Foreign analyst launches investor report: China's business growth slows

Andy Yeung, an investment bank's Andy Yang analyst, reported in Monday that the third quarter of China's e-commerce business grew 50%, down from 82% in the second quarter, down from 96% in the first quarter.

Andy Yang said in his report that the three Chinese business e-commerce companies that he studied – the only product, Dangdang and Orchid Pavilion – will have a robust revenue growth in the third quarter, but will ease in the next few quarters. The analyst also lowered its stock rating to "hold". The company's share price has risen by 316.5% per cent this year and has risen nearly 50% per cent since the release of its second-quarter earnings.

"The principles of investment that are strong growth and profit margins are still intact, but we don't think the company's fundamentals are up to the valuation," Andy Yang said. Based on our projected performance for 2014, only the current dynamic P/E ratio reached 49 times times, the market sales rate is 1.7 times times, the enterprise value/interest tax, depreciation, amortization before the profit (EBITDA) is 33 times times, all premium in addition to Amazon in China and the United States all e-commerce companies. In view of this, we cut the stock rating from the winning market to hold, and cut the target share price to 35 US dollars. ”

Only in Monday, the company released its unaudited earnings for the third quarter of the 2013 fiscal year ended September 30. Earnings showed that the total net revenue for the third quarter was $383.7 million trillion, up 146.1% from a year earlier, with a net profit of $12 million and a net loss of 1.5 million dollars over the same period last year. Not in accordance with the United States General accounting standards (excluding equity incentive expenses), only the third quarter of the goods will be attributable to ordinary shareholders in the United States depository receipts for each share of the income of 0.26 U.S. dollars.

Only the third quarter results exceeded market expectations. According to a survey by Thomson Reuters, market analysts had averaged an average of 0.21 US dollars in the third quarter, with a revenue of $364.65 million trillion, without the US GAAP.

The shares have fallen by nearly 50% per cent since the disappointing second-quarter results released in August. Oppenheimer also seemed sympathetic to the company's experience, though it gave a "buy" rating, but lowered its target share price from 17 to $11.5.

"The company's shares may have been oversold at a time when investors understand the disappointing growth trend of the orchid pavilion and the decline in revenue growth may affect profit margins," Andy Yang said. The Orchid Pavilion may need several quarters of the operation to solve the sales problem, reshaping the company's image in the eyes of investors. In 2014, the Orchid Pavilion should be able to increase the revenue growth of more than 30% per cent, and profit margin growth. Based on this, we lowered the company's target share price from 17 US dollars to $11.50, but maintained the buy rating. According to the 11.50 dollar target stock price calculation, the Orchid Pavilion 2014 enterprise value/interest tax, depreciation, amortization before the profit (EBITDA) is 19 times times. ”

Oppenheimer predicts that, after releasing its third-quarter earnings, there will be varying degrees of pullback in the stock prices of the commodities, Dangdang and LAN pavilions.