In 2008, the company’s net profit attributable to parent saw year-on-year increase of 48%, which is mainly benefited from promotion of business turnover and gross margin. However, its growth of net profit attributable to parent was below that of business turnover as led by surge of period expense ratio and income tax rate.
We predict its 2009-2010E basic EPS to be Rmb0.79 and Rmb1.03, representing dynamic P/E ratio at 21x and 16x based on closing price of Rmb16.47 on April 24, 2009. “Overweight” rating is hereby maintained.
Potential risks: Systematic risks of the big-cap, below-expected economic recovery and profitability of the fashion-series products.