Core ideas:
Love shares is a leading company in domestic middle and high-end underwear, with steady development. Founded in 1981, the company has many brands, such as admiration, Mr. admiration, admiration for children, love beauty, Lankavan, Huxi, Qianyu, Huangjin and other brands, with a leading market share in many market segments. In 2021 and 2022Q1-3, the company realized revenue of 3.519 billion yuan (yoy+4.66%) and 2.453 billion yuan (yoy-0.58%), and realized net profit of 345 million yuan (yoy-22.42%) and 173 million yuan (yoy-33.28%).
Since 2018, the company has upgraded its brand, comprehensively enhanced its brand image and terminal image, and invested heavily in brand promotion, channel construction and product research and development, resulting in a substantial increase in costs.
The scale of China's underwear industry is growing steadily, consumer brand loyalty is high, and there is much room for improvement in industry concentration. According to Euromonitor data cited by Bloomberg, retail sales in China's underwear industry totaled 263 billion yuan (yoy+18.90%) in 2021, faster than in Japan, the United States and the United Kingdom; in 2021, the underwear industry ranked 6.2% CR4, much lower than Japan, the United States and the United Kingdom in the same period.
The per capita consumption of female underwear in China is relatively low, and there is still much room for improvement.
Be optimistic about the long-term and steady development of the company. (1) the company continues to increase the omni-channel layout and create an integrated operation mode online and offline. As of 2022H1, the company has 1985 offline retail terminals.
(2) with deep insight into consumer demand, we have successively launched non-size lingerie brand "Huxi" and sports brand "ROAD" to seize the emerging blue ocean market. (3) has a strong supply chain management system. In 2021, the company revolves around the retail "people, goods, market" fine operation purpose, starts the supply chain, the consumer depth digitization project, more quickly accurate insight consumer and accurate supply, helps the company to improve the efficiency for a long time. (4) pay attention to the investment in R & D and have strong ability of R & D innovation.
Profit forecast and investment advice: we expect the performance in 22-24 to be 0.78 yuan per share, 0.95 yuan per share and 1.14 yuan per share, respectively. With reference to the valuation of comparable clothing companies, and the company as the underwear leader, comprehensive consideration, give the company 2023 18XPE, corresponding to a reasonable value of 17.13 yuan per share, the first coverage, given a "buy" rating.
Risk hint. The risk of market competition is intensified; the risk of inventory price decline; the risk of COVID-19 epidemic.