1. Nike Inc. JUST DO IT. Presented: November 9, 2017
Chen CHEN | Chester CHU | Johnny XU | Rosy WANG

2. Content Section 1 | Introduction Section 2 | Industry Overview
Section 3 | Macroeconomic Overview
Section 4 | Company Business Overview
Section 5 | Financial Analysis
Section 6 | Valuation
Section 7 | Recommendation

3. Introduction

4. 1-Year Historical Price VS S&P 500 Index
Introduction
Company at a glance and relevant stock market performance comparison
Profile
Market Statistics
Company Ticker
NKE
Year Founded
1964
Headquarter
Beaverton, Oregon, USA
Sector
Consumer Goods
Industry
Textile - Apparel Footwear & Accessories
Life Cycle Stage
Mature
Current Price
$55.43
52 Week High
$60.53
Market Cap
$90.4B
52 Week Low
$49.75
Trailing P/E
23.6
Fiscal Year Ends
May 31, 2017
Forward P/E
20.8
ROA
12.92%
PEG Ratio
2.8
ROE
32.63%
EV/EBITDA
16.5
Payout Ratio
30.64%
1-Year Historical Price VS S&P 500 Index
Q4 FY17 EARNINGS RELEASE
Source: Yahoo Finance

5. Industry Overview

6. Industry Status | Present Day
Footwear manufacturing is a mature industry with increasingly high level of competition
Defining the Industry
Global Footwear Manufacturing Industry Current Performance
Companies in athletic footwear, apparel and accessories manufacturing and retailing industry produce and sell primarily athletic shoes, such as running shoes, basketball shoes sneakers, and apparel as well. Stores may also sell specialty sports footwear, such as golf shoes, bowling shoes and spiked shoes.
($ in billions)
Global Footwear Manufacturing Industry at a Glance
US Athletic Footwear Store Market
Revenue
Annual Growth Rate
Annual Growth Rate
$251bn
3.6%
4.7%
Profit
Wages
Business
$13.6bn
$42.9bn
45,404
Products & Services Segmentation
Major Players
Adidas
Li Ning
ASICS
Life Cycle Stage
Mature
Regulation Level
None
Revenue Volatility
Low
Technology Change
Capital Intensity
Barriers to Entry
Medium
Industry Assistance
Industry Globalization
Concentration Level
Competition Level
High
Lululemon
Puma
Under Armour
V.F.
Source: IBISWorld, First Research

7. Industry | Future Outlook
Industry Revenue grows slowly but stable driven by growing demand and new opportunities
Industry Outlook
Revenue Growth Rate Projection
Growing Demand
Purchase More Expensive and High-end Shoes: Customer continue to shift their focus to quality rather than price
Per Capita Disposable Income: increases at an annualized rate of 2.9%
Increasingly Participate in Sports
Proliferation of the Athleisure Trend
($ in billions)
Key Trends & Opportunities
Opportunities and Limitations
Revenue growth will slow
Companies increasingly focus on expanding their inventory to include shoes for additional activities
Business Trends
Industry Opportunities
Brand Name Licensing: Large endorsement deals with a few top athletes have given way to a wide range of small endorsement arrangements with athletes in many different sports
Internet Sales: Website allows online shopping and especially important to small brands
International Sales: Growth opportunity beyond mature US market, especially for athletic, men’s high-end dress shoes
Profit and Performance
Price-based competition from online retailers will limit gains
Increase in wages as a share of revenue will eat into margins
New entrants continue to enter the industry
Companies will attempt to gain market share through mergers and acquisitions
More Casual Styles: The greater informality of dress at work and the spread of "casual Fridays" have cut into the market for expensive dress shoes, creating intense price competition
Using Consumer Data: To determine what types of products are most attractive and better cater to customers’ expectations
Top Selling Categories: Running, basketball, kids, skate/surf, and walking shoes are the top-selling categories of athletic footwear in the US, whose demand driven by consumers aged 13 to 24
Brand Extension: Successful shoe brands easily lend themselves to the branding of clothes and other products
Source for Graph: IBISWorld, First Research

8. Macroeconomics Overview

9. Key Macroeconomic Drivers
There are four key macroeconomic drivers of the industry
Per Capita Personal Disposable Income
Participation in Sports
($ in thousands)
Time Spent on Leisure and Sports x
E-commerce sales
($ in billions)
Source: IBISWorld

10. Company Business Overview

11. Company Overview NIKE—World's #1 footwear and apparel company
Company Introduction
Financial Snapshot
Brands
Incorporated in 1964
Principle business activity: design, development and world wide marketing and selling of athletic footwear, apparel, equipment, accessories and services.
Largest seller of athletic footwear and apparel in the world.
($ in millions)
2013
2014
2015
2016
2017
LTM 2017
Net sales
25,313
27,799
30,601
32,376
34,350
34,359
Growth Rate
9.8%
10.1%
5.8%
6.1%
Gross profit
11,034
12,446
14,067
14,971
15,312
15,151
Gross Margin
43.6%
44.8%
46.0%
46.2%
44.6%
44.1%
EBITDA
3,740
4,266
4,824
5,164
5,465
5,350
EBITDA Margin
14.8%
15.3%
15.8%
16.0%
15.9%
15.6%
Net income
2,472
2,693
3,273
3,760
4,240
3,941
Profit margin
9.7%
10.7%
11.6%
12.3%
11.5%
Diluted EPS($)
1.35
1.49
1.85
2.16
2.51
2.34
Key Categories
Major Product
($ in millions)
Footwear:
Designed primarily for specific athletic use
Largely worn for casual of leisure purposes
Running & Jordan lead in footwear sales
Apparel:
Feature same trademarks and distribution channel with footwear
Men’s Training & Running lead in apparel sales
With licensed college and professional team
Equipment & Accessories:
Including sports balls, bags, bats, etc.
Source: NIKE K
Source: IBISWorld, First Research

12. Revenue breakdown by Region US & International Market
Market & Distribution
NIKE has large market across world through different distribution channels
Revenue breakdown by Region
Distribution Channel
($ in millions)
DTC(Direct to consumer): NIKE-owned retail stores, internet websites, and mobile applications
Through a mix of independent distributors and licensees throughout the world.
US & International Market
US Market
46% revenue,6 distribution centers
International Markets
54% revenue,60 distribution centers
NIKE Brand factory stores
NIKE Brand in-line stores
Converse stores
Hurley stores
Total
Source: NIKE K

13. Manufacture NIKE has large network of manufacturing Footwear Apparel
127 factories
15 countries
Apparel
363 factories
37 countries
China
27% Footwear
26% Apparel
Vietnam
46% Footwear
16% Apparel
Thailand
10% Apparel
Other independent contract manufacture
in Argentina, India, Brazil and Italy
Indonesia
21% Footwear
Steady supply of inputs
Source: NIKE K

14. Management Team
Experienced management team improve the operating performance of NIKE
Mark G. Parker
David J. Ayre
Chairman, President and Chief Executive Officer
Been employed by NIKE since 1979 with primary responsibilities in product research，design and development, marketing and brand management
Executive Vice President, Global Human Resources
Used to hold a number of senior human resource positions with PepsiCo since 1990.
Chris L. Abston
Trevor A. Edwards
Vice President and Corporate Controller
Vice President and Controller of Walmart International from February 2013 to January 2015
Spent 25 years in public accounting with Ernst & Young LLP
President, NIKE Brand
Joined NIKE in 1992
Been the director of marketing for America, Europe, Middle East and Africa
Andrew Campion
Hilary K. Krane
Executive Vice President and Chief Financial Officer
Joined NIKE in 2007 as Vice President of Global Planning and Development, leading strategic and financial planning.
Leadership roles in strategic planning, mergers and acquisitions, financial planning and analysis,
Operations and planning, investor relations and tax at The Walt Disney Company from 1996 to 2007.
Executive Vice President, Chief Administrative Officer and General Counsel
Joined Nike in April 2010
General Counsel and Senior Vice President for Corporate Affairs at Levi Strauss & Co. from 2006 to 2010
Partner and Assistant General Counsel at PricewaterhouseCoopers LLP from
Source: NIKE K

15. SWOT Analysis Strengthens Weaknesses Opportunities Threats Lawsuit
Financial Performance
Revenue & profitability growth
Geographic Presence
Diversified customer base
Reduce country risk
Operational Capabilities
Supply chain
Innovative technology & design
Lawsuit
Misleading price information
Strengthens
Weaknesses
Increase in Counterfeit products
Hamper brand image
Foreign Exchange Risks
Conduct business operations worldwide
Foreign exchange hedging activities
International Operations and Trade Risk
Change of Customer’s preference
Opportunities
Threats
Expanding Retail Market in the US
Growth in private consumption, tourism
Government favorable policies
Initiatives
Expansion, special in-store service
Growing Footwear Market in the US

16. Economic Moat Analysis
NIKE’s research, design and development efforts are key factors in its success.
Largest seller of athletic footwear and apparel in the world
Conduct business operation on a global basis
Global growth through strength of brand
Brand Recognition
Large supply chain network
Comprehensive distribution channel
Economic scale
Technical innovation in the design and manufacturing process
Utilize research committees and advisory boards made up of athletes and experts in different areas
Ability to respond in a timely and adequate manner to the change in customer’s preference
Network
Effects
Product Innovation

17. Financial Analysis

18. Operating Efficiency Ratio
Financial Analysis
Stable cost, profitability, liquidity and operating efficiency
Gross Margin
Profitability Ratio
($ in millions)
Liquidity Ratio
Operating Efficiency Ratio

19. Financial Analysis DuPont Analysis Revenue Breakdown
Each part of ROE performs well and proportion of footwear in revenue increases
DuPont Analysis
2013
2014
2015
2016
2017
Tax Burden (NI / EBT)
75.9%
76.0%
77.8%
81.3%
86.8%
Interest Burden (EBT / EBIT)
100.6%
96.3%
100.7%
102.7%
102.9%
Operating Margin (EBIT / Revenue)
12.8%
13.2%
13.6%
13.9%
13.8%
Asset Turnover (Revenue / Asset)
1.51
1.54
1.52
Equity Multiplier (Asset / Equity)
1.6
1.7
1.8
ROE
23.3%
24.6%
27.8%
30.1%
34.4%
Revenue Breakdown
Footwear
Apparel
NIKE Brand
Equipment
Converse Brand
Global Division

20. Valuation
Comparabe

21. Valuation | Comparable Companies Analysis
NIKE’s implied share price is $ 56.37
V.F. Corporation
Under Armour, Inc.
Deckers Outdoor
NIKE, Inc.
· Apparel, Footwear & Accessories Companies with Brand North Face, Timberland, Lee and etc.
· Market Cap B
· Gross Margin %
· EBITDA Margin %
· P/E Ratio x
· EV/EBITDA x
· Apparel, Shoes & Accessories Designed for Sports & Fitness
· Market Cap B
· Gross Margin %
· EBITDA Margin %
· P/E Ratio x
· EV/EBITDA x
· Footwear Designer & Distributor
Having Brand UGG
· Market Cap B
· Gross Margin %
· EBITDA Margin %
· P/E Ratio x
· EV/EBITDA x
· Footwear, Apparel, Equipment, Accessories, and Services
· Market Cap B
· Gross Margin %
· EBITDA Margin %
EV / EBITDA
Financial Metric
Implied Enterprise Value
Equity Value
Implied Share Price
16.9X~17.8x
$5,350
$90,553~$95,370
$90,559~$95,376
$53.52~$56.37
Millions of the Currency Shares Outstanding : 1692 Millions

22. Valuation
Discounted Cash Flow

23. Valuation | Discounted Cash Flow Analysis
$62.61 from DCF and price range from $55.74 to $72.14
Unlevered Free Cash Flow Projection
Enterprise Value
Beta calculated from regression
Size premium
Discount Rate: 7.3%
WACC
Considering GDP growth rate and the industry situation, set the perpetuity as 3%
Perpetuity Growth Rate
2.9% Low Debt
Cost of equity
Capital Structure
Enterprise Value $ 98,322 mm
Implied Share Price $62.61
(Current $55.76 as of Nov 8, 2017)
$62.61
$72.14
$55.74
Perpetuity Growth rate

24. Recommendation

25. Add to Watch List Recommendation Current Price: $ 55.8
Price Range: $56.37-$62.61
$53.52-$72.14

26. JUST DO IT.
Thank you !
Q&A