\u3000\u3 China Vanke Co.Ltd(000002) 563 Zhejiang Semir Garment Co.Ltd(002563) )
Key investment points
The annual profit of the parent company is RMB 15.4 billion / year, and the annual profit of the parent company is RMB -1.4% YoY + 1.0 billion / year. Excluding the impact of kidiliz (acquired the French children’s clothing brand kidiliz in 2018 and stripped off the table in September 2020 due to large losses), the company’s original business revenue / net profit in 2021 was + 10.3% / + 14.1% year-on-year respectively. The profit performance was better than the revenue, mainly due to the improvement of gross profit margin, cost optimization and the superposition of kidiliz losses, which dragged down the profit in 2019 / 2020 to form a low base. Quarter by quarter, the revenue of 2021q1-q4 was + 20.9% / + 7.0% / – 5.7% / – 6.2% year-on-year, and – 19.6% / – 21.8% / – 30.5% / – 11.1% year-on-year, respectively. The net profit attributable to the parent company was + 1917.0% / + 7506.6% / + 42.8% / – 7.8% year-on-year, and + 1.6% / – 16.7% / – 52.6% / + 124.6% year-on-year, respectively. In 2021, the epidemic had an impact on the sales and profits of Q3, and Q4 recovered to a certain extent (compared with 2019). The net profit of Q4 decreased losses due to the elimination of kidiliz and increased significantly compared with 2019q4.
By business, the recovery trend of children’s clothing is good, and leisure equipment needs to be recovered. 1) Balabala has opened a net shop and its income has returned to its pre epidemic level. In 2021, children’s clothing revenue was 10.27 billion yuan / yoy + 1.38% / compared with – 18.88% / in 2019, accounting for 67%. Excluding the impact of kidiliz, Bala’s income in 2021 was + 14.9% year-on-year and + 4.3% compared with 2019, which has returned to the pre epidemic level. By the end of 2021, there were 5744 balamen stores and 110 net stores, yoy + 2.0%. 2) Casual wear has not yet returned to pre epidemic levels. In 2021, the revenue of casual wear was 5.03 billion yuan / yoy + 1.43% / compared with – 23.18% / in 2019, accounting for 33%. By the end of 2021, there were 2823 leisure wear stores and 268 net closed stores, yoy-8.7%.
By channel, online and franchise channels have maintained growth. Excluding kidiliz, the revenue of online / direct / franchise / joint venture of the original business in 2021 was + 13.1% / – 3.1% / + 8.2% / + 42.5% year-on-year, accounting for 42% / 9% / 44% / 4% respectively. By the end of 2021, the company had 8567 stores (158 net closed stores, the same below), including 781 Direct stores (+ 100, including H1 + 41 and H2 + 59), 7412 franchisees (- 281, including h1-15 and h2-266), and 374 joint stores (+ 23, including h1-18 and H2 + 41). Tiktok: 1) online, the impact of the epidemic is relatively small, and the company is making a new channel such as shaking, and online revenue keeps growing and the proportion is 1PCT. 2) Some of the offline sales of Direct stores were transferred to online and new stores were opened. At the end of the year, the income contribution was limited, resulting in a slight decline in income; 3) Franchisees carry out online sales to boost revenue; 4) The joint venture is a new mode (since the anti risk ability of franchise stores is lower than that of direct operation, the company will launch the joint operation mode of direct operation + franchise from 2020), with rapid growth.
Profitability improved and inventories increased. 1) Gross profit margin: due to the improvement of product price increase rate and discount rate, the gross profit margin in 2021 increased by + 2.2pct to 42.6% year-on-year, of which the gross profit margin of online / direct / franchise / joint venture increased by + 4.7/8.3/0.4/9.7pct year-on-year respectively, and the increase of franchise gross profit margin was less, mainly because the company considered that the epidemic had a great business pressure on franchisees and did not significantly increase the wholesale price; 2) Expense ratio: in 2021, the expense ratio increased from – 1.5pct to 27.3% year on year, of which the sales / management / R & D / financial expense ratio was – 0.1 / – 1.4 / + 0.1 / – 0.2pct year on year respectively. The decrease of sales and management expense ratio was mainly due to the elimination of the contribution of kidiliz expenses. 3) Net profit margin: under the improvement of gross profit margin and cost optimization, the net profit margin in 2021 will be + 4.3pct to 9.6% year-on-year. 4) Inventory: at the end of 2021, the inventory was 4.024 billion yuan / yoy + 60.9% / 2.1% compared with 2019, the turnover days of clothing inventory were + 22 days to 155 days year-on-year, the stock age structure was relatively healthy, and the inventory within one year accounted for more than 90%. 5) Cash flow: the net cash flow from operating activities in 2021 was 2.076 billion yuan / yoy-53.4% / 23.8% higher than that in 2019. By the end of 2021, monetary capital and financial management totaled 8.415 billion yuan, with abundant cash.
Profit forecast and investment rating: the company is the double leader of children’s wear and leisure wear in China. The recovery trend of children’s wear is good in 2021, and leisure wear needs to be recovered. In the long run, there is a large growth space, which is expected to benefit from the improvement of the market concentration of children’s wear and adult wear. Considering the impact of the epidemic, we reduced EPS from 0.67/0.77 yuan / share to 0.61/0.71 yuan / share in 20222023, increased the predicted value of 2024 by 0.82 yuan / share, corresponding to 11 / 9 / 8x PE in 20222024, 91% dividend ratio and 7.3% dividend rate in 2021, and maintained the “buy” rating.
Prompt: repeated epidemic situation and increase inventory risk.
