Core views:
It has been deeply involved in the garment industry for nearly 40 years, and its performance has been growing steadily. Shanghai Outsource provides one-stop human services solutions such as personnel management, recruitment, remuneration and benefits, business outsourcing, and flexible employment, and is a senior leader in the domestic human services industry. The company has more than 470 outlets across the country, providing services to more than 3 million employees in more than 50,000 enterprises, and its overseas business can cover 15 countries and regions.
2022Q1-3, Outsource Holdings' revenue was 10.41 billion yuan/YoY +25.7%, and Guimo's net profit was 4.4 billion yuan/YoY +10.1%. Performance has been growing steadily in recent years.
Policy support+industrial structure upgrade+mismatch between supply and demand, and the human services industry is showing a high level of prosperity. According to data from the Ministry of Human Resources and Social Affairs, the Chinese apparel market reached 2.5 trillion yuan in '21, the CAGR was 15.8% in 16-21, and the market pattern was highly fragmented; the growth rate of the flexible employment circuit was impressive. According to iResearch, the CAGR of the crafting market in 17-21 was as high as 30.5%, and there is a lot of room for improvement in China's garment penetration rate in developed economies.
Brand, customer, and channel advantages are obvious, and investment in mergers and acquisitions+digital transformation helps improve efficiency and development. Brand: The Shanghai Foreign Service brand has a strong influence. It is the main leader and participant in formulating many domestic clothing industry standards. It has ranked first in the list of Chinese clothing agencies for three consecutive years. Customers: The company has accumulated high-quality and diverse customer resources, and the customer turnover rate and large customer dependency are low. Channel: The company actively invests in mergers and acquisitions to expand the global market, acquires 51% of Yuanmao's shares, and is actively expanding in Hong Kong, Singapore and other places. At the same time, the company continues to increase technological innovation and digital transformation of human services, raising 960 million yuan for the transformation and upgrading of “digital outsourcing”, which is expected to achieve continuous cost reduction and efficiency.
Profit forecasts and investment recommendations. The company's EPS for 2022-2024 is expected to be 0.25/0.30/0.34 yuan/share, respectively. The company is a leading integrated service provider in the domestic garment industry. It has remarkable brand, customer and channel advantages, and further enhances its influence at home and abroad and accelerates the digitization process through external mergers and acquisitions to reduce costs and increase efficiency. Referring to comparable companies, the company was given 23 times the PE in 2023, with a reasonable value of 6.87 yuan/share, covered for the first time, and given a “buy” rating.
Risk warning. Macroeconomic fluctuations; increased industry competition; risk of changes in industry policies and regulations.