20220913-招银国际-江南布衣-03306.HK-Dividend_play_with_long-term_growth_potential_9页_1mb

JNBY Design (3306 HK) Company Update Summary

Core Content and Key Information

JNBY Design (3306 HK), a subsidiary of China Merchants Bank, is currently rated as BUY with a target price of HK$12.67, down from the previous target of HK$14.51. The company is positioned as a dividend play with long-term growth potential, offering an attractive yield and low valuation compared to its historical average.

Financial Performance

• Revenue:

  • FY21A: RMB 4,126 million
  • FY22A: RMB 4,086 million (down 1% YoY)
  • FY23E: RMB 4,561 million (up 12% YoY)
  • FY24E: RMB 5,021 million (up 10% YoY)
  • FY25E: RMB 5,368 million (up 6.9% YoY)

• Net Profit:

  • FY21A: RMB 647 million
  • FY22A: RMB 559 million (down 14% YoY)
  • FY23E: RMB 585 million
  • FY24E: RMB 709 million
  • FY25E: RMB 810 million

• EPS (Diluted):

  • FY21A: RMB 1.289
  • FY22A: RMB 1.113
  • FY23E: RMB 1.155
  • FY24E: RMB 1.400
  • FY25E: RMB 1.600

• Valuation:

  • Current P/E (FY6/23E): 8x (vs 3-year average of 10x)
  • Current Yield (FY6/23E): 11%
  • Target Price: HK$12.67 (based on 10x FY6/23E P/E)
  • Current Price: HK$9.33

Main Points

• Sales Turnaround: JNBY's sales have started to recover, with digital and smart retail channels showing strong growth. The GMV through these channels increased by 130% YoY in 2022, despite the pandemic's impact.

• Growth Strategy:

  • The company is targeting low teen sales growth in FY23E, with a focus on MSD net profit growth.
  • Key drivers include a low base in FY22, a strong recovery trend, store productivity improvements, upgraded supply chain management, and increased marketing efforts.

• Dividend Policy:

  • The 75%+ payout ratio has been maintained, indicating a strong commitment to shareholder returns.
  • Despite lower sales growth, the dividend yield remains at 11%, making it an attractive option for income-focused investors.

• Earnings Revision:

  • FY23E and FY24E EPS have been revised down by 13% and 11%, respectively, due to slower sales growth and higher staff and A&P expenses.
  • The FY24E target for revenue and net profit growth has been delayed to FY25E, primarily due to short-term volatility from the pandemic.

• Valuation Band:

  • JNBY is trading at a discounted valuation compared to peers, with a P/E ratio significantly lower than the 3-year average.
  • The forward P/E is considered attractive, supporting the BUY rating.

Key Factors Affecting Valuation

• Dividend Yield: 11% (FY6/23E), which is notably higher than the industry average.
• P/E Ratio: 8x (FY6/23E) vs 10x average, suggesting undervaluation.
• ROE: Maintains a high return on equity, indicating strong profitability.
• P/B Ratio: 2.6x (FY22), showing a reasonable price-to-book value.

Competitive Landscape

• JNBY is compared with other H-shares and A-shares apparel companies, such as Bosideng International, China Lilang, and Esprit, as well as international peers like Hugo Boss and Marks & Spencer.
• The company's P/E and P/B are below the average of its peers, which enhances its attractiveness in the current market.

Conclusion

JNBY Design is seen as a dividend-focused company with long-term growth potential. While short-term challenges such as the pandemic and higher expenses have impacted its growth trajectory, the company's digital initiatives, brand building, and operational improvements suggest a strong recovery. The current valuation is considered very attractive, and the BUY rating is maintained with a revised target price. Investors are advised to consider JNBY as a buy for long-term value and income.