Baozun: Key Valuation Metrics Are Attractive

Financial Performance - Baozun's Q2 2024 revenue increased by +3.1% YoY to RMB 2,391.0 million, marking the fifth consecutive quarter of YoY revenue growth [3] - The company's operating loss improved from -RMB 36.4 million in Q2 2023 and -RMB 54.8 million in Q1 2024 to -RMB 18.8 million in Q2 2024 [3] - Baozun achieved a +2.5% top line beat for Q2 2024, with the operating loss being -27.8% narrower than the consensus estimate of -RMB 26.0 million [3] - Service revenue grew by +9.4% to RMB 1,520.7 million, offsetting a -6.4% decline in product sales revenue to RMB 870.3 million in Q2 2024 [3] Revenue Growth Prospects - Baozun's BEC product sales revenue contraction narrowed from -39.6% YoY in Q1 2024 to -4.5% YoY in Q2 2024, indicating a potential turnaround [3] - The company expects BEC and BBM product sales to return to growth in 2H 2024 [3] - Sell-side analysts anticipate a +5% revenue growth in RMB terms for FY 2024, consistent with FY 2023 performance [4] Operating Profitability - Baozun's BBM segment operating loss narrowed by -RMB 10.1 million YoY to -RMB 50.0 million in Q2 2024 [3] - The company has implemented cost optimization initiatives and is fine-tuning the unit economics of new stores to improve future profitability [4] - Analysts expect Baozun's operating loss to improve from -RMB 206 million in FY 2023 to -RMB 122 million in FY 2024 [4] Share Buyback Program - Baozun has a $20 million one-year share buyback plan in place, expiring in late-January 2025 [5] - Between January 24, 2024, and August 28, 2024, the company allocated $4.9 million to share repurchases, averaging $0.7 million per month [6] - The potential buyback yield is 5.6% in the base case scenario, with a best-case scenario yield of 14.7% if the full $20 million is utilized by end-2024 [6] Valuation Metrics - Baozun is trading at a forward one-year normalized P/E multiple of 6.3 times, which is considered attractive [1][4] - The company's potential buyback yield of 5.6% further supports its valuation appeal [8]