The company is a leading domestic high-end women's wear brand, relying on JORYA to form a multi-brand matrix with diversified styles and different prices. The company's core brand JORYA was founded in the early 1990s and has been established for more than 30 years. It is a well-known brand with a long history of independent high-end women's wear in China. Due to the domestic macroeconomic downturn, consumer market sentiment is relatively low, enterprise industrial chain, supply chain is not smooth, the company's business has gradually hit bottom and rebounded. Since Mr. Sun Baihao, the new chairman, joined the company, he actively explored the company's digital and intelligent transformation, sought the company's second growth curve, and focused on the future with multi-matrix layout.

The trend of domestic brands is rising, and digitization accelerates the transformation of the clothing industry. In 2022, the cumulative retail sales of clothing, shoes, hats, knitwear and textiles above the quota were 1.3 trillion, down 6.5% from the same period last year. In 2021, the attention of domestic brands increased by 30 percentage points compared with 2016, realizing the anti-surpassing of foreign brands. The younger generation of consumers love domestic brands more, and the clothing field is a popular category in the national trend. In addition, Wenshengtu matures earlier and falls to the ground more easily in the field of artificial intelligence, which is helpful to solve the pain points of traditional clothing design.

The most important thing is to empower clothing design with efficient design ability, shorten the design cycle, enable designers and brands to respond quickly to market demand, optimize production and reduce inventory.

In the post-epidemic era, the company ushered in the "new store opening cycle" and "single-store efficiency recovery", leading the online business industry. Affected by the epidemic, the overall pace of opening stores in the company has been slow since its listing. By the end of 2022, the company had 506 stores, 64 fewer than in 2019 (before the epidemic). Less than 20% of the store fundraising plan has been completed, and we expect 2023-2024 to be the time for the company to expand aggressively. Revenue from individual stores in 2022 was 2.715 million yuan, down 24.5 percent from the same period last year, equivalent to 80.6 percent of revenue from individual stores in 2019. The recovery in consumption is expected to lead to a rebound in revenue from individual stores. The company's e-commerce business is very resilient, accounting for 26.4% of online sales, growing against the trend and leading the middle and high-end market.

Brand power, design power and digital power constitute a strong moat of the company. 1) Brand power: the company's core brand has a long history and relies on JORYA to establish a multi-brand matrix with diversified styles and different prices. 2) Design power: by the end of 2022, the company has set up a professional and high-quality design team composed of 438 people, with annual R & D investment approaching 80 million, accounting for 4.5% of business income, ranking in the forefront of the industry. 3) Digital power: the company continues to promote information and digital construction, and the deep ploughing industry has accumulated a large number of design and consumption big data for many years, which has a high degree of agreement with the practical application of technology in artificial intelligence and other related fields.

[investment advice]

We believe that benefiting from the recovery in consumption after the epidemic, the company has entered the volume and price phase of store expansion and the rebound of per-store income. in addition, the gradual landing of new technologies such as artificial intelligence and design in the industry is also expected to lead to a return to industry valuation. We estimate that the company's operating income from 2023 to 2025 will be 19.05, 23.35 / 2.752 billion, respectively, and the net profit from the parent will be 2.4910 million, respectively. The net profit returned to the parent will be 487 million, and the EPS will be 0.58, 0.86 and 1.13 yuan respectively, and the corresponding PE will be 1.13 times that of 19-13-10. According to the historical valuation, we gave the company 25 times PE in 2023, corresponding to a 12-month target price of 14.50 yuan per share, upgraded to a "buy" rating.