Nine Hing Holdings: Target Price Rise To 18.98 Yuan

After recent company visits, we still hold a positive view of 1836.HK Holdings (nine, 17, buy).

Under the planned expansion of capacity and the healthy development of China's retail business, we believe that the current price has not yet fully reflected the potential value of nine Hing Holdings.

Because more than 55% of the company's revenue comes from the United States, investors or worried that the growth of nine Xing's income will be hit by the next storm.

However, management believes that there should be no negative impact on shoe sales.

The business combination of nine Xing is dominated by high-end fashion and casual shoes. Therefore, we believe that the economic downturn is not a big influence.

Despite rising pressure on raw materials and labor costs, management expects the net interest rate to continue to improve, as companies have shifted production costs to customers.

In addition, the company continues to improve its product mix, and the proportion will be biased towards women's fashion shoes with higher gross margin than casual shoes.

Nine Hing also actively expanded its retail market. The company expects to open 83 retail outlets before the end of 2007, including 68 Stella Luna and 15 "What For" brand stores, and plans to increase its sales outlets to 170 in 2008 and 2009, most of which will be offered in retail counters in department stores.

The company also expects revenue from retail businesses to turn 5 times between 2007 and 2009.

We believe that this goal is not difficult to achieve with the strategy of nine progressive business and the high price of products relative to our local counterparts.

Based on the bright growth prospects of the company, we raised its profit forecast and raised the target price to 18.98 yuan, equivalent to 13.7 times the expected price earnings ratio in 2008.