报告名称：SA SA International(00178.HK)Women not ready to go for no make-up; Hold
报告类型：港股研究
报告日期：2016-04-18
研究机构：德意志银行
股票名称：莎莎国际
股票代码：00178
页数：14
简介：TP revised down to HK$2.2
Based on the recent sss trend for Sa Sa and other HK companies, and lowerthan-expected GPM in 2HFY16, we lower our NP by 17/19/19% forFY16/17/18E. We expect ~ 8-9% sss decline for FY17, but the sss decline willbe less severe than in the past three quarters. Management regards the newCBEC policy positively, as it can sell higher-ticket cosmetic products; it softlaunchedits CEBC website recently. We maintain our Hold recommendation asthe current share price is fairly valued compared to our revised target price ofHK$2.2.
FY17 outlook
We expect FY17 to be another tough year for Sa Sa. However, we expect thesss decline to be less severe than in the past three quarters, which has been inthe range of a 10% to high-teen decline. We expect ~8-9% sss decline forFY17. GPM is expected to be stable, as in FY16, but the opex ratio to sales willbe higher, due to operating deleverage. Management regards the new crossborderecommerce tax system positively and has soft-launched its CBECwebsite.
Lowering NP for FY16/17/18E by 17/19/19%
This is to factor in a higher sales decline for HK in 2HFY16 and a 2ppt declinein GPM in 2H (same as 1HFY16 vs. the previous expectation of a flat GPMyoy). This is due to a lower sales mix from the private label business with fewerPRC tourists. We also assume an absolute dividend for FY16 (same as FY15),given its net cash position.
Reducing target price to HK$2.2; risks
We maintain our Hold rating. Our DCF value is based on a HK market COE of7.5% and a TGR of 0% (from 1%). We use a beta of 1, which is in line withother consumer players (range: 1.0 to 1.3). Key downside risk: slower-thanexpectedGPM improvement. Key upside risks: better-than-expected HK sssgrowth and a P/E re-rating on Chinese growth potential.

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