Jiangsu Hongdou Industrial Co.Ltd(600400) (600400)
Main points
In 2017, the company stripped off its real estate business and began to focus on men's wear business. We recommend paying attention to the recent positive changes of the company, Including: (1) management change: change the general manager in 20 years and the chairman in 21 years, and start the business transformation of cooperation with Junzhi consulting in the second half of the year; (2) product change: focus on "classic comfortable men's wear", cooperate with external fabric resources to develop new products, and reduce the proportion of returns to suppliers in the future; (3) channel change: focus on "comfort" and focus on the first and second tier cities "Comfort" has differentiated characteristics, and the third and fourth tier cities emphasize that "classic" is the endorsement of high quality. In 22 years, new flagship stores will be opened in Jiangsu, Shanghai and other cities; (4) Increase investment in marketing. It is estimated that a total of 400 million yuan will be invested in channel upgrading and advertising promotion next year. Considering that this year and next are in the investment period, the growth rate of net profit next year will be reduced, but considering that the transformation effect is expected to appear in 23 years, the net profit in 23 years will be increased, the revenue forecast for 21 / 22 / 23 will be adjusted from 24.19/29.32/3638 billion yuan to 24.19/30.28/3942 billion yuan, and the net profit attributable to the parent will be predicted from 1.03/1.27/1.66 RMB 100 million was adjusted to RMB 103 / 119 / 172 million, corresponding to EPS of RMB 0.05/0.05/0.07, closing price of RMB 3.8 on November 26, 2021, corresponding to PE of 84 / 73 / 51 times respectively, maintaining the "overweight" rating. The safety margin refers to the average repurchase price of RMB 3.15-3.55.
Growth driven: store efficiency improvement + extension store resonance, deduction of non net profit margin has room for improvement
According to our analysis, in the short term, the company will focus on developing Jiangsu Province in 22 years. We expect to open 100 new stores in 22 years, driving the revenue growth of Jiangsu Province by 30-40%; In the medium term, the company's stores are expected to return to the historical peak level, reaching 1500-2000 stores; In the long run, with reference to 5000 + Peer Hla Group Corp.Ltd(600398) stores, we believe that the number of stores of the company is expected to reach at least 2000-3000.
From the perspective of store efficiency, in 2019, the store efficiency of the company's Direct stores was 1.78 million yuan, and the single store shipment of franchisees was 1.05 million yuan, which still has room for improvement compared with peers Hla Group Corp.Ltd(600398) . In the long run, we estimate that the retail market scale of the company is expected to reach 5-7.5 billion yuan (2.5 million stores * 2000-3000 stores).
In addition, at present, the net profit margin deducted by the company is less than 10%. In the future, with the improvement of store efficiency and price increase rate, the net profit margin of the company will rise to the average level of medium and high-end men's clothing. We estimate that it is expected to reach 15% +, driving the growth rate of net profit higher than that of revenue.
Risk statement
Uncertain impact of epidemic situation; The recovery of the same store is lower than expected; Systemic risk.
