\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 566 Joeone Co.Ltd(601566) )
Key investment points
Men’s pants category is the first leader, and the income side has recovered. Founded in 2004, the company is mainly engaged in the clothing business dominated by Joeone Co.Ltd(601566) brand. In 2009 and 2018, the company successively arranged the fashion clothing brand fun and the Korean fashion men’s clothing brand ziozia through acquisition and capital increase. From 2000 to 2020, Joeone Co.Ltd(601566) ranked first in the comprehensive market share of men’s trousers in China for 21 consecutive years. In 2020, the company’s revenue was 2.672 billion yuan / yoy-6.47%, and the net profit attributable to the parent company was 369 million yuan / yoy-0.32%. 2021q1-q3 revenue yoy + 23.37% / compared with the same period in 2019 + 7.28% (2021q1-q3 Joeone Co.Ltd(601566) / fun / ziozia revenue accounted for 84.2% / 10.7% / 4.5% respectively, and online / offline revenue accounted for 11.6% / 88.4% respectively). Due to increased expenses, inventory decline and fair value loss, 2021q1-q3 net profit attributable to parent yoy-81.0% / compared with the same period in 2019 – 86.2%. As of 2021q3, the company has 2691 stores (920 Direct stores + 1771 franchisees).
The double-digit growth of all brand revenue and the improvement of store efficiency brought by channel optimization. 1) Brand side: 2021q1-q3 Joeone Co.Ltd(601566) / fun / ziozia revenue + 23.6% / 13.4% / 51.6% year-on-year respectively, with an increase of 5.3% / 23.0% / 59.1% respectively compared with the same period in 2019. 2) Channel side: the online / offline revenue of 2021q1-q3 was – 4.7% / + 28.0% respectively year on year, and + 27.1% / + 5.7% respectively compared with the same period in 2019. The revenue of direct / franchise business in offline channels increased by 29.0% / 25.3% respectively and 8.70% / 0.16% respectively compared with the same period in 2019. As of 2021q3, there were 920 / 1771 direct / franchise stores respectively and 46 / 19 fewer than that at the end of 2020. Under the condition of net closure, the offline revenue maintained growth, This reflects the significant improvement of the same store revenue and the significant strengthening of channel power. 3) Quarter by quarter, the revenue of 21q1 / Q2 / Q3 was + 40.0% / 7.8% / 21.5% year-on-year, and + 1.3% / 5.8% / 15.6% year-on-year compared with the same period in 2019; The net profit attributable to the parent company was + 56.8% / – 83.5% / – 199.8% year-on-year respectively, and – 63.4% / – 56.7% / – 225.3% year-on-year compared with the same period in 2019. The net profit in Q2 decreased year-on-year mainly due to the increase of sales expenses and the net loss in Q3 mainly due to the large loss of fair value generated by investment business.
Multidimensional focus on building brand competitiveness, and the effect of strategic innovation has initially appeared. In recent years, the men’s wear industry has become seriously homogeneous, the competition is fierce, the consumption trend is younger and the attention of domestic brands has increased. Under this background, the company has re established the strategy of “deepening the image of men’s pants experts”, and built brand competitiveness by focusing on mainstream media, strengthening head products and promoting channel optimization. During the implementation of the strategy, the increase of marketing investment and channel expenses led to the decline of net interest rate. However, from the perspective of operation, the recovery of revenue and the improvement of store efficiency show that the company’s transformation strategy is suitable for the current consumer market. In the future, with the improvement of brand competitiveness, the decline of relevant sales expenses is expected to drive the improvement of profitability.
Profit forecast and investment rating: the company is the No. 1 leader in men’s pants in China. In 2020, the company started the strategic change of “men’s pants expert”, established the brand mission of “creating the best pants in the world” and the brand vision of “leading Chinese men’s pants and becoming the king of pants in the world”, and focused on improving brand power, product power and channel power, Its innovation effect is reflected in the growth data of terminal revenue and store efficiency in the first three quarters of 2021. In the future, with the promotion of focus strategy and the improvement of the company’s brand strength, the cost side is expected to be effectively controlled, and the net interest rate is expected to rise gradually. We expect that the net profit attributable to the parent company from 2021 to 2023 will be – 22.6% / + 28.8% / + 18.2% year-on-year respectively, corresponding to PE of 21x / 16x / 14x, and will be rated as “overweight” for the first time.
Risk tip: the epidemic repeatedly affects consumption, industry competition intensifies, brand transformation is less than expected, etc.
