Stifel: Time To Buy Vipshop Holdings

In a report published Wednesday, Stifel analysts initiated coverage of Vipshop Holdings Ltd - ADR VIPS, with a price target of $32.

"Vipshop is China’s leading online discount retailer of brands through its website www.vip.com. The company offers new but excess apparel inventory from mid-level and premium brands at discounted prices in a “flash sale” format to Chinese consumers," the analysts wrote.

While the company is responsible for delivering the products to customers, its suppliers bear most of the inventory risk. This supports Vipshop’s margins and cash conversion.

In the report Stifel enumerated the factors supporting the Buy rating:

1. Vipshop’s e-commerce business model, which is unique in China
2. "Compelling financial model which supports rapid growth, strong profitability, cash flow, and sustainable returns"
3. The Chinese apparel market opportunity being large, at an estimated $200 billion
4. A visionary management team focused on growth
5. Valuation analysis that suggests upside to the current share price

The company's recent initiatives include:

• Improving the visitor's shopping experience through expanded logistics
• Boosting the product selection
• Using big data to personalize shopping, particularly for those using their mobile phones for the purpose
• Expanding warehouse facilities to support the business and co-location services