20210902-招银国际-江南布衣-03306.HK-Conservative_guidance_after_a_strong_result_8页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Information

• Company: JNBY Design (3306 HK)
• Stock Data:
  • Market Cap: HK$9,649 million
  • Average 3 months total return: HK$14.98 million
  • 52-week High/Low: HK$21.50 / HK$7.16
  • Total Issued Shares: 518.8 million
• Shareholding Structure:
  • Mr. Wu Jian & Family: 59.20%
  • Free Float: 37.07%
• Share Performance:
  • 1-month: +13.4%
  • 3-month: +30.0%
  • 6-month: +55.6%
  • 12-month: +128.1%
• Auditor: PricewaterhouseCoopers

Key Points and Analysis

Financial Performance

• FY21 Results:

  • Net profit rose by 87% YoY to RMB 647 million, in line with the profit alert (expect 80%+ increase).
  • Sales growth was impressive at 33% YoY, driven by 159% distributor sales growth in 2H21 and 19% SSSG (sales per offline store up 20%+ vs 2019).
  • Gross profit margin increased by 3.3ppt to 62.9%, and net profit margin increased by 4.5ppt to 15.7% due to better retail discounts and operating leverage.
  • A special dividend of RMB 0.33 per share was proposed (effective payout ratio of 87%), with FY6/23E yield at 6.6%.

• FY22E Guidance:

  • Management guides for 10%+ sales growth and net profit of ~RMB 627 million to RMB 647 million, flat vs FY21's recurring net profit.
  • Despite conservative guidance, the firm is slightly more optimistic due to:
    1. Strong momentum with estimated 25%+ SSSG in 2H21.
    2. Strong growth from social retail channels (e.g., "Box Project", "Wechat Mall", and "Diversified social e-commerce").
    3. More store image upgrades for JNBY, Less, and jnby by JNBY.
    4. Better sales from VIPs, with a 21% growth in FY21 due to improved customer experience.
    5. Increased branding and marketing efforts, with 3 new brand ambassadors hired.

FY24E Targets

• The company disclosed more detailed targets for FY24E:
  • Listed co sales: RMB 6 billion.
  • Gross profit margin: 65%+.
  • Net profit: ~RMB 0.9–1 billion.
• These targets are expected to be driven by improved design, branding, marketing, and customer experience across all channels.

Valuation and Target Price

• Target Price: HK$22.84 (up from previous TP of HK$15.32).
• P/E Ratio: Based on 14x FY6/23E P/E (rolled over from 13x FY6/22E P/E).
• Dividend Yield: 6.6% for FY6/23E, which is higher than the 3-year average of 10%.
• Valuation: The current valuation is not too demanding at 13x FY6/23E P/E and 7% yield.

Earnings Revision

• Revised FY21E/22E EPS:
  • FY21E: 1.289 RMB (revised up by 21%).
  • FY22E: 1.301 RMB (revised up by 17%).
• Reasons for revision:
  • Robust SSSG.
  • Improved GP margin.
  • Higher staff and A&P expenses.
• CMBIS vs Consensus:
  • Revenue: CMBIS estimates are 8.2% higher than consensus for FY22E.
  • Net profit: CMBIS estimates are 6.9% higher than consensus for FY22E.

Valuation Comparison with Peers

• H Shares Apparel:
  • JNBY Design: P/E of 14.4x (FY21) and 14.3x (FY22E), with a yield of 6.5%.
  • Bosideng International: P/E of 26.4x (FY21) and 21.1x (FY22E), with a yield of 2.7%.
  • China Lilang: P/E of 7.1x (FY21) and 6.0x (FY22E), with a yield of 9.9%.
• A Shares Apparel:
  • Ningbo Peacebird: P/E of 21.8x (FY21) and 17.8x (FY22E), with a yield of 2.6%.
  • Joeone Co Ltd: P/E of 30.4x (FY21) and 26.4x (FY22E), with a yield of n/a.
  • Fujian Septwolves: P/E of 17.2x (FY21) and 14.9x (FY22E), with a yield of 2.1%.
• International Apparel:
  • Hugo Boss: P/E of 36.6x (FY21) and 21.3x (FY22E), with a yield of 1.5%.
  • Marks & Spencer: P/E of 13.3x (FY21) and 11.1x (FY22E), with a yield of 0.6%.

Assumptions

• Sales by Brand:
  • JNBY: RMB 1,762 million (FY20A), RMB 2,299 million (FY21A), RMB 2,552 million (FY22E), RMB 2,807 million (FY23E), RMB 3,059 million (FY24E).
  • CROQUIS: RMB 557 million (FY20A), RMB 692 million (FY21A), RMB 775 million (FY22E), RMB 853 million (FY23E), RMB 930 million (FY24E).
  • jnby by JNBY: RMB 444 million (FY20A), RMB 657 million (FY21A), RMB 742 million (FY22E), RMB 831 million (FY23E), RMB 923 million (FY24E).
  • Less: RMB 261 million (FY20A), RMB 391 million (FY21A), RMB 470 million (FY22E), RMB 531 million (FY23E), RMB 594 million (FY24E).
  • Other Brands: RMB 75 million (FY20A), RMB 87 million (FY21A), RMB 106 million (FY22E), RMB 129 million (FY23E), RMB 153 million (FY24E).
• Sales by Channel:
  • Self-owned: -9.1% (FY20A), 29.7% (FY21A), 10.7% (FY22E), 7.7% (FY23E), 6.6% (FY24E).
  • Distributors: -13.2% (FY20A), 33.9% (FY21A), 12.0% (FY22E), 10.0% (FY23E), 9.0% (FY24E).
  • Online: 18.0% (FY20A), 42.4% (FY21A), 19.0% (FY22E), 21.0% (FY23E), 19.0% (FY24E).
• GP Margins by Channel:
  • JNBY: 61.1% (FY20A), 63.5% (FY21A), 64.0% (FY22E), 64.5% (FY23E), 65.0% (FY24E).
  • CROQUIS: 61.8% (FY20A), 61.9% (FY21A), 62.2% (FY22E), 63.5% (FY23E), 64.0% (FY24E).
  • jnby by JNBY: 56.7% (FY20A), 61.6% (FY21A), 61.7% (FY22E), 62.5% (FY23E), 63.0% (FY24E).
  • Less: 62.0% (FY20A), 66.4% (FY21A), 63.5% (FY22E), 64.0% (FY23E), 64.5% (FY24E).
  • Other Brands: 19.3% (FY20A), 51.0% (FY21A), 47.0% (FY22E), 47.3% (FY23E), 47.3% (FY24E).
• Opex Breakdown:
  • Outsourcing charges: 9.6% (FY20A), 8.1% (FY21A), 8.4% (FY22E), 8.4% (FY23E), 8.4% (FY24E).
  • Rental expenses: 14.5% (FY20A), 11.9% (FY21A), 11.8% (FY22E), 11.7% (FY23E), 11.6% (FY24E).
  • Staff costs: 8.7% (FY20A), 8.7% (FY21A), 8.5% (FY22E), 8.7% (FY23E), 8.9% (FY24E).
  • A&P expenses: 4.6% (FY20A), 6.9% (FY21A), 8.0% (FY22E), 8.1% (FY23E), 8.1% (FY24E).
  • Provisions for inventory: 5.7% (FY20A), 2.9% (FY21A), 3.0% (FY22E), 2.9% (FY23E), 2.9% (FY24E).
  • D&A: 2.0% (FY20A), 1.7% (FY21A), 1.4% (FY22E), 1.4% (FY23E), 1.4% (FY24E).
  • Selling & Distribution costs: 36.9% (FY20A), 34.6% (FY21A), 36.8% (FY22E), 36.8% (FY23E), 37.0% (FY24E).
  • Admin expenses: 8.9% (FY20A), 8.0% (FY21A), 8.2% (FY22E), 8.0% (FY23E), 8.0% (FY24E).
  • OP margins: 15.6% (FY20A), 21.4% (FY21A), 19.2% (FY22E), 19.9% (FY23E), 20.2% (FY24E).
  • Effective tax rate: 28.7% (FY20A), 27.0% (FY21A), 27.0% (FY22E), 27.0% (FY23E), 27.0% (FY24E).
  • Net profit margins: 11.2% (FY20A), 15.7% (FY21A), 14.1% (FY22E), 14.6% (FY23E), 15.0% (FY24E).

Financial Summary

Income Statement

• Revenue:
  • FY20A: RMB 3,099 million
  • FY21A: RMB 4,126 million
  • FY22E: RMB 4,645 million
  • FY23E: RMB 5,150 million
  • FY24E: RMB 5,659 million
• Gross Profit:
  • FY20A: RMB 1,850 million
  • FY21A: RMB 2,597 million
  • FY22E: RMB 2,921 million
  • FY23E: RMB 3,272 million
  • FY24E: RMB 3,621 million
• Net Profit:
  • FY20A: RMB 347 million
  • FY21A: RMB 647 million
  • FY22E: RMB 656 million
  • FY23E: RMB 754 million
  • FY24E: RMB 848 million

Cash Flow Summary

• Net Cash from Operating:
  • FY19A: RMB 669 million
  • FY20A: RMB 723 million
  • FY21E: RMB 738 million
  • FY22E: RMB 882 million
  • FY23E: RMB 998 million
• Capex & Investments:
  • FY19A: RMB 117 million
  • FY20A: RMB 156 million
  • FY21E: RMB 176 million
  • FY22E: RMB 195 million
  • FY23E: RMB 214 million

Conclusion

• The firm maintains a BUY rating and raises its target price to HK$22.84.
• Despite conservative guidance, the company's strong FY21 results and growth momentum support the positive outlook.
• The valuation is considered reasonable with a P/E of 13x for FY6/23E and a 6.6% yield.
• The company is expected to benefit from continued growth in social retail channels and improved customer experience.