Introduction to this report:
The company's new retail channels gained strength in the first three quarters. The efficiency of the footwear and apparel business increased significantly, profitability improved, and digital transformation continued to advance, maintaining the rating for increased holdings.
Key points of investment:
Maintaining the increase rating: In the third quarter, the company continued to promote a simultaneous production and marketing model to achieve digital transformation. Q3 revenue declined. Considering that the company's business gradually returned to normal in the post-pandemic era, the EPS for 2020-2022 was lowered to 0.24 (-0.17) /0.41 (-0.09) /0.52 (-0.05) yuan. Referring to comparable industries, the company was given 22 times PE in 2021, maintaining the target price of 10.80 yuan.
The results of the new retail layout have been remarkable, and the footwear business has performed brilliantly online. The company's annual revenue for the first three quarters was 1,321 million, down 12.56% year on year, and net profit was 65 million yuan, down 61.92% year on year. The performance was in line with expectations. In terms of the footwear and apparel business, revenue was 1,177 million (yoy -4.46%) in the first three quarters. Among them, the online business increased 53.39% year-on-year, and the revenue share increased by 20 pct to 28.5%. Business efficiency increased significantly. The company is also actively optimizing stores, focusing on improving the efficiency of single stores, and sales at key stores have continued to rise steadily. In terms of internet business, the company achieved revenue of 148 million yuan (yoy -48.39%) in the first three quarters, fulfilling its performance promise.
Product restructuring has led to an increase in profitability, and the cost rate has increased. In the first three quarters, the company continued to push forward product restructuring and increase the scale of high-margin business. 2020Q3 achieved a gross margin increase of 10.32pct to 61.76%. The sales expense ratio and management expense ratio increased by 11.97 pct and 1.19 pct to 39.73% and 14.22% respectively, and the expense rate was more manageable.
The C2M simultaneous production and marketing model layout is leading a new trend in the footwear industry. The company actively promoted digital transformation and upgrading. In the third quarter, the company launched a new “2C” women's shoe brand with the C2M model. Through live streaming of the production line, the simultaneous production and marketing model of “direct direct evaluation” by consumers and “direct direct production and direct sales” by the brand was realized, opening up a new path for the digital transformation of traditional industries.
Risk warning: The expansion of stores fell short of expectations, and the recovery of the epidemic fell short of expectations.