Baozun: A Bet on Chinese e-Commerce

09/20/2016 10:00 am EST

Focus: GLOBAL

Paul Goodwin

Emerging Markets Specialist and Analyst, Cabot Heritage Corporation

Our latest featured stock is an e-commerce company that’s young (incorporated in 2007), still pretty small (market cap is just $701 million) and represents an indirect way to play the e-commerce phenomenon in China, explains Paul Goodwin, editor of Cabot Emerging Markets Investor.

Baozun (BZUN) helps its brand partners manage their Chinese market entry and operations such as website design, IT infrastructure, customer service, warehousing and logistics services, plus digital marketing.

At the end of the second quarter, Baozun had 120 brands signed up, including Nike, Coach, and Levi’s to Subaru, Honda, Mitsubishi, Fiat and Toyota, as well as Haagen-Dazs, Godiva, Pepsi, Microsoft and GoPro.

For foreign companies looking to either crack the Chinese market for the first time or trying to build market share, Baozun is a real bargain.

Baozun represents a web-savvy partner that can plumb the mysteries of Chinese e-commerce and a seasoned warehouse/shipper with plenty of capacity in major Chinese cities.

The company grew revenue by 62% in 2013, but just 3% in 2014, before snapping back to 60% growth again in 2015.

Revenue growth for the first two quarters of 2016 came in at 34% (Q1) and 26% (Q2). Earnings growth is forecast at 108% in 2016 and 159% in 2017.

BZUN came public in May 2015 at $10, and plunged to $4 during the broad market’s meltdown. The stock really caught fire in August, soaring from $7 to $15 on rising volume.

We expect significant volatility from the stock, but it’s slowly gaining a following, with four analysts now covering the stock. We think BZUN is buyable at around $14, and we recommend taking a half position.

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By Paul Goodwin, Editor of Cabot Emerging Markets Investor

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