Online high-end women's clothing brands are characterized by extreme price/performance ratio. 1) We have been deeply involved in Taoist platforms for more than 10 years, and a single store's revenue contribution exceeds 90%. With the “Rongmei Rumere” single brand as the core, the company focuses on cost-effective mid-range and high-end women's clothing. Using an all-online retail model, the single Taobao store “Rongmei High-End Women's Clothing” accounts for more than 99% of revenue. It has been in operation for more than 10 years, with a praise rate of over 99.9%, and an average annual sales of nearly 4,000 SPU models. The founders Guo Jian and Wendy are responsible for channel promotion and product design, respectively. 2) Steady growth in performance and steady, moderate and positive profitability. The company's revenue increased 2.5% year-on-year to 870 million yuan in '21, net profit remained flat at 160 million yuan, and the CAGR of revenue and profit in 17-21 was 10.5% and 25.6% respectively. Performance growth was steady. 22Q3 As the impact of the epidemic on logistics delivery weakened and the company's live streaming schedule returned to normal, revenue and net profit rose 72%/74% to 23/40 million yuan respectively, gross margin increased 7pct to 45.6% from 38.5% to 45.6% in 17-21, net interest rate increased 6.7pct from 12% to 18.7%, and profitability improved steadily.

The womenswear market is growing steadily, and consumption habits are shifting online at an accelerated pace. 1) The women's clothing market is large and growing steadily, and there is room for improvement in concentration. The size of China's women's clothing market reached 984.2 billion yuan in 2022, 1.8 times and 4.1 times the size of the menswear and children's clothing market during the same period. It is huge and continues to grow. The compound growth rate for 22-25 is expected to be 10%. The market pattern is scattered. China's women's clothing market CR10 was 7.8% in '22. Compared with 21.8% in the US, 40.2% in the UK, and 48.2% in Japan, there is still plenty of room for improvement. With users' brand awareness and demand for high-quality products strengthened, the market share of leading women's clothing is expected to increase steadily. 2) The expansion of the middle class is compounded by the rise of her economy, and the prospects for the middle and high-end women's clothing market are broad.

According to McKinsey, the number of middle- and high-income households in China is expected to reach 56% in 2030. The middle class continues to expand, compounded by the increase in women's economic status and consumption capacity. The prospects for the future development of the middle and high-end women's clothing market are still broad. 3) The epidemic has accelerated the online consumption of clothing, and clothing brands that launch online first are expected to continue to benefit. The size of China's online clothing market is expected to reach 925 billion yuan in 2022, and CAGR is close to 20% in 17-22. The growth rate clearly leads the clothing market, opening up new channels for clothing sales. Clothing brands with online retail marketing are expected to fully enjoy the market dividends.

High quality and low ratio create the ultimate cost performance ratio, and small orders respond quickly and efficiently to market demand. 1) The entire business process is digitized, and 52-week rolling development efficiently responds to market demand. After years of informatization construction, the company has set up various information systems to support the smooth progress of business, digitize the entire business process, achieve a 52-week rolling product development plan, adjust product strategies based on consumer feedback in a timely manner, respond to market demand on a high frequency on a weekly basis, and achieve a virtuous business loop with accurate product supply, timely information feedback, and a stable frequency of updates. 2) Create the ultimate cost performance ratio at a low rate, and cultivate a high-sticking customer base with high-quality products.

The company's products adhere to the principle of high quality from raw materials to workmanship, but the price increase ratio is only 2 times, which is significantly lower than that of middle and high-end women's clothing peers and popular clothing. They are characterized by extreme cost performance. High-quality products cultivate a high-sticking customer base. In 2020, Taobao stores purchased 2 times or more, accounting for 48% of buyers who purchased at Taobao stores 2 times or more, and 18% of 5 times or more. 3) Strictly select supplier networks, fast and flexible supply for small orders. After more than 10 years of cooperation and run-in, the company has established a stable supplier network. The raw material suppliers include major international brands such as LV to ensure the high quality of products. Outsourced manufacturers are mainly concentrated in regions with manufacturing advantages such as Jiangsu and Zhejiang, and have the ability to supply products flexibly to meet the company's small order and quick response business needs.

As a high-quality online women's clothing retail company, Rongmei Co., Ltd. uses high quality and a low mark-up ratio to create the ultimate price-performance ratio, optimizes and integrates the supply chain, quickly reverses high-frequency updates for small orders, responds efficiently to market demand, covers the market for the first time, and gives it an “increase in holdings” rating. With the expansion of the middle class and the increase in the purchasing power of women, the prospects for the development of the middle and high-end women's clothing market are still broad. The shift in consumption habits to online has accelerated in the post-pandemic era, providing new traffic and channels for the clothing market. The company is expected to use years of experience in online retail operations to fully grasp the dividends of online growth and continuously increase its market share with high-quality, extremely cost-effective products.

Net profit to the mother is expected to be 18/23/280 million yuan in 22-24. Referring to the average PE valuation of comparable companies, the company was given 20 times PE in 23 years. Compared with the latest market capitalization, there is still room for a 9% increase. It was covered for the first time, giving it an “increase in holdings” rating.

Risk warning: consumption recovery falls short of expectations; new product performance falls short of expectations; channel inventory risk; increased risk of industry competition.