Main points of investment
The company announced results for the first half of 2022, with revenue of 1.4 billion yuan (in RMB), + 3.2% year-on-year, and net profit of 260 million yuan,-5.3% year-on-year. The interim dividend is HK18 cents, with a dividend ratio of 83.8%.
Our comments are as follows:
Revenue in the first half of the year increased 3.2% to 1.4 billion yuan compared with the same period last year, with the positive impact of delayed recognition of revenue. After excluding the related effects, the group's income declined in low single digits, which was lower than the flow growth rate (low unit growth). Due to the delayed delivery of some orders due to the epidemic and weather, revenue will be included in the second half of the year. The Group made vigorous inventory clearance at the beginning of the year to increase sales by medium to high units in the first quarter compared with the same period last year, and to increase the price increase rate of individual products according to product design and market competitiveness during the period.
However, affected by the epidemic in the second quarter, the consumer market was hit, and the shipment of autumn clothes was delayed, offsetting the positive impact of some of the main series of resale. The flow declined by low units in the second quarter, and the overall flow of H1 recorded low unit growth. Some orders were delayed due to the epidemic-weather reasons, and revenue will be included in the second half of the year.
The absolute value of inventory decreased, the inventory-to-sales ratio was at an ideal level, and after being light, it increased the proportion of sales in the current quarter. E-commerce has completed its own transformation, which can be used as a more effective way to clean up inventory, open up inventory sharing mode and improve product turnover efficiency. The company also stepped up inventory clearance at the beginning of the year. Therefore, the inventory ratio of all channels is about 3-4 months, and the inventory-to-sales ratio is at an ideal level. After being packed light, the proportion of product sales in the first half of the quarter increased.
Optimize sales channels to improve store efficiency. During the period, the net number of stores decreased by 106to 2627. At present, there are 920 stores under the main series consignment mode, accounting for about 39% of the total number of stores in the main series. There are 73 stores in the main series and 33 stores in Light Business. During the period, the total store area decreased by 2.6% compared with the end of last year, but the average store area increased by about 2.0%.
Gross margin fell 0.8ppt to 48.7% compared with the same period last year. The sales caused by the main series distribution are deferred to the current period, which increases the proportion of the total sales of the main series with lower gross profit margin. During the period, the management expense rate / sales expense rate was + 1.5ppt/-0.8ppt to 6.1% monthly 22.6%, respectively. Operating margin fell 1.7ppt to 21.0 per cent year-on-year, and net interest rate fell 1.6ppt to 18.4 per cent.
Our point of view: the company's total flow growth target for 2022 has been lowered from more than 10% to single-digit growth, and we expect revenue growth in the second half of the year to be more than 10%. We will continue to show stores cautiously, and the target of exhibition stores in 2022 will be adjusted from 50-150 net stores to 100 net stores. The company's inventory clearance is basically completed, light business, the main series of light, investors are advised to pay attention.
We estimate that the annual income of China Lilang in 22-23-24 will be 3.93 billion yuan, 8.0%, 8.0% and 8.0%, respectively, and the net profit will be 6.6%, 7.2%, 770 million yuan and 8.3%, respectively, respectively.
Risk tips: inventory backlog, terminal depression, expansion less than expected, brand promotion less than expected
