Analyzing BOSIDENG's interim report: Innovation-driven brand leadership, achieving new performance highs and entering long-termism

"Only long-termism can transcend cycles, only long-termism can create the future." This statement is a profound insight from Gao Dekang, Chairman of the Board of BOSIDENG (03998), at the company's mid-term performance announcement for the 2024/25 fiscal year. In the face of a complex and changing market environment and economic cycles, BOSIDENG has once again demonstrated the value and power of long-termism with its steady growth and outstanding performance.

According to Zhitong Finance APP, on November 28, BOSIDENG released its mid-term performance announcement for the 2024/25 fiscal year. The financial report shows that for the six months ending September 30, 2024, the company achieved revenue of RMB 8.804 billion, a year-on-year increase of 17.8%; net profit of RMB 1.13 billion, a year-on-year increase of 23%, with an operating profit margin rising to 16.7%. Notably, BOSIDENG has achieved a net profit growth rate greater than revenue growth rate for seven consecutive years.

Based on its strong performance, BOSIDENG declared a mid-term dividend of 6 Hong Kong cents per share, a year-on-year increase of 20%. In addition, the investment value of BOSIDENG's stock has also been recognized by investors. In 2024, the company's stock price once rose to HKD 5.14, with a maximum increase of 55.3% within the year. Data from Zhitong Finance APP shows that as of November 28, BOSIDENG has received a net inflow of HKD 1.527 billion over nearly 60 trading days.

"Focus + Innovation" Strengthens Brand Leadership

In the view of Zhitong Finance APP, the root of BOSIDENG creating substantial investment returns for investors and continuously earning their "trust votes" lies in its value-driven long-termism and strategic determination. In 2018, BOSIDENG proposed the strategic direction of "focusing on the main channel and focusing on the main brand," clearly positioning itself as a "global leader in down jackets" and winning the recognition of mainstream consumers of the era by activating consumers' perception of being "down jacket experts."

In the new development period, BOSIDENG anchors its focus on "the main channel of down jackets and the main track of fashionable functional technology apparel," adhering to a brand-led development model, and is committed to becoming a world-leading group in fashionable functional technology apparel, outlining a broader growth vision.

In the process of practicing long-termism, BOSIDENG has summarized a set of effective business strategies, namely focusing on the core business of down jackets, leading with brand building, promoting product innovation, retail upgrades, high-quality quick response, and digital management transformation, thereby continuously strengthening its core competitiveness and supporting steady and high-quality growth in performance In terms of brand building, since 2024, BOSIDENG has integrated brand strategies, creative visuals, public relations experiences, and digital content to implement strategies focused on brand leadership, brand campaigns, and dual growth in brand and sales. This includes promoting best-selling items (Top items) and empowering Top stores to support brand strategy, continuously deepening consumer awareness and reputation of the brand, and achieving the goals of brand leadership perception and maximizing sales.

According to the "2024 Global Most Valuable Apparel Brands Top 50" released by Brand Finance, one of the five major international brand valuation authorities, the BOSIDENG brand has once again been selected and has moved up one position, ranking 46th among apparel brands, with brand value increasing by 13% to USD 2.1 billion, demonstrating its global leading brand strength and influence.

The enhancement of BOSIDENG's brand influence is intuitively reflected in the growth of its fan base. According to the financial report, in the first half of the 2024/25 fiscal year, the BOSIDENG brand gained over 1.3 million new fans on Tmall and JD platforms, with over 1 million new members; the total membership of the BOSIDENG brand on Tmall and JD platforms exceeded 19 million. Additionally, on the Douyin platform, the BOSIDENG brand gained over 500,000 new fans; as of September 30, 2024, the total number of fans on Douyin exceeded 9.5 million.

"Supporting brand height with product depth" is the underlying logic for BOSIDENG to achieve brand leadership. In the first half of the 2024/25 fiscal year, BOSIDENG applied for a total of 222 patents and 340 authorized patents, providing patent technology and endorsement support for its expertise in down jackets. As of September 30, 2024, the company had accumulated a total of 1,193 patents (including invention, utility model, and design patents). The high emphasis on product research and development has allowed BOSIDENG to continuously optimize product R&D and design based on changing consumer trends, providing the market with innovative products that offer a "high-value sense."

With the rise of outdoor sports, the wearing scenarios for functional down jackets are continuously expanding. In response to market demand changes, BOSIDENG launched a "breathable" down jacket in September 2023. It is reported that the down jacket uses technologically protective fabric, and its three-in-one detachable design allows for flexible switching in environments ranging from 0°C to 20°C, further expanding its usage scenarios. In March 2024, BOSIDENG introduced a single-shell outdoor jacket, extending the sales season and breaking seasonal constraints. In September 2024, BOSIDENG launched the Iteration Series of down jackets, successfully entering the outdoor warmth market, with the three-in-one down jacket quickly occupying consumer awareness.

In terms of sun protection, BOSIDENG has focused on sun protection clothing as a key category breakthrough, launching sun protection garments featuring "black technology sun protection" to strengthen category extension. With the continuous expansion of product lines, it is expected to create a second growth curve for the company's performance.

Sales performance is the best standard for testing product strength and brand power. In the first half of the 2024/25 fiscal year, the down jacket business under BOSIDENG achieved revenue of approximately RMB 6.063 billion, accounting for 68.9% of total revenue, a year-on-year increase of 22.7%; the revenue from OEM management business was RMB 2.319 billion, a year-on-year increase of 13.4% The diversified clothing business generated revenue of 117 million yuan, a year-on-year increase of 21.3%.

In the Bosideng brand down jacket business, revenue reached a historic high of 5.28 billion yuan, a year-on-year increase of 19.4%; the Xuezhongfei brand achieved revenue of 390 million yuan, a year-on-year increase of 47.1%; and the Bingjie brand achieved revenue of approximately 21 million yuan, a year-on-year increase of 61.5%. Notably, the outdoor jackets have become a "new force" driving the growth of the Bosideng brand down jacket business. Data shows that from August 2023 to September 2024, sales of outdoor jackets on mainstream e-commerce platforms exceeded 10 billion yuan. During the Double Eleven shopping festival, the transaction volume of outdoor jackets and pants on JD.com increased by over 100% year-on-year, while sales of outdoor jackets on Tmall increased by 35% year-on-year, with sales volume growing by 42%.

Multiple Measures in Parallel to Ensure Product Operation Efficiency

Zhitong Finance APP noted that in addition to the continuous sales peak of products, the improvement of product operation efficiency is also key to Bosideng's enhancement of operational quality.

Bosideng implements a leading futures/spot product operation model, controlling the initial order at around 40%, with the remaining proportion continuously adjusted based on market terminal sales data and trend forecasts, rolling orders during peak sales seasons. By supporting faster turnover cycles and efficiency through pull replenishment, rapid new arrivals, and small orders with quick returns, it fully realizes high-quality quick returns.

In achieving sustained hot sales of TOP products, Bosideng has transitioned from a flexible quick return model to a TOP product agile rapid supply model, achieving a replenishment availability rate of up to 99% for TOP products, ensuring that bestsellers are rarely out of stock; while maximizing support for sales targets, it drives collaboration across the product value chain, reconstructing processes and cultivating capabilities for flexible and agile responses.

Additionally, Bosideng implements a quality control digital operation system in quality management, integrating the entire quality cycle to achieve full-process positive controllability and reverse traceability, ensuring real-time online transparency of quality excellence, making quality one of the key mental perceptions for users when choosing a brand.

Data from the Down Jacket Golden Network shows that in the past six months, various down prices have risen to varying degrees, with the price of 90% white duck down increasing by 11.7% over the past six months. Against this backdrop, Bosideng's cost management focuses on market dynamics and trends, predicting and analyzing the price trends and fluctuations of core materials, and based on Bosideng's brand effect and industry influence, strategically breaking through in cost reduction and efficiency enhancement, effectively hedging and alleviating the pressure of rising costs.

These measures work together to enhance Bosideng's product operation efficiency while strengthening the brand's market competitiveness and consumer trust, laying a solid foundation for the company's steady growth.

Long-term Growth Expected, Institutions Forecast Stock Price to Reach HKD 5.5

Based on long-term stable operating performance, multiple institutions are optimistic about Bosideng's long-term growth before and after the release of its interim results.

Huaxi Securities pointed out in its research report that in the medium term, Bosideng continues to launch upgraded iterations of sun protection clothing, lightweight down jackets, and three-in-one down jackets, with continuous innovation in new products, focusing on outdoor activities. The proportion of seasonal products is expected to further increase in the future, smoothing out cyclical fluctuations; channel efficiency improvement: focusing on refined management of single stores, significantly increasing the performance of direct-operated stores, and strengthening the establishment of pop-up stores during peak seasons; there is still room for cost control in the future, and net profit margins are expected to improve; in the long term, the company's market share still has room for growth. Huaxi Securities maintains a "Buy" rating on Bosideng.

Zheshang Securities is optimistic about Bosideng's future performance maintaining steady growth. Considering the rapid development of functional jackets in the 2025 fiscal year, the positive growth plan for lightweight down products, and the steady growth of winter down jackets, Zheshang Securities expects Bosideng's revenue for the fiscal years 2025-27 to reach 26.3 billion yuan, 29.7 billion yuan, and 33.5 billion yuan, with a compound annual growth rate of 13%; net profit attributable to the parent company is expected to be 3.54 billion yuan, 4.07 billion yuan, and 4.64 billion yuan, with year-on-year growth of 15%, 15%, and 14%, respectively. Zheshang Securities believes that Bosideng's current valuation is cost-effective, with a dividend payout ratio exceeding 80% for three consecutive fiscal years, highlighting its low valuation, stable growth, and high dividend attributes, maintaining a "Buy" rating.

Huatai Securities maintains its earnings forecast for Bosideng for the fiscal years 2025-27, expecting net profit attributable to the parent company to grow by 16.7%, 15.3%, and 11.6% year-on-year to 3.587 billion yuan, 4.137 billion yuan, and 4.615 billion yuan, respectively. The comparable companies in the industry have a consensus expected PE of 12.8x for 2025 according to Wind. Considering the company's leading advantages and expected better-than-industry terminal performance with the arrival of peak season, the target price has been raised from HKD 5.38 to HKD 5.5, maintaining a "Buy" rating.

According to Zhitong Finance APP, in the face of continuous market changes and challenges, Bosideng's adaptability and foresight enable it to maintain a leading position in a competitive market. Through continuous product innovation and keen insight into market demand, Bosideng's product line continues to diversify, meeting consumers' varied needs. At the same time, the optimization of cost control and operational efficiency further enhances its market competitiveness. Bosideng is expected to continue leading in the global fashion functional technology apparel sector, creating greater value for consumers, investors, and the entire industry