Vipshop Holdings Limited 

VIPS Detail

Vipshop Holdings Limited (NYSE: VIPS) is engaged in providing high-quality branded products to consumers in the People’s Republic of China. This is done primarily through flash sales via vipshop.com and vip.com online platforms (under the Vip.com reportable segment). The company also operates offline retail stores in China (through the Shan Shan Outlets segment). As of December 31, 2020, the company had approximately 440 million registered members, partnered with 21,000 brands, and approximately 201 million customers buying both domestic and international brand products. VIP’s other two divisions i.e. internet finance and offline shop are grouped under the Others reportable segment. The company earns most of its revenue from the Vip.com segment. Each of the company’s American Depositary Shares (ADS) represents 0.2 Class A ordinary shares. As of May 26, 2021, the company’s market capitalization stood at USD 15.84 billion.

Share Repurchase Program: On March 30, 2021, the company announced a share repurchase program under which it may purchase up to USD 500 million of its Class A ordinary shares in the next 24 months. The repurchases might be made from time to time during the open market at general market prices. The company expects to finance its share repurchase program using its existing cash balance.

Robust Q1FY21 Results: The company reported a 51.10% increase in total revenue to RMB 28.40 billion in Q1FY21 (ending March 31, 2021) compared to RMB 18.80 billion in Q1FY20, primarily due to a 44% increase in the total number of orders during the quarter. The company’s Gross Merchandise Value (GMV) increased by 59% to RMB 46.10 billion in Q1FY21 compared to RMB 28.90 billion in Q1FY20. The number of active customers increased by 54% to 45.80 million in Q1FY21 compared to 29.60 million in Q1FY20. The company reported a massive increase in net income attributable to Vipshop’s shareholders to RMB 1.50 billion in Q1FY21 as compared to RMB 684.80 in Q1FY20.

Robust Growth (Source: Company Presentation, May 2021)

Risks: Prolonged frictions between the US and China, and the recent passage of a bill in the US that could lead to the delisting of some Chinese companies from the country’s exchanges (in case of the US authorities’ inability to satisfactorily audit the company for three consecutive years) expose the stock to significant political and regulatory risks. Though a solution to the standoff could be negotiated in the medium term (before the earliest delisting begins possibly in 2024), the companies that might not be able to fulfill the revised standards are at risk.’

Outlook: For Q2FY21, the company is expecting its total net revenue to be in the range of RMB 28.90billion to RMB 30.10 billion, reflecting a YOY growth of 20% to 25%.

Valuation: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

*% Premium/(Discount) is based on our assessment of the company’s FY21 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VIPS Daily Technical Chart (Source: REFINITIV) 

Stock Recommendation: VIPS has declined by 37.55% in the past three months and is currently inclined towards the lower end of its 52 weeks’ range of USD 14.86 to USD 46.00. The stock is currently trading below its 200 DMA. We have valued the stock using the EV/EBITDA based relative valuation methodology and arrived at a target price of USD 25.79. Considering the fall in the stock price in the past three months, growth potential, and solid margins, we recommend a “BUY” rating on the stock at the closing price of USD 22.58, down by 2.04% as of May 26, 2021.

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

Thor Industries, Inc. 

THO Details

Thor Industries, Inc. (NYSE: THO) is the largest manufacturer of recreational vehicles (RVs) globally. It manufactures RVs through its subsidiaries and markets them to independent, non-franchise dealers throughout U.S., Canada, and Europe. The company operates in three segments, viz. 1) North American Towable: This segment includes manufacturing and marketing of travel trailers and fifth wheels by brands like Airstream, Heartland, Jayco, Keystone, and KZ. 2) North American Motorized: provides the same products (as the previous segment) through Airstream, Jayco, and Thor Motor Coach Brands. 3) European: This segment consists of the EHG business, which manufacturers both towable and recreational vehicles through 8 RV production facilities across Europe. The company generates the majority of its revenues from the North American Towable segment. As of May 26, 2021, the company’s market capitalization stood at USD 6.53 billion.

Net-Zero Emissions by 2050:  On April 20, 2021, the company published its Carbon and Climate report specifying business risks associated with climate change. In its report, THO sets its goal to go carbon net-neutral by 2050, including a recent investment of USD 1.27 million to reduce the energy consumption by 10,815 Megawatt Hour (Mwh), expansion of partnership with National Forest Foundation to plant half a million new trees by 2025 and internal investments in self-generating renewable energy. The company is expecting to achieve a 50% reduction in the emission of greenhouse gases by 2030.

Quarterly Highlights (Source: Investor Presentation, Q1FY21)

Robust Q2FY21 Results: The company reported a 36.17% increase in net sales to USD 2.72 billion in Q2FY21 (ending January 31, 2021) compared to USD 2.00 billion in Q2FY20, primarily due to increased unit shipments across the business segments and the one-time inclusion of USD 82.40 million of net sales of Tiffin Group since the acquiring it on December 18, 2020. It sold 48,403 units under the North American Towable segment, 5,587 units under the North American Motorized segment, and 14,581 units under the European segment. The company reported a sharp surge of 61.80% in gross profits to USD 414.87 million in Q2FY21 compared to USD 256.40 million in Q2FY20. Net income for Q2FY21 was USD 131.19 million as compared to USD 27.02 million in Q2FY20. Low dealer inventory levels led to an uptick in dealer orders and a surge in THOR’s backlog.

Key Risks: THO’s largest dealer is Sales to FreedomRoads, LLC that contributed approximately 15% of the company’s net sales in FY20. During the recent tenure, Sales to FreedomRoads, LLC has also acquired several other RV dealerships, which impacted the company’s revenue. Prolong consolidation of dealerships by Sales to FreedomRoads, LLC could impact THOR's financial health in the future. The loss of this dealer could also harm the company’s financial state of affairs.

Outlook: The company is expecting its capital expenditures during the remaining FY21 to be around USD 100 thousand, mostly for building projects and replacing obsolete machinery and equipment. 

Valuation: EV/EBITDA Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

THO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: THO stock price has declined by 16.45% in the past one month and is currently trading at the mid-point of the 52 weeks range of USD 78.64 to USD 152.20. The stock is currently trading above its 200 DMA levels. We have valued the stock using the EV/EBITDA multiple-based relative valuation method and arrived at a target price of USD 144.02. Considering the significant decline in the stock price, growth potential, and robust financials, we recommend a “Buy” rating on the stock at the closing price of USD 121.48, up by 2.91% as of May 26, 2021.

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