Time To Buy Vipshop? This Summit Analyst Thinks So

In a report published Monday, Summit Research analyst Henry Guo maintained a Buy rating on Vipshop Holdings Ltd - ADR (NYSE: VIPS), with a price target of $35.The company's shares have recently underperformed the market mostly due to concerns surrounding a decline in top-line growth. Guo remains optimistic about Vipshop's growth momentum, and believes that the top-line pressure was mostly on account of a large base and difficult y/y comps, with the company phasing out its group buy business.Guo believes Vipshop is a dominant player in China's discount retailing market, and considers it to be a "key holding to get exposure" to the Asian country's B2C eCommerce growth in the longer term.Vipshop guided to 2Q15 revenue growth of 71 to 75 percent y/y, representing a significant decline from the 98 percent y/y growth recorded in 1Q15. However, Guo pointed out that the 2Q15 guidance "actually implies that the company's core business is likely to growth at 80%+ Y/Y in 2Q15."Vipshop shortened the promotion period from five days to three days on its mobile platform starting early June, while promotions on PC have always been three days. Summit Research noted that this change "should help Vipshop introduce more high-quality brands, and high demand promotion events" and should also help "improve user experience on Vipshop's mobile platform.""For the second half of this year, our model suggests that the change is likely to add $500M to $650M incremental GMV to the company, which is about 8%-10% of Y/Y increase," Guo mentioned.The report added, "Vipshop's increasing offline marketing activities recently, which is consistent with management's vision to further penetrate into lower tier cities to expand user base." Guo expects the company's margins to show some improvement this year.