Shoe Companies PEAK 2011&Nbsp; Orders Increased By 24% In The Third Quarter Of 2009.

So far, the growth rate of orders for PEAK in the first to third quarter of 2011 has been 25%, 24% and 24% respectively, plus the Annual Supplement of about 10% of annual sales. We expect that PEAK's revenue will increase by 26% in 2011, and the price of products will increase by 5-10%. However, the average selling price will be flat or only slightly increased, mainly due to the change of product mix and the increase in the sales of non basketball footwear with relatively low price.

PEAK also announced a 13% increase in the same store sales in the fourth quarter of 2010, the best performance in the industry, which can cover the increase in the cost of production and enhance the profit margins of channels and brands.

In the first quarter to the third quarter of 2010, the same store sales growth in PEAK reached 15%, 12% and 13% respectively. Based on the company's efforts to upgrade the enterprise resource planning system (ERP) in the future and strengthen the training of product knowledge of store managers and salesmen, we continue to expect that the company will maintain double-digit same store sales growth in 2011.

At present, PEAK's 1300 retail outlets (about 70% of dealers) have been networked with headquarters through the real-time data system. The company indicated that the target would cover the entire retail network by 2013.

By the end of December 2010, the total number of retail outlets in PEAK reached 7224, including 34 basketball themed shops, a net increase of 1018 compared to the end of 2009, reaching the target of setting up 1000 new targets at the beginning of the year.

The company aims to open about 800 shops in 2011, including 10 flagship stores with an area of 700-800 square meters, so that the total number of shops exceeds 8000 at the end of 2011.

PEAK currently has 46 major distributors, a net increase of 10 compared to the end of 2009, and the 10 are mainly upgraded from two level agents.

PEAK will continue to pay attention to refined pipelines and support agents at the prefecture level, so as to enhance cost advantages and short range management and reduce logistics costs. It is estimated that the number of distributors can exceed 50 in the 1 quarter of 11, and the total number of distributors will reach 66 in 2011.

In addition, from 2011 onwards, the company will increase the number of orders held annually from 3 to 4 times.

By the end of 2010, the average single store area of PEAK increased from 70-75 square meters in 2009 to 77 square meters. In 2010, the average area of newly opened shops was more than 100 square meters. The company said that some stores would be closed in the future, and the sales and sales of the stores would increase significantly, thereby enhancing the image of their products and brand.

Management said it would expand the average single store area by 30% to 100 square metres by the end of 2011.

Recently, the market has been overly worried about the increasing competition in sports wear industry and the rising cost of pipelines, and the unsatisfactory operation data of leading enterprises, leading to a marked decline in the valuation of the whole industry.

We lowered the 12 month target price of PEAK from 7.90 yuan to 7.10 yuan, which is equivalent to 12 times the expected price earnings ratio in 2011 and 0.6 times the 2009-11 year earnings growth rate of 2009-11 years, which is in line with the industry average level.

Although we lowered the target price, its 2009-11 year full diluted earnings per share compound annual growth rate of 18% was the highest in the industry. We still reiterate the buying rating of the stock.

PEAK's latest business data show that its demand for retail terminals is still strong. We believe that it will maintain good growth momentum in the future by virtue of its resource advantages in the two to four tier cities.