时间:2017年04月21日 16:19:39 中财网
Healthy sellthrough and improving inventory efficiency: Buy Feng Tay and Eclat
  In this report, we prepare a top-down analysis of US sporting goods sourcingand provide an update on two of the most debated ODMs: Feng Tay and Eclat.
  Our analysis suggests that US sporting good retail growth remains intact, withNike’s basketball shoes and high-end textile performing well. Prolongedweakness at ODMs is likely driven by an extraordinary channel inventoryclearance that brands launched to prepare for retail system reform. We thusremain positive on ODM revenue acceleration in 2H17 and reiterate Buy onboth Feng Tay and Eclat. We also provide bottom-up findings on the duo toexplain Feng Tay’s near-term weakness and Eclat’s 2017 margin strength.
  US retail sales intact; why has channel inventory destocking taken so long?
  Retail sales and channel inventory are two crucial leading indicators for ODMorders, in our view:
  On retail sales, we believe sporting goods demand growth remains healthyafter examining the long-term market growth forecasts, retailers’ revenueand short-term volume data, etc (Figures 1-7)。 Nike’s basketball shoes aretaking back market share and high-end functional textile continues tooutperform. This should mean improved demand for Feng Tay and Eclatproducts.
  However, inventory destocking has taken longer this time: As shown inFigure 8, the current destocking cycle is taking longer than usual. Webelieve the current cycle is special, as brands have launched a majorchannel clearance to prepare for future retail reforms (fast response, onlineand off-line integration and streamlining of SKUs)。 Although thedestocking appears to be prolonged, we still see signs of a potential ODMrevenue acceleration in 2H17.
  Feng Tay: 1H17 hurt by non-recurring negatives, but recovery in sight
We attribute Feng Tay’s 1H17 weakness to two factors: (1) The legacy impactof LeBron James 14, with the latest checks suggesting the “Elite” models ofLeBron James 14 have been cancelled. But Feng Tay should recover, enteringthe new LeBron James 15 product cycle from August 2017. (2) A mis-pricingthat knocked c. 50bps off 1Q17 gross margin. We expect Feng Tay to receivecompensation in 2H17. We introduce our segment analysis (Figure 16) and cutour earnings forecasts by c. 10%. Feng Tay is trading at 15x/13x 17E/18Erecurring EPS.
  Eclat: gross margin expansion a hidden driver in 2017
We believe Eclat’s business mix adjustment and new products should drivegross margin upside in 2017. We introduce our segment analysis (Figure 20) tomodel the margin expansion. Eclat trades at 19x/16x 17E/18E recurring EPS.
  Industry valuation and downside risks to our positive views
We value the sector using DCF methodology, as we expect investors to focuson the sector’s long-term value creation. For our WACC, we follow DeutscheBank’s view on RFR and ERP while assigning a beta of 0.9 to 1.3 and terminalgrowth of 1-2%. Downside risks: weaker cyclical recovery, weaker innovation,sports segmentation and e-commerce failing to drive growth for the sector.
□ .J.o.h.n. .C.h.o.u./.A.n.n.e. .L.i.n.g  .德.意.志.银.行.股.份.有.限.公.司
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