Baozun to Snap up eFashion China

Baozun Inc. (BZUN) has inked an agreement to acquire Shanghai Yi Shang Network Information Company, Ltd., aka eFashion China, to further penetrate the apparel category and reinforce its leadership in the industry. The financial terms of the all-cash transaction have been kept under wraps.

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Shares of Baozun, the leading e-commerce service partner that helps brands execute their e-commerce strategies in China, have gained 13% over the past six months.

Based in Shanghai, eFashion China provides e-commerce solutions focused on launching international fashion brands in China. The company offers one-stop e-commerce solutions, including brand consulting, store operation, digital marketing, IT solutions, and customer service.

The acquisition will aid the execution of Baozun’s medium-term strategic plan to drive growth and tap the potential of promising brands. Post-acquisition, eFashion China will operate as a sub-brand of Baozun. (See BZUN stock chart on TipRanks)

Baozun’s CEO Vincent Qiu, said, “We are excited about this acquisition as both Baozun and eFashion China share an ambition and commitment to bring global fashion brands to China’s fast-growing e-commerce market. eFashion China brings a strong understanding of apparel brands, efficient cost structure, and an impressive track record of high service quality. We believe our combined strengths will deliver unique added value to our brand partners of various stages of growth and sizes.”

The acquisition is expected to close during the third quarter, subject to mandatory regulatory approvals.

J.P. Morgan analyst Andre Chang recently initiated coverage on Baozun with a Buy rating and a price target of $45 (22.1% upside potential).

Chang said, “We believe Baozun’s share price has largely reflected the negative impact from some global sportswear brands’ sales in H121 due to the China cotton controversy, with consensus EPS cut by over 20% YTD. Investors are now likely to focus on Baozun’s long-term growth, which is more visible than for most China e-commerce names, in our view.

He further added, “As the largest brand e-commerce service provider by far in China, Baozun has a competitive advantage in securing growth together with leading brands, whose demand won’t be affected by uncertain market share shifts among major e-commerce platforms due to intensifying competition and regulatory pressure. We expect a 30%+ EPS CAGR in 2021-23E as Baozun taps into new brands, categories, and channels where online penetration is still low.”

Overall, the stock has a Strong Buy consensus rating based on 5 Buys and 1 Hold. The average analyst Baozon price target of $45.67 implies 23.9% upside potential from current levels.