\u3000\u3 China Vanke Co.Ltd(000002) 563 Zhejiang Semir Garment Co.Ltd(002563) )
Key investment points
The company announced the first quarterly report of 2022: 22q1 revenue of 3.309 billion yuan / yoy-0.03%, net profit attributable to parent company of 209 million yuan / yoy-40.74%. The slight decline in revenue was mainly affected by the epidemic in China since March, and the net profit attributable to the parent decreased more, which was mainly dragged down by the year-on-year decline in gross profit margin of 169 PCT, the year-on-year increase in expense rate of 592 PCT, and the asset impairment loss of 146 million yuan / year-on-year + 99% (mainly the provision for inventory falling price).
By product, children’s wear has maintained growth, while casual wear is under pressure. 22q1 casual wear revenue is 1.088 billion yuan / yoy-4% / accounting for 33% of the main business, and children’s wear is 2.195 billion yuan / yoy + 2% / accounting for 67% of the main business. From the performance of terminal retail flow, the terminal retail sales of Senma / barabarabara in 22q1 were – 5.2% / + 0.5% year-on-year respectively. Barabara flow still had double-digit growth in the first two weeks of March. The epidemic situation in Shanghai rose in late March and slowed down to nearly 8% year-on-year in March. The impact of the epidemic situation has continued since April. At present, the national closing rate of Bara is 10% +.
In terms of channels, double-digit growth was maintained online, and the decline was affected by the epidemic offline. 22q1 online / direct / franchise / joint venture revenue was + 14% / – 6% / – 11% / + 2% year-on-year respectively, accounting for 44% / 10% / 39% / 6% of the main business respectively. 1) Online: from the perspective of retail sales, SEMA / Bara respectively increased by + 2.82% / + 17.5% year-on-year, and Pakistan maintained a good growth trend. 2) Offline: the retail sales of SEMA / Bara were – 8.56% / – 7% year-on-year respectively, which was mainly affected by the epidemic. The company plans to continue to guide offline stores to make up for the decline in physical store sales through new retail methods such as live broadcast and applet. By the end of 22q1, the company had a total of 8495 stores (2829 casual clothes + 5666 children’s clothes), a net decrease of 72 compared with the end of 21 (casual clothes + 6, children’s clothes – 78).
The gross profit margin decreased, the expense rate increased, and the pressure on inventory and cash flow increased. 1) Gross profit margin: the gross profit margin of 22q1 was – 1.69pct to 54.19% year-on-year. The decline in gross profit margin was mainly due to the increase in the purchase cost of the company due to the rise in the price of upstream raw materials, while the terminal retail price and discount rate remained basically stable, resulting in the reduction of price increase ratio and gross profit margin. Throughout the year, the company expects the gross profit margin to be flat and slightly lower while maintaining the stability of selling price and discount rate. 2) Expense ratio: the expense ratio of 22q1 increased from + 5.92pct to 29.66% year-on-year, of which the expense ratio of sales / management / R & D / finance increased by + 4.7 / + 0.5 / + 0.05 / + 0.68pct year-on-year respectively, mainly due to the rigidity of offline expenses. Based on the current epidemic situation and consumption environment, the company plans to open stores carefully, negotiate rent reduction for stock stores, and increase cost control.
3) inventory: at the end of 22q1, the inventory was 4.052 billion yuan / yoy + 66% / QoQ + 0.7%, and the inventory turnover days increased by 72 days to 191 days year-on-year, mainly due to the rise of inventory pressure due to the poor sales of products in winter 21. By the end of 22q1, the proportion of memory goods accounted for 75% +, which was slightly lower than that at the end of 21. The company made careful provision for this. At present, the inventory income ratio is 26%, which is still in the normal range. 4) Cash flow: the net cash flow of 22q1 operating activities was – 5.62 million yuan, which was negative mainly due to the increase of expenses and payment for goods from suppliers. With the improvement of the epidemic situation, the pressure on cash flow is expected to be relieved. At present, the company has a total of 8.2 billion yuan of monetary capital + financial management, which is abundant.
Balabala: promote the business strategy of brand upgrading, category branding and retail operation. 1) In terms of brand, as the first leader of children’s wear in China, it focuses on the brand positioning of “best understanding of children’s growth” and continues to deepen the upgrading in science and technology, design and marketing. It is planned to hold the China Cup children’s wear design competition in 22 years to expand the brand influence and promote brand upgrading. 2) In terms of categories, it is planned to create advantageous products for single products such as down jacket and dress, and jointly release joint branded products and Guochao series products with cutting-edge designers and internationally renowned designers to strengthen product competitiveness. 3) In terms of retail, UNIQLO retail talents were introduced in the second half of 20 years to carry out retail system, digital transformation and upgrading for stock stores and improve store quality.
Profit forecast and investment rating: the company is the double leader of China’s children’s wear and casual wear, and has shown an overall recovery trend in the past 21 years. Among them, the recovery trend of children’s wear is good, and the recovery of casual wear is relatively slow. Terminal retail and inventory provision and performance in 22q1 have declined significantly due to the epidemic. We lowered the year-on-year growth rate of net profit attributable to parents in 22 years from 10.88% to – 5.47%, and the year-on-year growth rate of net profit attributable to parents in 23-24 years is + 17.48% / 14.48% respectively, EPS was 0.52/0.61/0.70 yuan / share respectively, corresponding to PE 13 / 11 / 9x, which was lowered to the “overweight” rating.
Risk tip: the epidemic situation worsens, the economy is weak, and the relief of inventory and cash flow pressure is less than expected.
