Company Overview: Brand Apparel, Cross-border Pioneer Company is a leading enterprise for cross-border sellers. Since 2016, it has deepened reforms and promoted brand apparel strategies, and deepened its supply chain and digital systems. By 2023, the company had incubated several private brands with over 100 million revenue, including the housewear brand Ecouaer, the menswear brand Coofandy, the underwear brand Avidlove, and the sports equipment brand ANCHEER. In 2023, the company's revenue was 6.564 billion yuan, four-year CAGR 23%, net profit to mother was 336 million yuan, and four-year CAGR 58%.

This article will provide an in-depth analysis of the business logic and competitive advantages behind the company's success in shaping multiple brands, as well as future growth space.

Core Competencies: Underlying Advantages, Highly Reusable

The cross-border Internet apparel industry is characterized by rich personalized demand, long links, and high returns. In response to this pain point, the company began to lay out and optimize the “small front end+large middle office” organizational structure in 2017, set up a “small front end” to hand over personalized aspects such as product design, sales and operation, preparation, etc. to the business group, and build a large middle office system to standardize common businesses including supply chain, logistics, marketing and other links. On this basis, the company's competitive advantage is reflected in three major aspects. type database, success Solve the problems of different sizes and high returns from overseas consumers; the second is the integration of upstream and downstream supply chains, deeply binding core fabrics and external suppliers, and pioneering the development of a digital supply chain system to maximize supply chain efficiency. Third, the brand positions clothing brands, and the design has simple and versatile characteristics, making the product supply chain easier to manage. Based on the above, we believe that the company has built a more mature business system and competitive barriers. Inventory turnover efficiency is in a leading position in the apparel and cross-border industries, laying a solid foundation for the subsequent growth path.

Growth space: brand hierarchy, building mentality

With the company's small front-end+large middle office model and the integration of upstream and downstream supply chain resources, the company already has mature brand replication capabilities, and the future echelon will grow in an orderly manner. On this basis, brand power building is the key to determining the long-term growth period, and this is also the long-term strategy that the company has consistently implemented. Specifically, the company has achieved a leading position in the niche market with its central and channel operation advantages, strengthening consumer mentality through global marketing, and expanding new categories. This has enabled the company's main brand to develop rapidly and maintain a strong brand mentality at the overseas consumer level. Whether it's from authoritative agency brand lists or shared links from overseas social media celebrities, you can see the company's branding trends. Based on this, we believe that the company has plenty of room for growth. The top-level design of the brand hierarchy and the main brand building will continue to drive the rapid growth of the group.

Investment advice: clothing brands are pioneers in overseas, and the growth path is clear

We believe that the company will gradually build a full-chain brand operation model integrating product development and design, brand incubation and operation, and supply chain integration, based on full-link digital capabilities and agile organization. Based on its low-level advantages of small front office+large middle office and high reuse, the two major growth paths of brand echelon building and main brand building are clear. Looking at the margins, there is no shortage of growth highlights: on the brand side, the company's main brand growth rate is leading, management dividends have been replicated to mid-tier brands, and some women's clothing brands have begun to emerge; at the channel and regional level, the company is actively developing a regional layout in Europe and laying out emerging channels such as Walmart, tiktok, and independent sites to gain incremental space; from a profit perspective, the company's hardware products are now basically in place, which is driven by profitability and has some support for marginal performance elasticity. Based on the above logic, we are optimistic about the company's investment value. We expect net profit to be 4.4, 5.6, and 740 million yuan for 2024-2026, respectively, covering the first time to give it a “buy” rating.

Risk warning

1. High dependence on a single channel; 2. Overseas policy regulation disturbances; 3. Slowing overseas demand; 4. Risk that profit forecasting assumptions are not true or fall short of expectations.