A leader in large-scale personalized clothing customization
The company is a leader in large-scale personalized clothing customization in China and a practitioner of the clothing C2M model. The core business model is “large-scale personalized customization driven by orders”. In 2019, personalized clothing customization, consulting, and other businesses accounted for 92%, 3%, and 5% respectively. Among them, clothing customization was dominated by the ODM model (ODM, OBM, and business wear each accounted for 65%, 10%, and 18% of total revenue) and the domestic market (domestic and foreign countries each accounted for 57% and 35%). The compound growth rate of revenue and net profit for 5 years from 2014 to 2019 was 31% and 17%, and revenue and net profit in 19 were 535 million and 68.67 million.
Large-scale personalized clothing customization industry: demand growth, technical empowerment, C2M Chaoyang model to be developed Large-scale personalized clothing customization is the third form of customization that has emerged. It is more advanced than group customization and traditional private customization. It can balance “personalization” and “industrial mass production”, breaking through the bottlenecks of high cost, small audience, and difficult mass production of traditional private customization. The two perspectives of supply and demand jointly promote the development of the large-scale personalized customization industry. Concepts are popularized, policy encouragement, audience growth, and the gradual release of customization demand is promoted. The supply side can solve the inventory pain points of traditional garment enterprises and promote industry transformation and efficiency. The industry is still in the early stages of development, and future growth will still take time. The entry threshold is high, and high investment and multi-channel construction are required. Currently, manufacturers and brands are involved among the participants, but most of them are small in size, and the leading pattern has not yet been formed.
Business analysis: ODM dominated the adjustment, and OBM was the highlight of business development. The company's performance grew rapidly until 18 years ago. There was a slowdown in the past 2 years. The 20Q1 customization business was also affected by the epidemic, but the production of protective equipment contributed to a sharp increase in net profit. Differences in the performance of various business segments have led to fluctuations in share in recent years. ODM revenue has continued to account for more than 65%, OBM and professional attire have increased slightly, and the consulting category has declined slightly.
Segmented business analysis: 1) The leading business ODM grew rapidly in the early stages. The growth rate slowed in '18 and declined in '19, mainly due to the impact of order loss from the two major customers, which has now been digested; 2) OBM connects with the C side, which is the company's highlight business, and currently accounts for a relatively low share, is still being cultivated. Currently, it has 5 direct-run stores and 126 franchise stores, accounting for nearly half of revenue in 19. Direct operations have continued to close stores in recent years, and franchise profitability has been low; 3) Business attire and group customization have formed differentiated competition. Revenue declined in 18, and the recovery strategy adjustments in 19 were influenced by order optimization; 4) The consulting business, which includes management consulting and engineering transformation revenue, has shrunk in recent years.
Highlight analysis: The company's first-mover advantage and strong competitiveness are as follows: 1) The company's large-scale personalized clothing customization industry is in the early stages of development. There is plenty of room for development and prosperity is higher than that of the traditional clothing industry. The competitive pattern has not yet been formed, and there is a lot of room for improvement in the size and share of leaders. 2) The company has an outstanding first-mover advantage. It has developed mature technology and systems, and achieved mass production, forming an entry threshold for latecomers; 3) Compared with those who have entered, the company has personalized customized manufacturer transformation over the years and has accumulated experience, data, resources, and word of mouth; 4) The consulting business targets a wide range of customers, and will support the company to expand its categories and open up long-term development space for customized business.
The company's IPO issued 60 million shares and plans to raise 316 million yuan in net capital for flexible smart factory construction projects and smart logistics, warehousing, big data and R&D center complex construction projects. Although there have been fluctuations in the company's various business developments in the past two years, we are optimistic about the company's leading position and development space within the industry segment. We predict that the company's EPS from 2020 to 2022 will be 0.38, 0.32, and 0.38 yuan, and the reasonable price range will be 9.42 to 11.30 yuan, corresponding to 25 to 30 times PE in 20 years.
Risk warning: The impact of the epidemic has exceeded expectations, industry development is slow, business development falls short of expectations, etc.
