The company is deeply involved in e-commerce platforms and mainly lays out high-end women's clothing. Rong Mei was founded in 2012 and listed in 2021. Since its inception, Rong Mei has been deeply involved in the Taobao platform and has relied on Taobao to sell its own “Rongmei RUMERE” brand, which mainly sells high-end women's clothing. Currently, it has 3 online stores, and the “Rong Mei high-end women's clothing” stores on the Taobao channel accounted for over 99% of revenue in 2022. By the end of 2022, “Rong Mei High-end Women's Clothing” had over 5.8 million fans, over 99.9% store reviews, more than 4,000 product SKUs, and more than 6.4 million subscribers to its Taobao live streaming account.
The online womenswear industry has a large market, and offline brands dominate, and high-quality e-commerce brands with outstanding positioning still have room for development. At present, online has become an important sales channel for clothing. The online clothing market is expected to exceed 80 billion yuan in 2022. Among them, women's clothing is the largest category, and the market size is large, but the competitive pattern is scattered, and there is still a lot of room for improvement in concentration. Judging from the competitive pattern of online womenswear, through the two stages of “rapid brand development” and “accelerated integration of offline brands”, leading offline brands currently occupy a dominant position online, but e-commerce brands with clear positioning and excellent quality still have a lot of room for development.
Online sales met the demand for home shopping during the pandemic. The company's performance increased dramatically in 2020, and was relatively steady thereafter, with a decline in 2023. The company's revenue/net profit CAGR for 2017-2022 was 10%/19% respectively. During this period, 2020 performance achieved good growth, and 2021 and 2022 performance showed steady growth. Mainly, the 2020 pandemic had a major impact on offline clothing consumption, and the company's main online channels were able to meet consumers' home shopping needs. 2023Q1-3's revenue/net profit was 522/063 million yuan, or -15%/-43% year-on-year respectively. Net profit declined significantly, mainly due to changes in market demand and an increase in the share of the company's low margin products, which led to a sharp decline in gross margin. Following a recovery in demand, performance is expected to pick up.
The ultimate cost performance positioning is in line with consumer trends, and small orders quickly meet online sales needs. In the changing competitive landscape of women's clothing online, we believe that it is mainly because the company has two major competitive advantages: ① In terms of positioning, the ultimate cost performance advantage is obvious, and the customer base is very sticky. The company carefully selects high-quality raw materials and well-known suppliers. The products have high-end fabrics and excellent quality. Although the products are positioned as high-end, the price increase ratio is low, about 2-3 times, which fully benefits consumers. As a “replacement” for a high-end brand with a high price increase ratio, the ultimate cost performance advantage is obvious. The core customer base is sticky, the number of repeat purchasers is close to 50%, and the total contribution of repeat purchasers is nearly 90%. Against the backdrop of weak consumption, it is expected that it will continue to accept some consumer replacement demand in the future. ② In terms of management, planning and design efficiency and supply chain management are excellent, and small orders quickly meet customer needs. Through high-frequency product planning and design, excellent supply chain management, and live broadcast room interaction, the advantages of grasping changes in customer trends and inventory management are obvious, meeting the needs of online consumers.
Profit forecast and investment rating: As the first stock of an online high-end womenswear brand, the company is expected, on the one hand, to strengthen its own planning, design, and supply chain management advantages to fully share the vast online women's clothing market; on the other hand, it is expected to position the ultimate cost performance ratio to attract more consumers and strengthen customer stickiness. We expect the company's net profit from 2023-2025 to be 1.0/17/2.0 billion yuan, a year-on-year growth rate of -38%/+61%/+22%, and a corresponding PE of 36/22/18 times, covering the first time, giving it an “increase in holdings” rating.
Risk warning: weak consumption, increased competition, inventory risk, new product sales falling short of expectations, etc.