Baozun: Momentum into Q3?

Summary

• Solid first quarter earnings provided in early June has given Chinese e-commerce company Baozun a strong push heading into Q3.
• A major factor in Q2’s success lies in the uncertainty of Covid19.
• Can Baozun sustain its high growth revenue model?
• SWOT Analysis.

Many have called Baozun the “Shopify of China.” While the overall business model is different, growth opportunity is not out the of question.

Solid first quarter earnings provided in early June has given Chinese e-commerce company Baozun (BZUN) a strong push heading into Q3. They are expected to release Q2 earnings between August 19 and August 24. A major factor in the short to mid-term success lies in the uncertainty of Covid19.

CFO of Baozun, Mr. Robin Lu had stated, “Despite increasing macroeconomic uncertainties during the quarter, our business demonstrated great resilience by achieving 17.6% and 18.4% year-over-year growth rate for GMV and net revenues, respectively. While we incurred incremental costs associated with the pandemic, we were able to reinforce our leading position in the market with a proven track record of empowering brand partners even during one of the toughest times” (Robin)[1]

Given this statement, as logistical operations and supply chains reconnect, Baozun will be able to sustain its growth and , “As things stand now, provided the macroeconomic environment does not deteriorate any further, we anticipate that GMV for the second quarter of 2020 will grow by at least 25%.”(Robin)1

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[1] https://ir.baozun.com/static-files/88a5b887-942c-4ce2-b7be-cbccaa2f79f0

What makes Baozun so unique is its various yet cohesive services within the e-commerce industry allowing for businesses to thrive in the growing Chinese market. With two sources of revenue, product sales and services, the company’s high growth B2C model depends on strong brand relationships and innovation.

Despite a relatively high PE ratio of 72.46[1], I do not believe that BZUN is overvalued. The market cap is only 2.69B2, and as more companies look to integrate their business into the Chinese marketplace, the more likely it is that BZUN can sustain its growth.

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[1] Baozun Inc. (BZUN) Stock Price, Quote, History & News - Yahoo Finance

Can Baozun bring this momentum into the third quarter? Much is dependent on the fluidity of supply chains as we begin reopening economies across the world.

Feel free to comment or ask me questions!

Note: I am long Baozun and will reevaluate my position overtime.

Disclaimer: It is important to do your own research in addition to the information given above. The research and opinions above are NOT financial advice.

Twitter: @evanbarnett004

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