Event description
Jia Linjie (002486) released the annual report for 2015. during the reporting period, the operating income was 701 million yuan, down 19.69% from the same period last year. The net profit belonging to shareholders of listed companies was-102 million yuan, compared with 28 million yuan in the same period last year. Basic earnings per share was-0.12 yuan per share, compared with 0.03 yuan per share in the same period last year.
Event comment
The reduction in major customer orders is a drag on overall revenue, while rising costs are a big drag on gross profit margins. The company's products are mainly mid-and high-end outdoor functional fabrics and clothing products, accounting for more than 90% of exports; affected by the global economic recession, textile and clothing terminal consumption is in the doldrums, upstream fabric enterprises are also faced with serious orders shrinking. The company to the second largest customer, fabric sales of the largest customer, "American POLARTEC,LLC" only achieved 86 million yuan in sales revenue in 2015, a sharp decrease of 36.06% compared with the same period last year. From a sub-regional point of view, export revenue and domestic sales revenue decreased by 18.68% and 32.24% respectively in 2015 compared with the same period last year; in terms of products, the sales revenue of fabrics and clothing were 122 million yuan and 578 million yuan respectively, down 39.87% and 13.55% respectively from the same period last year. In the context of the overall decline in sales revenue of 19.69%, operating costs decreased by 9.92% compared with the same period last year. In addition to the 11.54% reduction in raw material costs, labor wages, depreciation and energy costs are rigid and have limited declines, dragging down gross profit margins by 8.62 percentage points to 20.49%.
A substantial increase in management costs drags down net profits and increases the proportion of R & D investment to promote product upgrading. In 2015, the company's sales expenses, management expenses and financial expenses were 96 million yuan, 135 million yuan and 25 million yuan respectively, an increase of-14.91%, 48.58% and-7.50% respectively over the same period last year. The main influencing factors for the sharp increase in management expenses are intermediary adjustment fees, overseas management costs and newly established subsidiaries. During the reporting period, the expense rate during the period increased by 10.08 percentage points year-on-year, dragging the net interest rate to negative. In the context of shrinking orders and sluggish sales, the company continued to increase investment in R & D and upgrade its products. During the reporting period, the proportion of research investment in operating income increased by 0.63 percentage points year-on-year to 3.70%.
The SN brand, which strengthens its own brand promotion and gradually divests its US business, is expected to make a profit. In order to upgrade from manufacturing to brand channel, the company strengthens the promotion of its own brands KR and SN.
In the short term, KR takes reducing inefficient stores and restoring the break-even as its top priority. The subsidiary that plans to operate the brand in 2016 will achieve its sales target of 60 million yuan. After gradually divesting its lossmaking US business, SN brand has good sales in Europe and Japan. Thanks to the rapid popularity of national sports programs and domestic sales breakthroughs, SN brand is expected to make a profit in 2016.
With the globalization of industrial layout, the synergy effect of regional industry is gradually emerging. At present, the company has built a global industrial layout, including factories in Shanghai, Hubei and Pakistan. Although it is difficult to recruit workers, the production capacity in Hubei has not yet been fully released, and Pakistan is also facing hidden dangers in urban security. However, according to the theory of comparative advantage, the trend of global layout is irresistible, and the regional industrial synergy effect is gradually emerging. It is estimated that the earnings per share from 2016 to 2017 will be 0.01,0.02 yuan, corresponding to the current valuation of 1149 times and 240times, maintaining the "overweight" rating. Risk tips: changes in market demand; adverse effects of rising costs.