Baozun:Brand e-com summit takeaways,new marketing strategy underpins growth

Cementing leadership via new marketing programs, further Ali collaboration

    Baozun hosted its 2nd annual Global Brand Ecommerce Summit last Thursday.Leading brand partners (Haier, Mondelez), and platform partners (Alibaba,Tencent) presented at the summit. The brands claim to value Baozun for itsstrong basic operational and omni-channel data capabilities; Baozun has alsoformed a strategic partnership with Alibaba in digital marketing. We arepositive around Baozun’s omni-marketing strategy and cooperation withAlibaba. More Tmall brand promotion events in the near future should drivestrong GMV growth for Baozun. We meanwhile note an impressive pipeline ofnew brands; maintain Buy.New toolkits and more brand promotion events to roll out

    Event attendees including Alibaba, Tencent, and several brands agreed that abig data-driven omni-marketing era is upon us. Alibaba meanwhile plans tolaunch several big data marketing toolkits for brands and service providers inJuly. Recall that Alibaba organized 8promotional events last year; we expectmore brand-related promotional events in 2017. Baozun’s self-developedShopCat, an omni-marketing tool to connect with Alibaba’s uni-marketingtoolkit, should underpin better brand GMV growth during these events. Wealso visited Baozun’s largest warehouse in Wujiang, and discovered theautomation in inbound and outbound inventory management for its largestbrand partners.Maintaining 0.7x PEG valuation and Buy

    We apply an unchanged 0.7x PEG ratio against CY17E EPS and CY17-19E EPSCAGR. Our target price implies a 2017E P/E of 31x. Downside risks includelower-than-expected GMV growth of existing brand partners, failure toexpanding through new partners, and intensifying competition from otherthird-party operation suppliers.