20181207-信达国际控股-维珍妮-02199.HK-Strategy_shift_to_high-margin_customers_5页_835kb
报告摘要
Summary of Regina Miracle (RM) 1HFY19 Performance and Strategy
Core Content
Regina Miracle (RM) reported its 1HFY19 results, which were in line with market expectations. The company achieved a revenue of HK$3,062.9 million, representing an 8.9% YoY increase. This growth was primarily driven by the strong performance of new brand orders. The gross profit margin improved to 21.5% from 20.7% in 1HFY18, attributed to increased production efficiency in Vietnam. Net profit rose by 39.9% YoY to HK$133.7 million, reflecting the company's improved profitability.
Revenue Breakdown
- Bras and Intimate Wear: Revenue of HK$2,372.9 million, up 4.0% YoY, accounting for 77.5% of RM's total revenue (down from 81.1% in 1HFY18). Gross margin improved by 1.1 ppt to 22.0%.
- Functional Sports Products: Revenue of HK$432.0 million, up 67.0% YoY, representing 14.1% of RM's revenue (up from 9.2% in 1HFY18). This growth was fueled by the contribution of a new footwear brand and double-digit growth in sportswear. Gross margin remained stable at 18.9%.
- Bra Pads and Other Molded Products: Revenue of HK$258.0 million, down 5.1% YoY, accounting for 8.4% of RM's revenue. Gross margin slightly increased to 21.4% from 21.2% in 1HFY18.
Strategy Shift and Long-Term Gains
RM is shifting its strategy to focus more on high-margin customers. In March 2019, the company terminated cooperation with several low-margin brands, including Under Armour, L brand's La Senza, and six other small brands, which accounted for 8%–10% of its FY19 revenue. This move is expected to improve overall profitability. The company also indicated that new customers in 2H19 will bring in higher order volumes than those being withdrawn. The analysts expect this strategic shift to yield long-term benefits, even though the current valuation appears less attractive compared to industry peers.
Vietnam Production Expansion
RM has been gradually increasing its production capacity in Vietnam to reduce reliance on Shenzhen and mitigate the impact of the China-US trade war. The company currently operates three factories in Vietnam (A, B, and C) and has plans to start production at Plant D in 2Q19 and the first phase of Plant E in 2Q19, with the second phase expected in 2Q–3Q20. Vietnam factories contributed 52% of RM's revenue in 1HFY19 and are projected to account for 60% in FY19E and 80%–85% in FY21E. The utilization rate of Shenzhen and Plant A is currently at 70% and 55%, respectively, and the proportion of skilled workers in Plant A increased from 55% to 63% during FY18–1HFY19. The company expects other Vietnam plants to follow Plant A's operational model, leading to further efficiency improvements.
Valuation and Market Position
RM is currently trading at a PE ratio of 20.9x for FY19E and 14.3x for FY20E, which is higher than the industry average of 11.6x and 9.7x respectively. Despite this, the analysts suggest that investors should keep an eye on RM due to its potential for long-term gains. The company's financials show a strong performance in terms of profitability, with net profit growing significantly from HK$240.2 million in FY18A to HK$323.8 million in FY19E.
Key Financial Highlights
| Metric | FY16A | FY17A | FY18A | FY19E | FY20E |
|---|---|---|---|---|---|
| Revenue (HKD mn) | 5,081.8 | 4,676.9 | 5,868.0 | 6,584.9 | 7,512.1 |
| Net Profit (HKD mn) | 442.1 | 97.6 | 240.2 | 323.8 | 463.8 |
| Net Margin (%) | 9% | 2% | 4% | 40.2% | 39.8% |
| Gross Margin (%) | 27% | 23% | 26% | 21.5% | 21.5% |
| ROE (%) | 23% | 4% | 9% | - | - |
| Net Gearing (%) | 6% | 41% | 59% | - | - |
| Interest Coverage (x) | 14 | 6 | 7 | - | - |
| Effective Tax Rate (%) | 22% | 39% | 16% | - | - |
Key Information
- RM has a strong presence in the global intimate wear market, with a focus on innovation and design.
- The company has five production facilities in Vietnam, with two more under construction.
- RM is transitioning from a broad brand portfolio to a more focused strategy on high-margin products and customers.
- The strategic shift is expected to result in better profitability and long-term growth.
- The company's financial performance has shown improvement in recent years, with net profit increasing significantly in 1HFY19.
- The current valuation may not be attractive, but analysts are optimistic about RM's future prospects.
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