BELLE International: Store Opening Plan And Profit Forecast Analysis

BELLE has made several acquisitions recently. Some investors want to know more about BELLE's future store opening plan and our profit forecast analysis.

We expect that by the end of 2007, the number of BELLE's existing brand stores will reach around 5500, and the number of stores that are acquired by brands such as San Da, Miao Li and Fila will be about 840.

In the next few years: 1) BELLE plans to keep 20% of its new stores open in 20082009 years, but the expansion rate of Fila will exceed that of other brands. 2) BELLE will still take the acquisition as one of its expansion strategies to integrate sports and footwear products market.

At present, our future forecasting models do not take into account future acquisitions.

The expansion rate of stores in the future is relatively stable. BELLE can make use of more resources and stronger control to achieve endogenous growth and improve the profitability of new acquisition brands.

We expect that in the next few years, the revenue growth of footwear products will exceed the growth of sports business in the next few years.

However, the net profit growth of footwear business will be less than that of sports business. The reasons are as follows: 1) the endogenous growth momentum of sports business is stronger, and the net profit margin will increase faster in 2008. 2) the net profit margin of newly acquired footwear brands is not as high as that of BELLE.

BELLE is a well-known brand operator whose furniture has many brands, its business capacity is large, its business scale is large and its profit growth is relatively high (2007 net profit growth is expected to exceed 65% over the same period last year, 2008 and 2009 respectively, up 50% and 35% respectively).

In addition, the company's continued acquisition strategy will not only enhance its long-term growth potential, but also stimulate its stock price rise.

BELLE's current stock price earnings ratios of 2008 and 2009 are only 27.2 and 18.9 times, respectively.

We maintain the recommended rating and the 12 month target price of HK $19.58 (corresponding to the 2009 earnings ratio of 40 times).

Conservatively, investors can give a target price earnings ratio of 40 times in 2008, reaching a short-term target price of HK $13.6, which is still much higher than the current stock price.