\u3000\u3 Shengda Resources Co.Ltd(000603) 839 Anzheng Fashion Group Co.Ltd(603839) )
Key investment points
China’s well-known middle and high-end fashion brands have been under pressure in recent years. The company is positioned for medium and high-end fashion. It owns four private brands: JZ Jiuzi, IMM Yinmo, moissac and anzheng anzheng. At the same time, it holds and jointly operates three baby and children’s clothing brands: Frog Prince, corabit, ALU and Ru. In 2018, it arranged the operation business of mother and baby e-commerce agents through the acquisition of Lishang information. In 2021, the operation revenue of clothing brands / agents accounted for 71% / 29%. In recent years, the company’s performance has been under great pressure. The revenue of 2020 / 2021 / 22q1 was + 47.43% / – 14.37% / – 29.85% year-on-year respectively, and the net profit attributable to the parent was – 35% / – 65% / – 73% year-on-year respectively (the decline of net profit attributable to the parent in each year was large, and the influencing factors were different: the gross profit margin decreased by 9.69pct in 2020; a large one-time loss occurred in 2021, and the period expense rate increased by 6.94pct; the gross profit margin / period expense rate of 22q1 was – 1.70 / + 4.80pct year-on-year). At the same time, the performance is under pressure and the management changes frequently. In October 21, Zheng Ankun, the founding major shareholder, was welcomed back as CEO, which is expected to gather the family resources and business management experience of major shareholders and lead the company out of short-term difficulties.
Clothing brand business: Children’s clothing contributed to the growth, while the growth rate of adult clothing was relatively stable. 1) 20112019 clothing revenue cagr8 48%. In 2020, the income of children’s clothing (frog prince, corabit, aluheru) and clothing increased by 30.85%. 2) The income of adult clothing and children’s clothing accounted for a slight increase of – 6% / 25.5% and 25.5% respectively, of which the income of adult clothing and children’s clothing accounted for a slight increase of – 6% / 23.5% respectively, with the same proportion of adult clothing and children’s clothing accounting for – 6% / 25.5%. In terms of channels, Jiuzi and frog prince are mainly franchised, and other brands are mainly directly operated. In 2021, the offline direct / franchise revenue accounted for 57.18% / 42.82%. The number of direct / franchise stores increased from – 316 / + 98 to 364 / 1871 respectively year-on-year. The closure of direct channels is mainly due to the contraction of corabit, Jiuzi and feinachen brands. As of 22q1, the company has 2153 stores (345 directly operated + 1808 franchised).
E-commerce agent operation business: the performance fluctuates greatly in recent years, and the sharp decline in 21 years has dragged down the overall performance. Lishang information has been consolidated since November 2018, promoting the proportion of the company’s online business to 44.73% in 2021 from 13.80% in 2017. The performance of agent operation business fluctuates greatly in recent years: in 2019, the income from benefit consolidation and Lishang information increased by 24% and the income from agent operation business increased by 542%; In 2020, due to the expansion of children’s milk powder brand Wyeth, the revenue increased by 78.33%, but the low gross profit margin of new business dragged down the gross profit margin of agent operation by 13.29pct; The divestiture of low gross profit Wyeth business in 2021 led to a sharp decline of 41.52% in operating revenue in 2021, which dragged down the overall performance. In recent years, there have also been changes in the senior management of the agent operation business. In October 21, the former business head returned and will sort out and restructure the business.
The adjustment of clothing brand business is in progress. After taking office, the new CEO proposed to “focus on the main business of fashion and cultivate national fashion brands”, increase the construction of “retail power, product power and brand power”, strive to build a younger management team, adjust the development plans of various brands, adhere to cost control, stabilize channels and brands, tilt resources to the main brands, cultivate new brands with small volume and adjust brands with poor performance. Stores are expected to show net growth in 2022 Become the main driving force of income growth. Specifically: (1) channel adjustment of the main brand: Jiuzi will optimize and adjust the channel in 2021, with a net of – 55 stores (direct sales – 34 + franchises – 21). In the future, it will consider moving to the shopping center to achieve channel renewal. (2) Focus on cultivating potential new brands: the brand style of mosak is in line with the aesthetics of young people, focusing on direct sales, and the growth can be expected; Frog Prince’s performance has turned losses into profits, and the brand team was established in the second half of 21 years. (3) Adjust the brands with poor performance: feinachen adjusted the development plan, stopped investment and gradually closed stores in the second half of the 21st century (net – 45 stores in the 21st year); Aluhe may restructure its strategic planning in the future if its business volume is small and its business stability is weak. The above two brands have partially accrued goodwill impairment reserves in 2021.
Profit forecast and investment rating: the company is positioned as a medium and high-end fashion brand. In recent years, the children’s clothing business is relatively stable, the agent operation business fluctuates greatly, the executives change frequently, and the overall performance pressure is great. In the future, with the arrival of the new CEO, we will re sort out the development focus of the four private brand businesses, strengthen the brand gene, promote the return of channel stores to net stores, and the performance end is expected to improve gradually. Considering the large amount of one-time provision for asset impairment and goodwill in 2021, it is expected that the net profit attributable to the parent company will increase by 74.13% / 17.59% / 15.51% respectively from 2022 to 2024, the EPS will be 0.30/0.36/0.41 yuan, the corresponding PE will be 23 / 20 / 17x, and the “neutral” rating will be given for the first time.
Risk warning: repeated epidemic, weak economy and business adjustment lower than expected.
