\u3000\u3000 Zhejiang Sunrise Garment Group Co.Ltd(605138) (605138)
The company’s customers cover well-known leisure and sportswear brands at home and abroad
The company is a fabric production and processing and garment making company with core production technology, which mainly serves medium and high-end brands at home and abroad. Its business covers five processes: spinning, fabric, dyeing and finishing, printing and embroidery, garment cutting and sewing. Its production capacity is distributed in China, Vietnam, Cambodia and Sri Lanka;
The company’s main customers include Ralph Lauren, UNIQLO, lacoste (i.e. French crocodile), Calvin Klein, Tommy Hilfiger, Youngor Group Co.Ltd(600177) , Filo, Hugo Boss, Li Ning, Armani, Burberry, etc. From 2018 to 20, the revenue of the company’s top five customers accounted for 53.2%, 55.3% and 53.3%; In 2020, the top five customers and their proportion are UNIQLO (14%), Ralph Lauren (12%, the largest customer in 2018-19, which has been greatly affected by the epidemic before), lacoste (11%), FILA (11%), and Zhao clothing (6%).
Ralph Lauren fy22q3’s revenue increased by 28% at the same time, and the guidance for the whole year was raised. The business growth trend is obvious, and the order is expected to hit the bottom and reverse
Ralph Lauren fy22q3 (2021 / 09 / 26-2021 / 12 / 25) had a revenue of US $1.815 billion, about RMB 11.612 billion, a year-on-year increase of 28% (excluding exchange rate, the same below); The net profit was 218 million US dollars, about 1.392 billion yuan, an increase of 81.7%.
By channel, the retail revenue of fy22q3 was US $1.249 billion, about RMB 7.989 billion, an increase of 29.8% at the same time; Wholesale revenue was US $525 million, about RMB 3.361 billion, an increase of 21.2%. As of December 25, 2021, the company has 505 Direct stores and 141 authorized stores, with a decrease of 43 and 145 stores respectively compared with the same period in 2020.
By region, the three major sales regions achieved double-digit growth, and also increased compared with fy20q3 before the epidemic. Among them, the revenue in Asia was US $383 million, about 2.447 billion yuan, an increase of 19.8%, accounting for 21.1% of the total.
Raise fy22 annual guidelines, and it is expected that the annual revenue will increase by 39% ~ 41% at the same time
Ralph Lauren increased marketing investment, enhanced brand potential, increased average product price and optimized product portfolio; At the same time, the company continued to expand sales regions and channels, released Ralph Lauren’s full category shopping app in 2021, cooperated with roblox to set foot in metauniverse and attract new high-end consumers. With the help of multiple engines, the company is expected to continue to improve its medium and long-term performance. Ralph Lauren raised the annual revenue growth guideline to 39% ~ 41%, compared with 34% ~ 36%, and is expected to achieve revenue of about 39.13 ~ 39.69 billion yuan.
Sales of major overseas customers recovered, national brands are expected to be in large quantities, and orders are expected to be optimistic
As an important strategic supplier of Ralph Lauren, Shengtai has cooperated with Ralph Lauren for decades, and Ralph Lauren has been the largest customer of Shengtai for many years. From 2018 to 2020, Shengtai’s revenue from Ralph Lauren accounted for 22.96%, 19.99% and 11.80% respectively; Affected by the epidemic in 2020, Ralph Lauren’s own sales revenue declined and procurement decreased, but the cooperative relationship between the two sides is still relatively stable. The business volume of cooperation between the two sides may have recovered in 2021. With the recovery and continuous growth of Ralph Lauren’s performance, the company’s order volume is expected to continue to increase.
On the other hand, Shengtai is an important supplier of Guopai (Anta Group and Li Ning) and the only platinum supplier of FILA in knitted fabrics. The sales revenue of fila21h1 is 10.8 billion yuan, which may exceed 20 billion yuan in the whole year of 21 years, and the proportion of revenue is expected to continue to increase.
In addition, Shengtai and Li Ning established a joint venture (Guangxi Ningtai Garment Co., Ltd.), and Shengtai sold knitted fabrics to Guangxi Ningtai. Due to the competitive advantage of the company in the R & D and production of medium and high-end knitted fabrics, the cooperation between the company and Li Ning has been deepened, and the amount of knitted fabrics sold by the company to Guangxi Ningtai has increased significantly in 2020, It is expected that the order amount will continue to grow in 2021 and may enter the top ten customers in 2022.
Maintain profit forecast and buy rating
Shengtai’s long-term cooperation with key customers has recovered and is expected to maintain stable growth. At the same time, the company optimizes the customer structure, deepens cooperation with Anta, Li Ning and other national brands, and has sufficient downstream orders; The company’s factories in Henan, Vietnam and other places are expanding production. It is expected that the release of production capacity in 22 years will open up growth space, and the automation transformation of some factories will further improve profitability. We continue to be optimistic about high-quality supply chain opportunities. It is estimated that the company’s EPS will be 0.56, 0.74 and 0.94 yuan respectively from 2021 to 23, and PE will be 20, 15 and 12 times respectively.
Risk warning: relying on a small number of customers, the progress of production expansion does not meet expectations, repeated overseas epidemics, continued obstruction of shipping and other risks.
