20210301-招银国际-江南布衣-03306.HK-Speedy_recovery_and_ambitious_long-term_goal_9页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Information

• Company: JNBY Design (3306 HK)
• Equity Research Rating: BUY (Maintain)
• Target Price (TP): HK$15.32 (Previous TP: HK$9.57)
• Up/Downside: +28.9%
• Current Price: HK$11.88
• Valuation: 11x FY6/22E P/E (vs 3-year average of 10x), 8% FY22E dividend yield
• Auditor: PricewaterhouseCoopers

Key Highlights

• Strong Performance in 1H21E:

  • Net profit beat by 24%
  • Sales and net profit grew by 8% YoY
  • Outperformed Bloomberg estimates by 2% and 24% respectively
  • SSSG (Same Store Sales Growth) reached 12.6%, significantly higher than HSD (HSD negative in 2H20)
  • Admin costs fell by 3% YoY
  • Inventory days improved from 201 in 1H20 to 172 in 1H21
  • Operating cash flow surged by +70% YoY

• Upbeat FY21E Guidance:

  • Management expects HSD sales growth and similar net profit level to FY19
  • This is far ahead of their previous target of HSD sales and 20%+ net profit growth vs FY20
  • Confidence in achieving targets attributed to:
    1. Favorable weather in Jan-Feb 2020 and low base
    2. Image upgrades for 200-300 stores
    3. All-channel strategy (digital sales via WeChat, digital marketing on Bilibili, Xiaohongshu, TikTok, etc.)
    4. Improved CRM with new department focused on customer experience and member/fan engagement
    5. Potential future events at new headquarters (Tian Mu Li)

• Ambitious Long-Term Goal:

  • Targeting RMB 10bn in retail sales by FY23E-24E
  • Doubling FY20 sales and implying an 18% CAGR
  • Management expects to increase branding investments, raising A&P expenses to 7% of annual sales
  • Acquiring more talents in design, display, marketing, and innovation

Financial Summary

Revenue (RMB mn)

• FY19A: 3,358
• FY20A: 3,099
• FY21E: 3,620
• FY22E: 4,175
• FY23E: 4,768
• YoY Growth: 17.3%, -7.7%, 16.8%, 15.3%, 14.2%

Net Profit (RMB mn)

• FY19A: 485
• FY20A: 347
• FY21E: 479
• FY22E: 557
• FY23E: 661
• YoY Growth: 19.4%, -28.2%, 37.5%, 15.7%, 17.9%

EPS (RMB)

• FY19A: 0.939
• FY20A: 0.675
• FY21E: 0.928
• FY22E: 1.074
• FY23E: 1.267
• Revised Up: 13% for FY21E and 17% for FY22E

P/E Ratio

• FY19A: 12.6
• FY20A: 17.6
• FY21E: 12.8
• FY22E: 11.1
• FY23E: 9.4
• Current P/E: 11.88 (based on FY22E)

P/B Ratio

• FY19A: 3.8
• FY20A: 3.8
• FY21E: 3.2
• FY22E: 2.9
• FY23E: 2.6

Dividend Yield (%)

• FY19A: 6.5
• FY20A: 3.9
• FY21E: 6.4
• FY22E: 7.4
• FY23E: 8.8

ROE (%)

• FY19A: 34.4
• FY20A: 23.3
• FY21E: 27.5
• FY22E: 28.7
• FY23E: 30.3

Net Gearing (%)

• All periods: Net cash

Earnings Revision

Valuation Comparison (Peers)

Strategic Initiatives

• All-Channel Strategy: Increased digital sales through WeChat mini-program and digital marketing on Bilibili, Xiaohongshu, TikTok
• CRM Enhancement: New department dedicated to customer experience and member/fan engagement
• Store Expansion: Faster store openings and image upgrades for 200-300 stores
• Branding Investment: A&P expenses to be raised to 7% of annual sales starting FY21E
• Talent Acquisition: More design, display, marketing, and innovation talents to be added

Conclusion

JNBY Design has demonstrated a strong recovery and has set ambitious long-term goals. The company's improved financial performance, coupled with strategic initiatives and favorable valuations, supports the BUY rating and the raised target price. Its ability to beat earnings expectations, maintain robust margins, and execute a comprehensive growth strategy positions it well for future success.