Mid-range fashion women's clothing designer brand leader

The company is positioned as a mid-range fashion designer brand for women. It has the main brand “Broadcast: Broadcast”, the rapidly growing brand “CRZ”, and “PERSONAL POINT”, which is still in the nurturing period. The founders are designers. The three brands have distinct styles, showing urban literary style, youthful vitality, and personality style, respectively.

The channels are mainly offline, supplemented by online (11% of revenue). Offline includes direct management, distribution, and joint sales, of which distribution contributes 57% of revenue. There were 886 offline channels in 2016 (direct management 179+ distribution 625+ joint sales 82). The compound growth rate of revenue and net profit in 2012-16 was 5.09%, -11.99%, revenue in 2016 was 900 million, and net profit was 75.62 million.

The women's clothing market segments have spawned the rise of designer brands. Low concentration and intense competition in the middle class of the public can generate many segmented needs, such as women's clothing positioning for different ages, grades, and styles, providing opportunities for designer brands to rise. The concentration of the industry is low. Luxury goods are basically dominated by foreign brands, and differentiated competition among local brands occupies the high-end market. Competition in the mass mid-tier market is fierce. In recent years, the market share of local companies entering the top ten has declined.

The growth rate of the women's clothing industry has slowed in recent years, and a compound growth rate of 4.34% is predicted for the next 5 years. Benefiting from the rise in female consumption, there is still plenty of room for development in the future. Based on the per capita consumption expenditure of women's clothing in developed countries, the industry still has 3-5 times more room.

Historical performance compared to peers: Revenue growth resumed in 2016, and the company's distribution model, which was low in scale and growth, was under pressure from weak consumption in 14-15. The company adjusted its business strategy, expanded direct sales channels externally, developed a new brand CRZ, introduced advanced information systems internally, adjusted in place in 2016, and revenue growth resumed. At the same time, the above strategy pushes gross profit margins and expense ratios to continue to rise.

Compared with peers, the size and growth of the company are low, but the operating indicators are excellent. The company's main brand is slightly smaller, and there is room for improvement in scale and store efficiency; growth is constrained too much by the main brand and lower than peers; gross margin is in line with its positioning, but high management expense ratios drag down net interest rates; operation is prudent, and inventory and accounts receivable turnover are superior to peers.

Competitive advantage: The brand style is clear and sticky, the channel coverage is diverse and wide, the level of information systems is high and adheres to original design. The three self-created brands have distinct styles, interpreted the brand style in multiple dimensions such as color, pattern, and pattern, which resonated with specific consumer groups, enhanced consumer stickiness, and formed brand barriers; diversified channel coverage, experimentation in 2016, with advantages such as strong terminal control and channel expansion using external capital; the industry pioneered the adoption of the VMI delivery model, “small batches, multiple batches, etc.” Improve operational efficiency.

Profit forecasting and valuation

This time, no more than 60 million shares were issued, and 381 million yuan was raised to build 209 new direct-run stores, build R&D centers, upgrade information systems, etc. EPS is estimated to be 0.32, 0.35, and 0.39 yuan after dilution in 17-19, respectively. Considering the company's 3-year CAGR of 7.76%, referring to the valuation levels of sub-IPOs and Anzheng Fashion, which are close to the company's positioning, 28-33 times PE in '17 was given, corresponding to a reasonable value range of 8.96-10.56 yuan/share.

Risk warning: loss of designers, new brands and overseas expansion falling short of expectations, weak terminals, and abnormal weather.