Baozun: Buying Opportunity Amid Temporary Macro Headwinds

seekingalpha04-10

Baozun is an e-commerce enabler company based in China, serving over 450 brands globally.The stock has performed poorly, down over 55% in the past year, much due to the weak market sentiment amid ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2426042435?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1347685642/image_1347685642.jpg","is_english":true,"pubTime":"2024-04-10 14:19","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2426042435","market":"hk","top_or_hot":-1,"title":"Baozun: Buying Opportunity Amid Temporary Macro Headwinds","media":"seekingalpha","content":"<div>\n<p>Baozun is an e-commerce enabler company based in China, serving over 450 brands globally.The stock has performed poorly, down over 55% in the past year, much due to the weak market sentiment amid ...</p>\n\n<a href=\"https://seekingalpha.com/article/4683019-baozun-stock-buying-opportunity-amid-temporary-macro-headwinds\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Baozun: Buying Opportunity Amid Temporary Macro Headwinds</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBaozun: Buying Opportunity Amid Temporary Macro Headwinds\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-10 14:19 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4683019-baozun-stock-buying-opportunity-amid-temporary-macro-headwinds><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Baozun is an e-commerce enabler company based in China, serving over 450 brands globally.The stock has performed poorly, down over 55% in the past year, much due to the weak market sentiment amid ...</p>\n\n<a href=\"https://seekingalpha.com/article/4683019-baozun-stock-buying-opportunity-amid-temporary-macro-headwinds\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SEA","symbol_name":"U.S. Global Sea to Sky Cargo ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4683019-baozun-stock-buying-opportunity-amid-temporary-macro-headwinds","article_id":"2426042435","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1347685642/image_1347685642.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2426042435","pubTimestamp":1712729967,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Baozun is an e-commerce enabler company based in China, serving over 450 brands globally.The stock has performed poorly, down over 55% in the past year, much due to the weak market sentiment amid cons","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SEA":"U.S. Global Sea to Sky Cargo ETF","IE00B64QTZ34.USD":"NEUBERGER BERMAN US SMALL CAP \"A\" (USD) ACC","BK4502":"阿里概念","BK4214":"汽车零售","BK4122":"互联网与直销零售","BK7154":"办公室房地产信托","ABG.AU":"Abacus Group","BZUN":"宝尊电商","BK4558":"双十一","ABG":"阿斯伯里汽车集团","BK4220":"综合零售","BK4531":"中概回港概念"},"translate_title":"宝尊：暂时宏观逆风中的买入机会","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ABG":1,"ABG.AU":1,"BZUN":1,"SEA":1},"content_text":"Baozun is an e-commerce enabler company based in China, serving over 450 brands globally.The stock has performed poorly, down over 55% in the past year, much due to the weak market sentiment amid consumer weakness in China.I believe BZUN presents an attractive buy opportunity at $2.4 today. I set a 1-year price target of $3.3, a potential upside of over 37%.   AsiaVisionBaozun (NASDAQ:BZUN) is an e-commerce enabler company providing various services ranging from digital marketing to logistics to help brands run and manage their operations better. Based in China, it serves over 450 brands globally. BZUN has three business lines, BEC (Baozun E-commerce), BBM (Baozun Brand Management), and BZI (Baozun International). I first covered BZUN in 2020, when I rated the stock neutral due to a churn of one of its key clients despite the still decent demand environment at the time. BZUN has not performed well in recent times. Trading at $2.3 today, the stock is down over -55% over the past year. BZUN is also still far away from revisiting its $11 IPO price level in 2015. I am upgrading BZUN to buy. My 1-year price target of $3.3 presents over 37% upside from the current trading price of $2.4. I believe BZUN appears undervalued. Financial Reviews Fundamentals have been mixed, with improvements in certain areas as of FY 2023. For instance, BZUN saw a rebound in revenue growth after seeing a decline in its overall business in FY 2022 due to the weak macro and better cotton initiatives. company presentationBZUN ended FY 2023 with RMB 8.8 billion of revenue, a 5% YoY growth. However, it is still far away from FY 2021’s achievement, when BZUN delivered over RMB 9.4 billion of revenue. Meanwhile, GAAP operating profit turned negative in FY 2023. BZUN saw an operating loss margin of -2.3%, a far cry from 0.4% in FY 2022, when BZUN effectively reached a breakeven. However, cash flow generation has improved. In FY 2023, BZUN delivered operating cash flow (OCF) of RMB 454 million, which was a new record. The strength in OCF has helped offset the use of cash across financing and investing activities, which amounted to RMB 544 million, enabling BZUN to maintain a relatively steady cash position. BZUN ended FY 2023 with over RMB 3 billion of cash, more or less the same level as last year’s. Catalyst Considering the relatively subdued outlook that has been pressuring e-commerce business in China, I believe catalysts remain minimal in FY 2024. However, I expect the continued strength in BBM and growth potential in BZI to help partially offset the weakness in BEC. BZI and BBM, for instance, should benefit from Hunter’s China and Southeast Asia (SEA) expansions. The expansion will happen through the JV setup with Authentic Brand Group (ABG), the owner of Hunter footwear brand. While BBM will likely see potential revenue growth from services fee charged to ABG, BZI should start seeing initial traction once Hunter executes its SEA expansion strategy. In addition, I also believe that BZUN’s recent initiative to leverage AIGC (AI Generated Content) will help drive cost efficiencies longer term. In the Q4 earnings call, the management indicated that BZUN will expect to utilize AIGC in supporting multi-media content creation: The second one is about AIGC. I just want to talk this in two levels. First level is that in a whole group, no matter its BEC or brand business BBM, these two business units, we all use AIGC in general. It means that when we want to generate, no matter it's text or photos or videos, we utilize the results from OpenAI Microsoft, these kind of big players. So you can see AIGC capabilities in different, almost all functions of our business units. So that is in general, we are adapting this capability from outside players. Source: Q4 earnings call. More specifically, there is a possibility for the AIGC initiative to help in driving down Sales & Marketing and Technology & Content expenses. In FY 2023, these two operating expense items combined made up over 37% of BZUN’s revenue. In my opinion, the impact of this cost optimization potential may also be more pronounced in the BBM business, which comprises branding and marketing as well as retail operation services, some of the key areas where AIGC could add a lot of value. In FY 2023, BBM business saw an adjusted operating loss of RMB 187.7, meaning that there seems to be more room for improvement. Risk I view the ongoing weak consumer sentiment in China as a key risk to my thesis. Over 86% of BZUN’s revenue comes from its e-commerce business, which is concentrated in China. In FY 2023, the e-commerce segment declined by -9.5% YoY despite the 4.9% YoY growth in overall revenue. Recent news has suggested that the domestic demand in China remains weak. Based on an article published by CNN just last month, China still seems to be in a deflationary environment, even as the government continued cutting rates to help achieve the inflation target of 3%. Nonetheless, one thing that stands out here would be the overall strength in consumption within travel and tourism industry: Services prices in February were strong, particularly in relation to tourism and entertainment activities. The sub-index for tourism soared 23.1% from a year ago, the highest among all categories. Source: CNN. With these in mind, I would hypothesize that many Chinese consumers might have been shifting their consumption from products like apparels to experience-based services like travel and entertainment. As such, this should be creating potential headwinds for e-commerce companies like BZUN. Valuation / Pricing My target price for BZUN is driven by the following assumptions for the bull vs bear scenarios of the FY 2024 projection. All revenue and share price figures here are in US dollars instead of RMB:  Bull scenario (50% probability) assumptions - I expect BZUN to achieve an FY 2024 revenue of $1.3 billion, a 4.7% growth, in line with the market’s estimate. I assume a forward P/S to expand to 0.2x, implying a share appreciation to $4 price level last seen last year. Bear scenario (50% probability) assumptions - BZUN to deliver FY 2024 revenue of $1.24 billion, also in line with the market’s estimate. This means that BZUN will expect a flat revenue growth YoY. I assign BZUN a forward P/S of 0.1x, which is where it is trading today, assuming a sideways price action within $2 range into FY 2024.    own analysisConsolidating all the information above into my model, I arrived at an FY 2024 weighted target price of $3.3 per share, projecting a potential upside of over 37%. I would rate the stock a buy. In my opinion, at $2.4 today, BZUN appears undervalued. Moreover, my projection here is relatively conservative, since I did not incorporate the recently authorized share repurchase program expected to take place in FY 2024. Even then, the price target model still yields a relatively attractive upside. Conclusion  BZUN is a leading e-commerce enabler with a focus in China. Its e-commerce business, which is concentrated in China, has faced challenges due to the ongoing weak consumer sentiment in the domestic market. As such, the recently-announced international initiative with BZI appears to be a positive first step towards geographic diversification. Moreover, the use of AIGC could also help BZUN improve its cost efficiencies further, driving operating profitability, in my opinion. At $2.4, BZUN appears undervalued. My 1-year price target suggests a 37% upside. I rate the stock a buy.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2426042435"}