Jiangnan cloth announced its interim operating results up to December 31, 2022: FY23H1 revenue of 2.36 billion yuan, year-on-year-5.0%, gross profit of 1.53 billion yuan, year-on-year-3.0%, gross profit of 64.7%, and net profit of-16.2% to 370 million yuan. The company declared an interim dividend of HK $0.3 per share.
Under the repeated impact of the epidemic in the second half of the year, the consumer environment continued to deteriorate, Jiangnan cloth business resilience highlighted, the decline was relatively small, FY23H1 revenue fell 5.0% year-on-year, offline same-store retail sales fell 3.9% year-on-year.
-- from a sub-channel point of view, online growth is high (+ 17.9% compared with the same period last year), offline distribution revenue is better, and inventory sharing / digital retail contributes GMV4.0/5.4 billion yuan respectively.
-- in terms of brands, the JNBY of mature brands decreased by 4.8%, which was better than that of growing brands. Among the growing brands, children's wear performed better, while jnby by JNBY revenue fell by only 0.9% compared with the same period last year. Less dropped by 6.1%, with the largest decline in menswear.
Against the trend to adhere to the discount, with the support of upward brand power, the company's gross profit margin increased 1.3ppt to 64.7%, mainly due to the contribution of women's clothing brands JNBY and Less, and JNBY / Less gross profit margin increased 2.2ppt/1.2ppt to 67.8% and 66.3% respectively.
The stickiness of members is high, and the proportion of members with high consumption power continues to increase. The number of members increased by 21% over the same period last year to 6.4 million, and the number of members with annual consumption of more than 5000 yuan increased by 10% to 220000 compared with the same period last year. Members with annual consumption of more than 5000 yuan accounted for more than 50% of offline sales.
Brand building efforts were improved, and the sales expense rate increased by 2.5ppt to 34.6% compared with the same period last year, and the management expense rate increased by 1.3ppt to 8.9% year-on-year.
The company's operating profit margin dropped to 21.9% from 2.8ppt to 21.9%. Among them, the operating profit margin of mature brands remained good, with a slight decline in 0.2ppt, a decline in 3.7ppt for growing brands, and a loss for nascent brands. The company's net interest rate fell by 2.1ppt to 15.8%, and its net profit fell 16.2% to 370 million yuan compared with the same period last year.
Inventory pressure increased, inventory turnover days compared with the same period last year + 44 days to 191 days, inventory + 20.6% to 920 million yuan.
Our point of view: the company's core fans are sticky, and the proportion of high-end consumers is relatively high, and the resilience, consumption willingness and sustainability of post-epidemic recovery are stronger. In the long run, the company's three strategic plans are clear, and it will continue to give priority to increasing investment in brand construction and talent echelon training to ensure long-term design-brand power double-driven strong competitiveness. at the same time, continue to promote the fast reverse model-digital intelligence global retail to improve operational efficiency, and through incubation or mergers and acquisitions to cultivate multi-brand matrix relay main brand growth. Considering the twists and turns of the epidemic, the retail target of 10 billion yuan was postponed to FY2026.
We estimate that the company's FY23/24/25 revenue is 42.3 million yuan, + 3.4%, 10.4%, 12.5%, and net profit is 5.0 million, 60 million, and 19.3%, respectively, with a commitment to maintain a high dividend yield of 75%, potential dividend ratio of 9.0%, and target price of HK $12.36. Maintain the "overweight" rating.
Risk tips: sales are not as expected, offline passenger flow is not as expected, brand expansion is not as expected, and industry competition is intensified.