Overview of results for fiscal year 2020
China trend sales in fiscal 2020 were 1.841 billion yuan, up 12.6% from the same period last year, while net profit was 366 million yuan, down 14.6% from the same period last year. China trend changes the fiscal year for the first time, so the financial data for fiscal year 2019 in the right column and page 2 of the home page are values for the 15 months ending March 2019. The financial data for fiscal year 2020 are for the 12 months ended March 2020, which cannot be compared with the same period last year.
Sales of the Chinese segment increased by 18.4% year-on-year, accounting for 84% of the total revenue, of which direct operation, indirect operation and online channels accounted for 35.6%, 36.2% and 18.3% of the total revenue, respectively. Indirect channel sales rose 70 per cent year-on-year, in part due to a change in revenue recognition principles, as the Chinese trend adopted a bulk order model aimed at better inventory control.
When retail (non-wholesale), the retail price (non-wholesale price) is recognized as the income of the trend in China, and the wholesale price reduction is treated as sales expenses. Therefore, after the transformation of the model, profit and loss income, operating costs and inventory balance are magnified. On a comparable basis, China still recorded 5.4% growth in revenue. The total number of stores was 1129, down 6 per cent.
The total investment income is 567 million yuan, and the core operating profit margin of clothing business is-3.5%. As a result of the new business model, inventory turnover days increased by 40 days to 248 days, and the closing inventory balance increased by 0.6% year-on-year.
Trend of development
Channel inventory and same-store sales are still the main levers to improve single-store efficiency and operating profit margins in the retail business. In the short term, we believe that the trend in China is in the post-epidemic recovery stage, with the decline in sales narrowing, with a year-on-year decline of 25% in April and positive growth resumed in May.
Profit forecast and valuation
Due to the changes in China's fiscal year, we introduce earnings per share forecasts of 0.05yuan and 0.07yuan for fiscal years 2021 and 2022. The company's current share price corresponds to 12 times fiscal 2021 and 9 times fiscal 2022 p / e. Maintain its outperforming industry rating and cut its target price by 19 per cent to HK $1.00 to reflect changes in segment valuation forecasts, with 49 per cent upside for share prices.
Risk.
Affected by the epidemic, the cost structure is under pressure during the transition period.