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CITIC Construction Investment Li Junsong
The company’s information construction is currently in the echelon among clothing companies. The company can currently grasp the shipment and price information of products in directly operated stores and franchised stores. The company is also an early company in the industry that pays attention to information construction. As early as 2005, before going public, the company had begun to carry out enterprise process reengineering and information strategies. At present, the company has successfully implemented the SAP system and is currently launching a BI business intelligence analysis system. At present, the company can grasp the sales and inventory information of all franchise stores. In view of the improvement of the company’s information system, the company will gradually increase the number of annual trade fairs in the future, and plans to increase it from the current 2 to 4 times.
In principle, the settlement method between the company and each specialty store (hall) is based on the company’s unified ex-factory price, from deposit to delivery. For some specialty stores (halls) that have been franchised for a long time, have a good reputation and have a large sales volume, certain discounts will be provided on the ex-factory price and a certain payment credit will be granted.
The company’s franchise channel is not like the provincial model of Septwolves. The store opening speed is not as fast as the provincial model. The investigation of new franchisees mainly relies on interviews to investigate the franchisees’ ability, strength, and connections to obtain stores. Channel managers, The general manager or chairman conducts an on-site investigation of the local market, economy, etc. before signing the lease, which constitutes an investigation report. At the same time, the company’s R&D personnel match products to form a product platter; designers design the store; and the training department trains new store employees.
The company allows a small part of the exchange, but mainly adopts the method of transferring goods, such as transferring clothes that are not easy to sell in the south to the south, and the south to the south, etc. The inventory that cannot be disposed of initially will be removed. Bird tag post disposal.
The company’s brand currently covers the main categories of men’s clothing. The Bird of Fortune brand is subdivided into casual, business and classic subdivision series, covering different classes of men respectively. The newly cultivated Sanjieluo brand is also growing very fast. The Baoniao brand currently focuses on business attire group purchases, but also has high-end customized brands and online direct sales brands. The company’s multi-brand and multi-channel strategy has begun to take shape.
The company achieved revenue of 314 million in the third quarter, a year-on-year increase of 17.47%; in the first three quarters, it achieved revenue of 706 million, a year-on-year increase of 26.61%. The realized cost in the third quarter was 63.088 million, a year-on-year increase of 121.86%; the performance in the third quarter increased significantly compared with last year, mainly because: 1) The company was recognized as a high-tech enterprise, and the income tax increased to 15% for three consecutive years starting from this year; 2) Shipments in the third quarter of this year are earlier than this year. We estimate that the impact of tax incentives on EPS is about 0.05 yuan, and the impact of early shipment factors is more than 10%, which is equivalent to about 0.035 yuan on EPS. Excluding these two effects, the company’s net costs in the third quarter were approximately 81 million, a year-on-year growth of 41.7%.
As of mid-2009, the company has 668 Santa Claus stores and 73 Sanjero stores. It is estimated that the number of Santa Claus stores will reach 700 and Sanjero stores will reach 100 throughout the year. In the next 2-3 years, the business series will expand to 1,000 stores, and the business series will expand to 200 stores first. At present, the company has nearly 100 direct-operated stores in the business series and nearly 700 in the business series. In addition, the company’s orders for spring and summer next year will increase by more than 20%, of which the price will increase by about 2-3% and the quantity will increase by about 10%.
The company intends to raise no more than 800 million yuan through the additional issuance, which will be used to add 18 new Phoenix Bird core stores (8 directly operated, 4 jointly operated, and 6 franchised stores) and 80 Phoenix Bird core stores for sale. (15 directly operated stores, 10 jointly operated stores, 55 franchised stores), 80 Sanjieluo fashion stores (30 directly operated stores, 50 franchised stores), a total of 178 stores.
Baoniao’s foreign trade and group buying business were greatly affected by the financial crisis. The company’s interim report showed that import sales were 27.977 million yuan, a significant increase of more than 100% year-on-year, but still higher than the more than 80 million yuan before the financial crisis. There is a big difference, showing that the import business has recovered quickly; in addition, the group buying business has also risen rapidly due to the continued recovery of the international economy. It is estimated that Baoniao’s business will be the same as last year this year and will resume growth next year.
We believe that the company has passed the foundation stage of a consumer goods company and will enter a period of rapid development in the next 3-5 years. The prerequisites necessary for the company’s rapid expansion have been basically mature, management equity incentives are also in place, and the company will enter a period of continuous and rapid release of performance. It is estimated that the company’s average annual growth rate will be higher than 25% in the next three years, and its gross profit margin will steadily increase. Without taking into account the additional issuance of equity, the EPS is 0.75/0.99/1.21. If the additional issuance price is taken into account, we calculate the diluted EPS based on the additional issuance prices of 16, 18, and 20 yuan respectively. The results are shown in the table below. In view of the company’s excellent future growth, we obtained the company’s 2010 25PE, a target price of 25 yuan, and raised the company’s investment rating to buy.
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