Main points of investment:
The company is a light industrial manufacturing enterprise with both military supplies and civilian use, and is a leader in the military supplies industry. The company is mainly engaged in professional wear, professional shoes, leather shoes, textile printing and dyeing, protective equipment, brand clothing and other product research and development, production and sales, to carry out domestic and international trade-based trade logistics business. In 2017, the company's operating income was 25.44 billion yuan, down 6.3% from the same period last year, of which munitions accounted for 17.5%, civilian products accounted for 38.1%, and trade income accounted for 44.4%. From a profit point of view, the gross profit contributed by munitions accounted for 47.1% of the company's overall gross profit in 2017, which is an important source of profit for the company. The company operates synchronously around the domestic trade in the upstream and downstream of the main business industrial chain and the international trade mainly in munitions exports, and has made great efforts to expand its business services in recent years.
The market share of quartermaster products is leading, and gross profit margin has rebounded in recent years. 1) the company has about 60% of the market share of munitions (including clothing, shoes, hats, accessories, etc.), as well as about 10% of the uniform market share of the uniform departments of public security, judicial and other 15 countries, with a strong market share. 2) in terms of procurement bidding, the company co-ordinates the sales and services of various business sectors, and the affiliated enterprises make use of their own advantages to open up the comparative advantage market and obtain market demand information. Use the advantage of "Jihua Design + Jihua Manufacturing + Jihua Service" to win market orders. 3) in terms of product quality, it is basically produced and manufactured by the company's own enterprises, and the product quality is guaranteed through the unified process control of "modularization of production organization and template of processing process" (double model) developed by the company independently. 4) the gross profit margin gradually rebounded. With the deepening of military reform, the requirements of intelligence, functionalization and specialization of equipment have prompted the upgrading of equipment, and the company's gross profit margin for munitions has increased from 14.4% in 2015 to 19.1% in 2017. With the promotion of the research and development of munitions functional clothing and supporting products, the distribution of special protective clothing of arms will be increased in the later stage, and it is expected that the variety structure will continue to be optimized in the future, and the value is expected to increase steadily.
With the implementation of the strategy of "going out of the city and entering the park", the "Jihua Garden" project has become an important growth point in the transformation and upgrading. Since 2013, the company has been marching into areas with strong consumption power to carry out high value-added land resource use, including fashion shopping, indoor extreme sports, specialty hotels and catering and entertainment. Jihua Garden is located as a modern life service experience center integrating international high-quality brand shopping, fashion sports and entertainment, tourism, vacation and leisure, and characteristic catering. The first cities are Chongqing, Changchun, Yangzhong, Xi'an, Xianning and Qingyuan. Among them, the indoor extreme sports venues of the Chongqing project were put into trial operation in October 2016, fashion shopping and catering and entertainment were put into trial operation in the first half of 2017, and the construction of the Changchun project was actively promoted.
The company is the leader of the quartermaster clothing industry, actively expanding business in emerging areas, giving "overweight" rating for the first time. We believe that the company has been engaged in the quartermaster supplies industry for many years and has accumulated good business advantages. at present, it has entered the field of leisure services and clothing retail, contributing a new driving force for performance growth. We added the profit forecast for 18-20 years, and estimated that the EPS for 18-20 years is 0.19 PE 0.21 yuan, and the corresponding PE is 18-16-15 times. The company is the leader of military clothing manufacturing and production, with strong R & D advantages, comparable companies corresponding to the 2019 average PE of 17 times, the first coverage, given a "holding" rating.
Risk hint: the expansion of emerging business is lower than expected; the prosperity of tourism cultural consumption is declining.