FY13-15E NP fine-tuned by 4-5%; maintainin g HK$5.5 targ et price and Buy
Deutsche Bank AG/Hong Kong
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1HFY13 core NP was in line while EBIT was slightly below our forecast. SSS growth was 9.2%. For 2HFY13, mana gement maintains its SSS growth guidance in the low teens. We expect a slightly lower commission rate at ~18%. SSS growth in Jan/Feb was in the single digits due to some weakness in the high-end segment and gift cards. As its department stores are mainly in the mid-to-mid-high-end segment, slowin g sales in these segments are unlikely to have a significant impact on the op eration. Thus, we maintain our Buy.
1HFY13 core NP in line while EBIT slightly below our forecast Reported NP was flat at HKD332m on sales increase of 19.7% to HKD2bn yoy.
Core EBIT rose by 4% to HKD408m. Core EBIT was slightly lower than our estimates by ~5% while NP was broadly in line thanks to lower-than-expected tax rate. NP, excluding exceptional, ro se by 11.6% to HKD317m. It declared interim DPS of HKD0.098/share as it did last year.
Maintaining SSS growth guidance although Jan/Feb was slightly below budget Management maintains its guidance of very low-teen SSS growth for FY13. For Jan/Feb, SSS growth of mid-to-high single digits was slightly below its budget. This is due to weaker consumer sentiment and anti-corruption measures affecting high-end sales and pre-pay cards. Management will continue to build its store network and add an additional 1m sm for self-operated stores.
Fine-tuning forecasts; maintaining Buy
We trim our FY13-15 NPAT forecasts by 4-5% to factor in a lower direct sales gross margin and slightly higher A&P. Our target price of HKD5.5 (~13.8x core CY13E P/E) is based on a 20% discount to our DCF value of HKD6.89 to factor in NWDS’s smaller market cap and lower liquidity. Key risks: competition, an opex cost hike and the macro outlook.