港股公司研究-西牛证券-赢家时尚Strong cash inflow after acquisition and COVID19
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EEKA Fashion | 03709.HK
Strong cash inflow after acquisition and COVID-19
STOCK RATING
BUY
TARGET PRICE
HK$ 14.80
Established in 2007, EEKA Fashion (03709.HK) is a middle and high-end womenswear
company operating in China. As of the end of 2020, the brand portfolio of the Group
comprises of i) the high-end brands: Koradior, La Koradior and Koradior elsewhere, ii) the
cost-effective brand: FUUNNY FEELLN, and iii) acquired brands: CADIDL, NAERSI,
NAERSILING and NEXY.CO.
A diverse brand portfolio targeting different customers: EEKA Fashion (03709.HK) primarily
targets the ladies between 30 – 45, and its brand portfolio covering a wide price range caters
for ladies with various price appetites and needs. We believe that a more diverse brand
portfolio targeting a similar group of customers is positive to the Group because i) it
potentially expands the customer base, ii) the competition between the brands owned by
EEKA Fashion (03709.HK) is limited in a scattered market, iii) more exposure to different
customers helps build the brand recognition.
Optimization of distribution channel: Thanks to i) an expansion in the number of self-
operated retail stores, ii) the quick response to the COVID-19 (e.g. a change of
communication or sales strategies through adoption of WeChat), the Group recorded RMB
4,385.1mn in the sales derived from the retail stores, driving up the contribution of total
revenue from 78.7% in 2019 to 82.3% in 2020. Besides, We believe that the online channel
will continue being an important distribution channel to EEKA Fashion (03709.HK), instead of
clearance of inventories at a discounted price, more new products will be sold on the online
channels like EEKA Fashion Mall at a less discount, driving up the potential profit margin of
the Group.
Valuation: We use the DCF valuation methodology for valuation and take the P/E valuation
methodology as a reference to derive the fair value. We initiate our first coverage on EEKA
Fashion (03709.HK) with a “BUY” rating and a HKD 14.80/share target price, implying
11.0x/10.0x/8.6x forward P/E of 2021/2022/2023.
Risk factors: Slow recovery of sales of apparel in China, Keen competition in the apparel
market in China, Failure to introduce new products or brands, Re-outbreak of COVID-19
| RESEARCH
10 Aug, 2021
INITIATION
H F NGO, Brian, CFA
SENIOR ANALYST
brianngo@westbullsec.com.hk
+852 3896 2965
2701 – 2703, 27/F, Infinitus Plaza, 199 Des Voeux Rd
Central, Sheung Wan, HK
EEKA Fashion (03709.HK)
Stock Rating
BUY
Target Price
HK$ 14.80
Current Price
HK$ 9.88
52-Week Range
HK$ 8.14 – 19.12
Market cap. (HKD, bn)
HK$ 7.0
RMB, mn
20(A)
21(E)
22(E)
23(E)
Revenue
5,325
7,376
8,454
9,604
Gross Profit
3,910
5,425
6,225
7,076
Gross Margin
73.4%
73.5%
73.6%
73.7%
Net Profit
440
779
870
1,009
EPS
0.674
1.136
1.255
1.458
P/S
13.0
7.4
6.7
5.7
P/E
2.4
2.2
2.0
1.7
ROE
13.2%
21.1%
21.0%
21.7%
Performance
1 mth
3 mth
6 mth
1 year
Absolute
-6.8%
-11.7%
-15.4%
11.9%
Relative to HSI
-4.5%
-8.1%
-10.8%
5.4%
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
2020-08-13
2020-09-13
2020-10-13
2020-11-13
2020-12-13
2021-01-13
2021-02-13
2021-03-13
2021-04-13
2021-05-13
2021-06-13
2021-07-13
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