BofA Merrill Lynch today released its research report, keeping its stock rating unchanged

Summary: Check the latest quotes Beijing time, March 6 morning News, BofA Merrill Lynch released a study today, the only product will (Nyse:vips) of the stock rating to maintain the same, and its target price from 158 U.S. dollars to 196 U.S. dollars. The following is a summary of the report

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In the early hours of March 6, Beijing time, BofA Merrill Lynch today released a study to keep the Nyse:vips stock rating at "buy" unchanged, while raising its target price from $158 to $196.

The following is a summary of the contents of the report:

Executive summary of comments;

-Product and marketing programs contribute to sustainable growth:

A recent analyst meeting at the management level after discussing its marketing and product strategy, we feel more confident that it will be able to maintain its leadership position in the industry sector, and that the latest initiatives of the Commodities Council support these strategies, such as upgrading the brand portfolio, and cooperation with television and micro-letters.

The company said it will use the brand combination of updates to enhance repeat purchase activities and increase the size of the order, and micro-credit and other new marketing channels to test to attract new users. The only product will have a large addressable market and focus on the commercialization of the platform, so we expect the company to achieve sustained sales growth over the next few years.

We will increase the revenue and earnings per share by 3%, 10% and 8% respectively in 2014, 2015 and 2016, and expect sales in 2014, 2015 and 2016 to grow by 80%, 50% and 25% respectively; our repeated inspections of industry growth confirm these growth forecasts.

The major changes we have made to the assumption of sales growth are: 1 increase the volume of orders in 2014 and 2015 by 3% and 12% respectively, as the number of active users has increased by increasing marketing activities and continuing to update the brand mix, and 2 per cent of revenue for each order Mainly because the only product will be from the local brand to human bearing higher mass market global and regional brands.

In view of the improved strategic visibility of the only product, we also raised the expected free cash flow growth rate from 2016 to 2019 to 11% (before 9%) on the basis of the cash flow discounting method, and therefore raised its target price to $196. This target price means that, based on our expectation of 2015 revenue for the only commodities meeting, the market sales rate is 2.4 times times, based on the expected earnings per share in 2015, which has a P/e ratio of 50 times times, and the peg value from 2014 to 2016 (the ratio of city surplus growth) is 0.7 times times, compared with the market sales rate of the same company is 1 time times, the P/E ratio is 35 times times, the peg value is 0.4 times times.

We believe that this valuation premium is reasonable because the sales of the goods will grow faster and the business model of the niche market.

-New marketing channels bring user growth upside up:

Since the end of 2013, the company has been taking more marketing activities, such as brand advertising campaigns and television commercials, in particular by sponsoring a popular talent show in China. In addition, the only product will deepen the cooperation with Tencent (0700.HK) micro-letter, and thus become the latter platform merchants. We expect that the micro-letter as an e-commerce platform will be equivalent to two-thirds of the size of the only product in 18-24 months time.

While it is too early to estimate the market share that the only product will occupy on the micro-trust platform, we expect it to be beneficial to the growth of its users.

Investment theme:

Compared with the online market or multiple categories of the consumer Web site, the only product has successfully established a business model that is different from these sites, that is, discount flash online retail mode.

The only product will occupy a leading position in a niche market, which can benefit from: 1 The rising penetration rate of e-commerce; 2. Higher inventory on the apparel market. The optimization of brand combination, the expansion of product category and the market model can form key support for profit margin. Only products will be able to invest in the Lok Bee Network will expand its user base and product portfolio.

Target Price and risk:

We use the cash flow discount method to value the goods only because we think it best reflects the intrinsic value of the product and the long-term growth trajectory in the clothing and cosmetic discount retail market.

We set the target price of the only product to $196, which includes: 1 net cash per share of USD 12, 2 per share of 12% USD, based on the discount rate of 11%, the medium-term of 4% (between 2016 and 2019), and the final growth rate of 184. In our view, 11% of the medium-term free cash flow compound annual growth rate is expected to be more conservative, since the expansion of capital expenditure between 2014 and 2016 will result in the gradual integration of China's discounted sales market with stable cash flow.

The risks to the target price of the product will include: 1) increased competition, 2 industry inventory reduction, 3 the implementation of problems and the transition towards the mobile domain may have an impact on the user's shopping experience, 4 capacity management and expansion costs, 5 in the integration of Lok Bee Network cosmetics Sales process implementation risk.