\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 398 Hla Group Corp.Ltd(600398) )
Core view
The annual performance recovered rapidly, the inventory was significantly optimized, and the brand transformation and upgrading strategy was actively implemented. In 2021, the company’s revenue was 20.2 billion yuan, + 12.4%, net profit was 2.5 billion yuan, + 39.6%, and the revenue / net profit recovered to 92% / 78% in 2019 respectively. According to our calculation, the annual direct sales / franchise / e-commerce / San Keno increased by 40% / 5% / 33% / 9% respectively, accounting for 10% / 61% / 14% / 11%. During the period, the company actively implemented the brand upgrading and fashionable and young transformation strategy, and opened direct stores in shopping centers, which was compared with 2019, The increase in the proportion of direct sales increased the total gross profit margin by 1.1 percentage points to 40.6%, which was partially offset by the sharp decline of 14 percentage points in the gross profit margin of e-commerce. At the same time, the sales expense rate increased by 5 percentage points to 16%, so the net profit margin decreased by 2.3 percentage points to 12.3%, but it has been greatly improved compared with 9.9% in 2020. Year end inventory turnover – 31 days to 233 days, reaching the best level since listing.
The epidemic repeatedly superimposed the influence of warm winter, and the performance in the fourth quarter and the first quarter fell year-on-year. In 2021, Q4 company’s revenue was 6.03 billion yuan, – 2.4%, and its net profit was 440 million yuan, – 10.3%. In 2022, Q1 company’s revenue was 5.21 billion yuan, – 5.2%, and its net profit was 720 million yuan, – 14.2%, which was mainly affected by the repeated epidemic and the weak retail environment in China. In the first quarter, the company continued to strengthen the development of Direct stores in the shopping center, with direct / franchise / online growth of 100% / – 15% / – 6% respectively, and the gross profit margin / sales expense rate + 2.4 / + 4 percentage points. Outlook: brand transformation and upgrading continue, and we look forward to a rapid recovery after the epidemic. Although the epidemic situation since the second half of 2021 has put pressure on the company’s performance, the company has firmly implemented the brand upgrading and fashionable youth transformation strategy, and achieved initial results. From the perspective of brand, Hla Group Corp.Ltd(600398) by becoming the exclusive clothing partner of China Central Television Spring Festival Gala, jointly publishing T-shirts with China aerospace, in-depth interaction with spokesperson Jay Chou and other effective outputs of national brand value; From the perspective of products, create “fashion + technology” products, and launch explosive products such as six-dimensional elastic pants, three anti black and white small T, all-round jacket and so on; From the perspective of channels, actively explore new online retail and enter the shopping center through opening direct stores. In the first quarter, the direct sales revenue increased by 100% year-on-year.
Risk tips: repeated epidemics, less than expected channel reform, fluctuations in raw material prices and systemic risks. Investment suggestion: look forward to the recovery after the epidemic and be optimistic about the growth toughness of the leading enterprises. The epidemic and warm winter have put some pressure on the company’s performance, but the company, as a leading brand in the field of men’s wear in China, has a certain scale and influence. At the same time, the transformation and upgrading of main brands, the incubation of new brands and the development of new retail are expected to bring the second growth curve to the company in the medium and long term and see the growth toughness of the company after the epidemic. Considering that the current weak retail environment in China and the company’s vigorous development of Direct stores will lead to rapid cost growth, it is prudent to lower the profit forecast. It is estimated that the net profit from 2022 to 2024 will be RMB 2.80/31.2/3.48 billion respectively (compared with RMB 3.22/3.58 billion in 20222023), with a year-on-year increase of 12.5% / 11.5% / 11.3%. Corresponding to 10-10.5xpe in 2022, the reasonable valuation will be reduced to RMB 6.5-6.8 (compared with RMB 7.8-8.2), maintaining the “overweight” rating.
