Vipshop Holdings Limited

VIPS Details

Vipshop Holdings Limited (NYSE: VIPS) is a Chinese online discount retailer that sells a variety of brands. Its operating segments are 1) Vip.com offering branded products via online flash sales, 2) Shan Shan Outlets, operating offline retail stores in China and 3) Others, comprising internet finance and an offline shop. As of November 17, 2021, VIPS' market capitalization stood at USD 8.27 billion, with 676.21 million American Depository Shares (ADS) listed and outstanding (each ADS representing 0.2 Class A ordinary shares).

Q3FY21 Results:

• Growth in Revenues: The company reported a YoY increase of 7.51% in total net revenues to RMB 24.92 billion in Q3FY21 (ended September 30, 2021) from RMB 23.18 billion in Q3FY20, attributable to YoY growth of 4.96% in Gross Merchandise Value (GMV) to RMB 40.2 billion.
• Contraction of Net Income: VIPS' net income was reduced to RMB 628.35 million in Q3FY21 from RMB 1.24 billion in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents (including short-term investments) of RMB 16.20 billion and total debt of RMB 1.80 billion.

Key Risks:

• Product Concentration: VIPS derived most of its revenue from online retail sales of apparel products in FY20. Any downturn in the volume sold, or customer base could significantly impact its financials.
• Political and Regulatory Risk: The Chinese authorities' crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Outlook:

• Revenue Estimate: In Q4FY21, VIPS expects to generate revenue in the range of RMB 35.8 – 37.6 billion, thus realizing a YoY growth of 0% - 5%.

VIPS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

VIPS' stock price decreased 64.41% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 10.15 to USD 46.00. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 52.38.

Considering the significant correction in the stock price, disappointing bottom-line performance, and the lackluster technical indicators, we recommend a "Sell" rating on the stock at the closing price of USD 12.23, down 2.78% as of November 17, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.