Walter Woo, an analyst from CMB International Securities, maintained the Buy rating on China Lilang Ltd. (5LX – Research Report). The associated price target is HK$4.96.
Walter Woo has given his Buy rating due to a combination of factors that suggest a positive outlook for China Lilang Ltd. Despite weak financial results in FY24, the company is showing signs of improvement for FY25. The management’s guidance for the upcoming fiscal year includes a 10% growth in retail sales and a 15% increase in new retail channel sales, alongside an enhanced product mix on e-commerce platforms. These targets are deemed achievable due to several growth drivers, such as the success of the smart casual line, which saw a significant sales increase, and the ongoing benefits from the direct-to-consumer (DTC) transformation.
Moreover, the company’s margins are expected to improve with the elimination of one-off transformation costs and better management of retail discounts. The stock is currently trading at an attractive valuation, with a projected dividend yield of 10% and a price-to-earnings ratio of 8x for FY25. Walter Woo maintains a positive outlook for a potential turnaround, supported by favorable macro trends and the strategic initiatives undertaken by China Lilang.