Incident Overview
“Chuzhou Mirun”, a wholly-owned subsidiary of the company, plans to use capital of 137 million yuan to acquire 10.9% of “Shanghai Jiale” shares held by Anhui Taihe, and to acquire 5% of the “Shanghai Jiale” shares held by Jiuan Investment for 63 million yuan. After this transaction, the company directly holds 51.85% of Shanghai Jiale's shares (previously 35.94%). We analyzed that the significance of this acquisition is: (1) Jia Le merged to increase its performance; (2) the company moved from the packaging category to increase its performance The OEM field and market space are larger. Shanghai Jiale's total equity is valued at 1.26 billion yuan. The company plans to change the convertible bond raising project of 160 million yuan (before the change, it was an information-based construction project for the fashion women's bag factory project) and its own capital of 40 million yuan, for a total acquisition of 200 million yuan.
Analytical judgment:
The acquisition helped the company fully enter the clothing circuit. It is estimated that revenue/net profit to mother will increase by 8/012 billion yuan in 24 years, and revenue/net profit to mother will increase by 20.052 billion yuan in 25 years. Shanghai Jiale's revenue/net profit in '23 was 12.85/-0.75 billion yuan, and 24Q1 revenue/net profit/net margin was 3.22/ 011 million yuan/ 3%. We assume that Gia Le's revenue growth rate for 24 years is 30%, net profit of 3%, and the table period is expected to increase by 8/012 billion yuan for this consolidated year; revenue/net profit to mother increased by 20/52 billion yuan in '25.
Kara's future growth space lies in new customer expansion+net interest rate restoration. (1) We analyzed that Carle's advantage lies in the Indonesian layout+knitwear category. At the time of the acquisition in '20, Carle's revenue/net profit for 2019 was about 1.31 billion yuan, with a net interest rate of 8%. Since then, due to factors such as the impact of the epidemic, investment in equipment automation upgrades, disposal of old equipment, and new customers starting to climb the slope from taking small orders, 24Q1 has already reversed losses, but there is still room for improvement in the future. After Kairun took over, we believe that the company can support Carle in two ways: 1) expand new customers, such as Adidas, Puma, and MUJI. Previously, Carle mainly served Uniqlo; 2) enhance bargaining and negotiation capabilities.
Investment advice
Our analysis: (1) According to our estimates, the 2B business is expected to achieve high double-digit growth in 24. The core advantage comes from the Indonesian layout. The core drivers are net interest rate restoration, downstream inventory replenishment, increase in the company's share of old customers, and expansion of new customers. We estimate the high order growth of old customers NIKE, Decathlon, and VF, combined with the contributions of new customers Uniqlo and PUMA. (2) According to our estimates, the 2C business is expected to achieve 30% high growth in 24 years. (3) The acquisition of Shanghai Jiale will help increase performance and expand the clothing OEM business. Considering this merger, the 24/25/26 revenue forecast was raised to 38.36/45.77/5.260 billion yuan to 46.39/65.85/7.570 billion yuan; the 24/25/26 net profit forecast was increased by 3.01/4.09/493 million yuan to 314/4.61 billion yuan; and the 24/25/26 EPS was adjusted accordingly by 1.31/1.92/2.36 billion yuan. The closing price of 21.00 yuan on June 5, 2024 corresponds to a 24/25/26 PE of 16/11/9X, maintaining a “buy” rating.
Risk warning
Fluctuations in raw material prices and rising labor costs; exchange rate fluctuations; capacity expansion falls short of expectations; systemic risks. The proposed acquisition has not yet been completed, and there is uncertainty.