Incident: Mr. Chen Jiabin, vice chairman of the company, and his co-actors increased the company's shares by 5,507,900 shares through centralized bidding transactions from April 27, 2023 to May 25, 2023, accounting for 0.9585% of the company's total share capital. Mr. Chen Jiapin and his co-actors plan to use their own funds to increase the company's shares through centralized bidding transactions within the next 6 months. The proposed increase in total holdings (including the increased shares) is no less than 2.00% of the company's total share capital, and no more than 3.00% of the company's total share capital. The increase in management holdings shows confidence in long-term development under strategic transformation.

Focus on the main brands and implement expert brand strategies for men's pants, and continue to promote the rejuvenation of the brand's product channels. The revenue of 2023Q1 Jiumuwang/FUN/ZIOZIA was 690/0.40/029 million yuan respectively, with year-on-year changes of +5.48%/-37.61%/-18.06%, respectively. Among them, the main brand Jiumuwang's post-epidemic recovery trend was positive, and gross margin remained at 56%-60% for a long time, ahead of its peers. (1) On the brand side, the Jiumuwang brand appeared at Milan Fashion Week for the first time and released a new series of pants shows inspired by “Shengshi China” and “A Thousand Rivers and Mountains” respectively, showing the results of the transformation of the Jiumuwang brand into specialization, internationalization and fashion. (2) In terms of products, we continue to strengthen research and development of products, fabrics, and patterns to promote the youthfulness of product styles; continue to develop and innovate pant styles, and successfully launch popular products such as small black pants and easy pants. In 2022, the proportion of men's pants sales reached 46%, and the mentions rate of men's pants increased from 6% before the change to 22%. (3) In terms of channels, ① business transformation: breaking through middle and high-end shopping malls such as China Resources Vientiane City and Vientianhui to enter mainstream Ole shopping malls across the country; ② Store upgrades: Continued construction of ten-generation stores. By the end of 2022, there were more than 850 new and renovated ten-generation stores, accounting for nearly 40%, further deepening consumers' perception of Jiumuwang's “men's pants expert” image. ③ Improved store efficiency: Store upgrades and the opening of inefficient stores have led to a steady increase in store efficiency. By the end of 23Q1, the average area of a single store directly managed/franchised by the Jiumuwang brand was 141/156 square meters, respectively.

Profit forecast and investment advice: The company is the number one leader in men's pants in China. In 2020, the “Men's Pants Expert” strategy transformation began, and reforms were carried out around brands, products and channels. The company has continued to optimize channels for the past three years. Combined with the repeated influence of the epidemic, the results of the transformation have not yet been shown. It was the first loss since listing due to investment business in '22. We believe that with the recovery of consumption after the epidemic, the effects of the company's strategic changes are expected to be shown, laying a solid foundation for performance recovery; when combined with the influence of a low base, the company is expected to release performance elasticity this year. This increase in management holdings also shows confidence in long-term development under strategic transformation. Considering the good recovery of the company's main brand after the pandemic, we expect net profit of 2023-25 to be $309/386/463 million, respectively. The corresponding PE for 2023-25 will be 22/17/14 times, respectively, giving it a “buy” rating.

Risk warning: Risks such as increased competition in the industry, channel adjustment plans falling short of expectations, inventory backlog, etc.