Lining: Proposal To Increase Holdings

As the top third sports brand operator in China, Lining has the ability to resist fierce competition at home and abroad and maintain its expanding market share and strong profit growth.

After taking into account the RMB appreciation factor, the current stock price is equivalent to 2008 and 2009, the market consensus forecast price earnings ratio is about 32.3 times and 23.72 times, from 2007 to 2008 and 2008 to 2009 earnings per share growth is 47% and 36% respectively.

It is generally expected that group earnings will grow more significantly with the stimulation of the 2008 Olympic Games.

In addition, the group will take advantage of the new Z-DO to seize the low level consumer market, which will help the group to increase sales, and the expansion of business outlets is also the main driver of performance.

In addition, the group has ample cash and has the ability to make other acquisitions in the future to further practice the multi brand strategy, and also become a driving force for earnings growth.

The group's financial report will be announced in March 18th.

We believe that the group's performance will outperform market expectations and stimulate stock prices to rise.

In addition, because of the Olympic Games approaching, I believe that the sales volume of Lining's brand clothing and footwear will stimulate the stock price.

The group is still in the stage of rapid growth. From 2003 to 2006, the annual compound growth rate of Lining's store reached 19.5%, while its operating quota increased by 35.6%.

In addition, the combined growth of net profit and profit reached 47.2%.

It is believed that the trend of rapid growth will continue in the next few years, and the driving force will come from the expansion of business outlets, better store sales, higher brand premium and the synergistic effect of new brand acquisitions.

In terms of price earnings ratio, the value of the company is not low, and the ratio of earnings to earnings is more than that of the main retail businesses in China.

In 2008, the average intercity earnings growth ratio (PEG) was 0.87, while that of Lining was 0.69. We think the reasonable price should be HK $28, which is about 26% higher than the current price of HK $22.3.