 

61.0% 

40.5% 

1-2Q12 3Q12 4Q12 1-2Q13 

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. 

Cut FY12/13/14 basic EPS forecasts by 10.2%/16.6%/22.1%, respectively. We have cut our FY12/13/14 total revenue 

forecasts by 10.5%/17.3%/23.2%, respectively, to factor in the limited replenishment order for fall and winter products this year 

and the potential drop of 2013 fall order book due to the excessive 2012 fall inventory at retail level. We now expect the 2013 

fall and winter order book growth to be -12% and 5%, respectively. As a result, we cut our FY12/13/14 basic EPS forecasts by 

10.2%/16.6%/22.1%, respectively. We now expect our FY12-14 basic EPS forecasts to be RMB 0.503/0.463/0.487, 

respectively. 

Table-1: Key assumptions 

RMB mn New Old Changes 

2012F 2013F 2014F 2012F 2013F 2014F 2012F 2013F 2014F 

Total Revenue 2,849 2,728 2,816 3,184 3,300 3,666 -10.5% -17.3% -23.2% 

Lilanz revenue 2,680 2,531 2,596 3,015 3,103 3,445 -11.1% -18.4% -24.7% 

L2 revenue 169 197 221 169 197 221 0.0% 0.0% 0.0% 

Gross Profit 1,140 1,088 1,125 1,274 1,317 1,464 -10.5% -17.3% -23.2% 

17.0% 



Company Report

Operating Profit 750 714 740 840 869 970 -10.8% -17.8% -23.7% 

Net Profit 604 557 585 673 668 751 -10.2% -16.6% -22.1% 

Basic EPS (RMB) 0.503 0.463 0.487 0.560 0.556 0.626 -10.2% -16.6% -22.1% 

Gross Profit Margin 40.0% 39.9% 40.0% 40.0% 39.9% 40.0% (0.0) 

Changes(ppt) 

(0.0) 0.0 

% A&P of total turnover 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 0.0 0.0 0.0 

% SG&A of total turnover 14.1% 14.2% 14.1% 14.0% 14.0% 13.8% 0.1 0.2 0.3 

Operating profit margin 26.3% 26.2% 26.3% 26.4% 26.3% 26.5% (0.1) (0.1) (0.2) 

Effective tax rate 24.5% 28.0% 28.0% 24.5% 28.0% 28.0% 0.0 0.0 0.0 

Net profit margin 21.2% 20.4% 20.8% 21.1% 20.2% 20.5% 0.1 0.2 0.3 


Maintain ‘Reduce’ and Target Price of HKD4.17. Given current still weak retail sales, the 2013 fall order book is expected to 

be disappointed as the slower response of wholesale model. The profitability of the Company in 2013 is under pressure as a 

sharp decrease of order book growth, gross profit margin contraction pressure as well as the substantial increase of effective 

tax rate. We maintain the Company rating at ‘Reduce’ and Target Price of HKD4.17, representing 6.6x 2012 forward PE or 

7.2x 2013 forward PE. 




Company Report



Turnover 2,053 2,708 2,849 2,728 2,816 

Cost of sales (1,275) (1,653) (1,710) (1,639) (1,691) 

Gross profit 778 1,055 1,140 1,088 1,125 

Other revenue 9 12 12 13 14 

Selling & Distribution Expenses (224) (274) (310) (300) (310) 

Administrative expenses (81) (89) (92) (87) (88) 

Other Operating (Expenses)/income (2) (0) (0) (0) (0) 

Profit from operations 480 704 750 714 740 

Net Finance income (costs) 8 49 51 59 73 

Profit before taxation 488 753 801 773 812 

Income tax (69) (130) (196) (216) (227) 

Net profit 419 623 604 557 585 

EPS (RMB) 0.349 0.519 0.503 0.463 0.487 


Balance Sheet 


PP&E 180 204 214 221 225 

Lease prepayments 38 37 36 35 34 

Investment Property 30 29 28 28 27 

Other assets 16 139 139 139 139 

Total non-current assets 264 410 418 422 425 

Inventories 182 225 275 291 306 

Trade and other receivables 501 715 769 753 794 

Fixed Deposits Held At Banks with Maturity Over Three Months 576 0 0 0 0 

Cash balance 847 1,241 1,467 1,852 2,245 

Total current assets 2,144 2,185 2,515 2,900 3,350 

Total assets 2,408 2,595 2,933 3,322 3,775 

Trade and Other Payables 509 339 377 386 423 

Bank Loans 0 0 0 0 0 

Total current liabilities 536 368 406 415 452 

Total non-current liabilities 12 49 49 49 49 

Total liabilities 548 418 455 464 502 

Shareholders' equities 1,860 2,177 2,478 2,858 3,273 

Total liabilities and equity 2,408 2,595 2,933 3,322 3,775 

Book value per share (RMB) 1.550 1.813 2.064 2.380 2.726 





Company Report




Depreciation and amortisation 15 17 20 23 25 

Interest expense 0 0 0 0 0 

(Interest income) (11) (44) (51) (59) (73) 

Others 5 3 0 0 0 

Working capital change 71 (399) (67) 10 (19) 

Income tax paid (49) (92) (196) (216) (227) 

Operating cash flow 518 234 506 530 519 

Purchase of PP&E (49) (120) (28) (27) (28) 

Others (262) 582 51 59 73 

Investing cash flow (311) 462 23 32 44 

Dividend paid (192) (300) (304) (177) (170) 

Other investing activities 0 0 1 0 0 

Financing cash flow (192) (300) (303) (177) (170) 

Change in cash 15 396 226 385 393 

Cash balance at year end 847 1,241 1,467 1,852 2,245 

Source: The Company, Guotai Junan International. 



Revenue growth (%) 31.6 31.9 5.2 -4.3 3.2 

Net profit growth (%) 38.2 48.8 -3.0 -7.9 5.1 

Gross margin (%) 37.9 39.0 40.0 39.9 40.0 

Operating margin (%) 23.4 26.0 26.3 26.2 26.3 

Net profit margin (%) 20.4 23.0 21.2 20.4 20.8 

ROE (%) 23.9 30.9 26.0 20.9 19.1 

ROA (%) 18.9 24.9 21.9 17.8 16.5 

Inventory turnover days 47 45 53 63 64 

Account receivable days 85 82 95 102 100 

Account payable days 124 94 76 85 87 

Current ratio (x) 4.0 5.9 6.2 7.0 7.4 

Payout ratio (%) 48.7 64.0 30.0 30.0 30.0 

Source: The Company, Guotai Junan International. 




Company Report

Company Report: Active Group (01096 HK) Jerry Peng 彭港祥 

公司报告:动感集团 (01096 HK) +86 755 23976722 


Weak Sales Performance 

销售表现疲弱 

Total sales are expected to increase around 5% this year. The OEM sales 

are expected to account for 18-19% of total sales this year. The trade fair is 

held 4 times a year and the orders placed in trade fair normally account for 

50% of total sales. The order book increased 5-10% in 1-2Q13. The gross 

profit margin declined from 36.5% in 2011 to 26.1% in 1H2012. The Company 

expects the gross profit margin to improve by 1 to 2 percentage points in 2012 

on the 26.1% margin in 1H2012 due to the higher gross profit margin for fall 

and winter products. But the gross profit margin is expected to be relatively 

stable in 2013. 

The Company expects the number of retail sales point to be around 2500 as 

at the end of 2012. The accounts receivable is expected to increase slightly 

compared to the RMB580 mn as at the end of June 2012. The accounts 

receivable turnover days is expected to increase further as major clients 

(including department stores) are requiring longer credit periods. 

We cut our FY12/13/14 basic EPS forecasts by 0.0/11.6/18.8%, 

respectively, given lower sales forecasts. Although the current retail 

market sentiment remains weak, we believe Active Group is well positioned 

as a men’s casual footwear industry leader, leading to continued market 

share gains. We Maintain ‘Accumulate’ rating of the Company and Target 

Price of HKD0.86, representing 10.0x FY12 forward PE. 

今年的总销售额预计将增加 5%。OEM 销售预计占全年总销售额的 18-19%。公司的订货 

会一年四次,订货额占全年销售总额约 50%。2013 年一二季度的订单增加约 5-10%。公 

司今年上半年的毛利率从去年的 36.5%下跌至 26.1%。公司预期全年毛利率将比上半年的 

毛利率改善 1 到 2 个百分点,主因秋冬季产品的毛利率较高。但是 2013 年的毛利率预期 

将较稳定。 

公司预期年底零售销售网点将达到约 2500 个。应收贸易账款和票据预计将比半年底的 5.8 

亿人民币轻微增长。应收贸易账款周转天数预计将进一步增加,主因主要的客户(包括百 

货)要求延长账期。 

由于较低的销售预测,我们分别调低了 2012-14 年基本每股盈利预测 0.0/11.6/18.8%。近 

期零售市场气氛维持弱势,但是我们相信动感集团在休闲鞋行业处于有利位置,能够持续 

增加市场份额。我们公司“收集”评级和目标价 0.86 港元,对应 10 倍 2012 年预测市盈 

率。 

Year End 

年结 

Turnover 

收入 

Net Profit 

股东净利 

EPS 

每股净利 

EPS 



Rating: Accumulate 

Maintained 

评级: 收集 (维持) 

6-18m TP 目标价: HK$0.86 




股价表现 


PER 

市盈率 

BPS 


25.0 

0.0 

(25.0) 

(50.0) 

% of return 

Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 

HSI Active Group 


股价变动 

1 M 

1 个月 

3 M 

3 个月 

1 Y 

1 年 

Abs. % 


(11.4) 6.9 (17.7) 



(10.1) 1.2 (32.7) 


1.0 0.9 



1.1 

PBR 

市净率 

DPS 

每股股息 

Yield 

股息率 

ROE 



2010A 412 71 0.079 126.1 9.4 0.174 4.3 0.000 0.0 58.6 

2011A 607 112 0.115 45.3 6.5 0.550 1.4 0.007 1.0 32.4 

2012F 642 82 0.069 (40.3) 10.8 0.508 1.5 0.021 2.8 14.4 

2013F 680 92 0.077 11.4 9.7 0.564 1.3 0.023 3.1 14.3 

2014F 734 105 0.087 13.8 8.5 0.629 1.2 0.026 3.5 14.6 

Shares in issue (m) 总股数 (m) 1,200.0 Major shareholder 大股东 Ms. Cai family 57.1% 

Market cap. (HK$ m) 市值 (HK$ m) 1,116.0 Free float (%) 自由流通比率 (%) 42.9 

3 month average vol. 3 个月平均成交股数 (‘000) 3,426.4 FY12 Net gearing (%) FY12净负债/股东资金 (%) 26.2 

52 Weeks high/low (HK$) 52 周高/低 1.360 / 0.700 11-14 PEG (X) 市盈率/增长率 n.a. 



Active Group 动感集团 (01096 HK) 

Company Report

Key takeaways from Active Group (1096 HK) 

The macro environment is getting worse starting the second half last year and getting even worse this year. The 

consumers seem to buy shoes quite conservatively. Also the group purchasing power is quite weak this year. Group 

purchasing accounted for more than 10% of branded business in the previous years. 

The production capacity is expected to double after the production expansion in Jiangsu. 

The Company opened one flagship store in Xiamen. 

Current cash position: around RMB80 mn. 

Expect number of retail sales point to be 2500 as at the end of 2012. 

The trade fair is held 4 times a year and the orders placed in trade fair normally account for 50% of total sales. The order 

book increased 5-10% in 1-2Q13. 

Total sales increase around 5% this year. The OEM sales are expected to account for 18-19% of total sales this year. Sales 

targets are RMB600 mn for 2012 and RMB600 mn to RMB700 mn for 2013. 

The accounts receivable is expected to increase slightly compared to the RMB580 mn as at the end of June 2012. The 

accounts receivable turnover days is expected to increase further as major clients (including department stores) are requiring 

longer credit periods. 

The gross profit margin declined from 36.5% in 2011 to 26.1% in 1H2012. The Company expects the gross profit margin to 

improve by 1 to 2 percentage points in 2012 on the 26.1% margin in 1H2012 due to the higher gross profit margin for fall and 

winter products. But the gross profit margin is expected to be relatively stable in 2013. 

The selling and administrative cost is increasing substantially due to some new senior management joined the Company in 

late 2011 as well as more cost was incurred for trade fairs and more advertisements. 

Operating profit margin is expected to be 15-16%. 

We cut our basic EPS forecasts by 0.0/11.6/18.8%, respectively, in FY12-14. We cut our total sales forecasts by 

0.0/10.5/17.7%, respectively, in FY12-14, to factor in lower growth of branded business in view of the unfavorable 

Macroeconomic perspective. Thus we cut our FY12-14 basic EPS forecasts by 0.0/11.6/18.8% to RMB0.069/0.077/0.087, 

respectively. 

Table-1: Key assumptions 

New Old Change 

2012F 2013F 2014F 2012F 2013F 2014F 2012F 2013F 2014F 

Total revenue (RMB mn) 642 680 734 642 759 892 0.0% -10.5% -17.7% 

Branded Sales 541 574 624 541 654 782 0.0% -12.2% -20.2% 

OEM Sales 100 105 110 100 105 110 0.0% 0.0% 0.0% 

Gross Profit 176 190 209 176 213 254 0.0% -10.5% -17.7% 

Operating Profit 120 134 151 120 151 184 0.0% -10.8% -17.8% 

Net Profit 82 92 105 82 104 129 0.0% -11.6% -18.8% 

Basic EPS 0.069 0.077 0.087 0.069 0.087 0.107 0.0% -11.6% -18.8% 

Gross Profit Margin 27.5% 28.0% 28.5% 27.5% 28.0% 28.5% 0.0 

Change(ppts) 

0.0 0.0 

% A&P expenses of total turnover 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 0.0 0.0 0.0 

% SG&A of total turnover 9.4% 8.7% 8.4% 9.4% 8.6% 8.2% 0.0 0.1 0.2 

Operating profit margin 18.7% 19.8% 20.7% 18.7% 19.8% 20.7% 0.0 -0.1 -0.0 

Net profit margin 


12.9% 13.5% 14.3% 12.9% 13.7% 14.5% 0.0 -0.2 -0.2 

Maintain ‘Accumulate’ rating and Target Price of HKD0.86. The men’s casual footwear industry in China is still in the early 

stage of development. We believe Active Group is well positioned as a men’s casual footwear industry leader, leading to 

continued market share gains and putting it in a strong position to capture industry growth. We maintain ‘Accumulate’ rating of 

the Company and Target Price of HKD0.86, representing 10.0x FY12 forward PE. 




Company Report



Turnover 412.1 607.2 641.7 679.8 733.5 

YoY 78.1% 47.3% 5.7% 5.9% 7.9% 

COGS (283.0) (397.6) (465.2) (489.4) (524.5) 

Gross Profit 129.2 209.6 176.5 190.3 209.1 

YoY 101.4% 62.3% -15.8% 7.9% 9.8% 

Other revenue 0.3 1.0 3.9 3.3 3.8 

Other net loss (0.6) 5.6 0.0 0.0 0.0 

Selling and distribution expenses (16.6) (33.6) (27.0) (27.9) (29.3) 

Administrative expenses (14.5) (27.3) (33.4) (31.3) (32.0) 

Operating Profit 97.8 155.2 120.0 134.4 151.5 

YoY 116.8% 58.8% -22.7% 12.0% 12.7% 

Finance costs, net (1.3) (3.7) (8.6) (10.3) (10.1) 

Profit before taxation 96.5 151.5 111.4 124.2 141.4 

YoY 117.7% 57.0% -26.4% 11.4% 13.8% 

Income tax (25.1) (39.2) (29.0) (32.3) (36.8) 

Net Profit 71.3 112.3 82.5 91.9 104.6 

YoY 126.1% 57.4% -26.5% 11.4% 13.8% 

Basic EPS (RMB) 0.079 0.115 0.069 0.077 0.087 

YoY 126.1% 45.3% -40.3% 11.4% 13.8% 


Balance Sheet 


PP&E 50.9 61.4 136.9 159.3 182.3 

Lease payments 4.6 4.5 4.4 4.3 4.2 

Non-current prepayments for PPE acquisitions 0.2 0.0 0.0 0.0 0.0 

Deferred tax assets 0.8 1.1 1.1 1.1 1.1 

Non-current assets 56.4 67.0 142.3 164.7 187.5 

Inventories 48.6 65.5 76.7 80.7 86.5 

Current portion of lease prepayments 0.1 0.1 0.1 0.1 0.1 

Trade and other receivables 211.7 460.5 582.9 603.9 637.0 

Pledged deposits 8.7 34.7 34.7 34.7 34.7 

Cash and cash equivalents 24.7 213.2 174.8 205.8 237.4 

Current assets 293.7 774.1 869.2 925.2 995.6 

Total assets 350.2 841.0 1,011.6 1,089.9 1,183.2 

Trade and other payables 137.3 184.2 215.5 226.7 242.9 

Bank loans 33.5 84.6 150.0 150.0 150.0 

Current taxation 22.3 34.5 34.5 34.5 34.5 

Current liabilities 193.2 303.3 400.0 411.2 427.4 

Deferred tax liabilities 0.0 1.5 1.5 1.5 1.5 

Non-current liabilities 0.0 1.5 1.5 1.5 1.5 

Capital 0.0 97.9 97.9 97.9 97.9 

Reserves 156.9 438.3 512.1 579.2 656.3 

Total equity 157.0 536.2 610.0 677.2 754.2 

Total liabilities and shareholders' equity 350.2 841.0 1,011.6 1,089.9 1,183.2 

Book value per share (RMB) 0.174 0.550 0.508 0.564 0.629 





Company Report



Profit before taxation 96.5 151.5 111.4 124.2 141.4 

Interest expense 1.3 3.7 8.6 10.3 10.1 

Depreciation 4.2 4.3 4.5 7.5 7.1 

Amortisation of lease prepayments 0.1 0.1 0.1 0.1 0.1 

Net foreign exchange loss 0.1 (5.6) 0.0 0.0 0.0 

Interest income (0.2) (0.8) (3.7) (3.1) (3.6) 

Impairment loss on trade receivables 0.6 1.3 0.0 0.0 0.0 

Loss on disposal of PP&E 0.5 0.0 0.0 0.0 0.0 

Change in working capital (63.2) (191.3) (102.2) (13.8) (22.6) 

Income tax paid (14.3) (25.8) (29.0) (32.3) (36.8) 

Net cash from operating activities 25.5 (62.7) (10.3) 92.9 95.7 

Payment for PP&E (0.7) (7.8) (80.0) (30.0) (30.0) 

Payment for non-current prepayments of PP&E (0.2) 0.0 0.0 0.0 0.0 

Interest received 0.2 0.8 3.7 3.1 3.6 

Changes in pledged deposits (3.2) (26.1) 0.0 0.0 0.0 

Net cash from investing activities (3.9) (33.0) (76.3) (26.9) (26.4) 

Proceeds from issuing new shares 0.0 267.2 0.0 0.0 0.0 

Proceeds from new bank loans 38.5 96.1 65.4 0.0 0.0 

Repayment of bank loans (25.6) (45.0) 0.0 0.0 0.0 

Interest paid (1.3) (3.7) (8.6) (10.3) (10.1) 

Dividends paid 0.0 0.0 (8.6) (24.7) (27.6) 

Changes in amounts due to directors (14.2) (30.3) 0.0 0.0 0.0 

Net cash from financing activities (2.6) 284.2 48.2 (35.0) (37.7) 

Net increase in cash and cash equivalents 19.0 188.5 (38.4) 31.0 31.6 

Cash and cash equivalents at beginning of the year 5.7 24.7 213.2 174.8 205.8 

Effect of foreign exchange rate changes (0.0) (0.0) 0.0 0.0 0.0 

Cash and cash equivalents at end of the year 24.7 213.2 174.8 205.8 237.4 




Gross Margin 31.3% 34.5% 27.5% 28.0% 28.5% 

Operating Margin 23.7% 25.6% 18.7% 19.8% 20.7% 

Net Margin 17.3% 18.5% 12.9% 13.5% 14.3% 

ROE 58.6% 32.4% 14.4% 14.3% 14.6% 

ROA 26.0% 18.9% 8.9% 8.7% 9.2% 

Inventory Turnover Days 54.0 52.4 55.8 58.7 58.2 

Trade Receivables Turnover Days 90.2 119.1 161.0 172.8 167.5 

Trade and Bills Payables Turnover Days 52.1 78.1 94.9 99.8 98.9 

Cash Conversion Cycle 92.0 93.4 121.8 131.7 126.7 

Current Ratio (x) 1.5 2.6 2.2 2.2 2.3 

Quick Ratio (x) 1.3 2.3 2.0 2.1 2.1 





Company Report

Company Rating Definition 

The Benchmark: Hong Kong Hang Seng Index 

Time Horizon: 6 to 18 months 

Rating Definition 

Buy Relative Performance >15%; 

or the fundamental outlook of the company or sector is favorable. 

Accumulate Relative Performance is 5% to 15%; 

or the fundamental outlook of the company or sector is favorable. 

Neutral Relative Performance is -5% to 5%; 

or the fundamental outlook of the company or sector is neutral. 

Reduce Relative Performance is -5% to -15%; 

or the fundamental outlook of the company or sector is unfavorable. 

Sell Relative Performance 5%; 

or the fundamental outlook of the sector is favorable. 

Neutral Relative Performance is -5% to 5%; 

or the fundamental outlook of the sector is neutral. 

Underperform Relative Performance

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