Key points of investment:

The first equity incentive plan after listing was released, deeply tied to core executives and key players. The company announced the 2023 restricted stock incentive plan (draft). It intends to grant 1.18 million restricted shares to directors, senior managers and core key employees of the company (including wholly-owned subsidiaries, the same), accounting for about 1.09% of the total share capital at the time the draft incentive plan was announced. Among them, 1.01 million shares were granted for the first time, accounting for 0.94% of the total share capital and 85.59% of the incentive plan. The incentive targets to be granted for the first time cover a total of 41 directors, senior managers and core key employees, including Liu Yi and Ma Lijuan, who are the actual controllers of the company; the remaining 170,000 shares are reserved, accounting for 0.16% of the total share capital. The assessment period for this incentive plan is 2023-2025, and the grant price for restricted shares (including the reserved portion) is 13.06 yuan/share.

The assessment target is growing steadily, demonstrating the company's confidence in medium- to long-term growth. According to the announcement, the assessment target value for the first vesting period is that the cumulative net profit for the two years 2023-2024 is not less than 380 million yuan, and the trigger value is that the cumulative net profit for the two years is not less than 360 million yuan.

The assessment target value for the second vesting period is that the cumulative net profit for the three years 2023-2025 is not less than 610 million yuan, and the trigger value is that the cumulative net profit for the three years is not less than 590 million yuan.

Recently, fertility policies in many places have continued to increase, and the children's clothing sector is expected to be catalyzed. Since 22Q4, relevant policies to encourage childbearing have been introduced in many places. For example, the Shenzhen Municipal Health Commission has publicly solicited opinions on the “Administrative Measures on Childcare Allowances in Shenzhen” and initially proposed a one-time allowance of 0.3/0.5/10,000 yuan for the birth of one child/two/three children, with a total of 0.75/1.1/19,000 yuan over three years. The Housing and Construction Bureau of the City of Changsha, the Municipal Health Commission, and the Municipal Public Security Bureau jointly formulated the “Implementation Rules for Locally Registered Households Who Have Given Birth to Two or More Children According to Law”, which stipulates that families with local domicile registration who have given birth to two or more children in accordance with the law will increase the housing purchase target by 1 unit in Changsha. The introduction of fertility policies in many places will effectively reduce the burden of childcare, which is expected to stimulate childbearing will and catalyze the children's clothing sector.

Offline traffic is recovering rapidly, stores are expected to restart and grow, and e-commerce channels continue to strengthen multi-platform operations. Since January, infections have peaked in cities across the country. Offline traffic has clearly recovered. Combined with the centralized release of demand for new clothing in the early Spring Festival period, the offline sales situation has improved rapidly. It is expected that e-commerce channel sales will remain the same year on year in January, and offline channels will achieve double-digit growth. In particular, Haggis and Haggis and Huckley brands are performing better. E-commerce is currently the core channel for the company's development. Currently, Tmall and Vipshop are still the main platforms, but emerging channels such as Douyin are developing strongly. It is expected that the proportion of Douyin channels in e-commerce revenue will rise to double digits in 2022 (9% in 2021), which is expected to continue to contribute to the growth of e-commerce channels. Furthermore, as offline terminal consumption picks up, the company will accelerate the expansion of offline stores and brand promotion. Offline stores are expected to restart clean stores.

Jiaman Apparel is a rising star of high-end domestic children's clothing brands. It has high performance growth, has built a pyramid brand matrix to form strong complementarity, e-commerce accounts for leading the industry, and maintains a “buy” rating. The growth of the domestic children's clothing industry is on par with the movement. As one of the few middle and high-end children's clothing brand groups in China, the company has built a pyramid brand matrix with a mid-range, middle and high-end layout to drive performance growth. Its Haggis and Housubushi brands have great potential for growth, and the channel layout is forward-looking, and has grasped the dividends of e-commerce channel growth. Maintaining the original profit forecast, it is expected to achieve net profit of 1.3/2.0/260 million yuan, year-on-year decline of 34.9% /increase of 61.4% /26.4%, corresponding PE of 22/14/11 times, 22-24 net profit CAGR of 43%, corresponding to PEG in 23 years, and only 0.3 times that of PEG in 23. Growth is high. Referring to the average PE of comparable companies, the target market value of 4 billion yuan is 4 billion yuan. The space for increase from the current market value is 43%, maintaining the “buy” rating.

Risk warning: The birth rate continues to decline; industry competition intensifies; online traffic dividends decline; brand licensing model risks.