20210810-西牛证券-赢家时尚-03709.HK-Strong_cash_inflow_after_acquisition_and_COVID-19_27页_1mb

EEKA Fashion (03709.HK) Summary

Core Content

EEKA Fashion (03709.HK) is a middle and high-end womenswear company established in 2007, operating primarily in China. The company has a diverse brand portfolio that targets different customer segments, including high-end, cost-effective, and acquired brands. It also has a strong presence in both physical retail and e-commerce channels, with a notable increase in sales from self-operated stores and e-commerce platforms post-pandemic.

Main Points

Brand Portfolio

EEKA Fashion (03709.HK) offers a variety of brands, each with distinct positioning and target groups:

• High-end brands: Koradior, La Koradior, and Koradior elsewhere

  • Koradior: Targets ladies aged 30–45, offering feminine, stylish, and young-looking designs. Net sales: RMB 1,970.4mn (37.0% of total revenue)
  • La Koradior: Offers perceptual, elegant, and romantic designs. Net sales: RMB 544.4mn (5.7% of total revenue)
  • Koradior elsewhere: Focuses on leisurely, comfortable, and high-quality designs. Net sales: RMB 301.6mn (8.5% of total revenue)

• Cost-effective brand: FUUNNY FEELLN

  • Targets '80s ladies, with a low base in 2019. Net sales: RMB 49.9mn (0.9% of total revenue)

• Acquired brands: CADIDL, NAERSI, NAERSILING, and NEXY.CO

  • CADIDL: Urbanism, elegant, and modern designs. Net sales: RMB 234.8mn (4.4% of total revenue)
  • NAERSI: High-end clothing for professional women. Net sales: RMB 1,202.1mn (22.6% of total revenue)
  • NEXY.CO: Targets urban, chic women. Net sales: RMB 614.0mn (third-largest contributor)

Distribution Channels

The company has a nationwide sales network, covering 32 cities across China and Hong Kong, with 1,836 retail stores as of 2020. Of these, 1,422 are self-operated, while 414 are operated by distributors. The company also has a strong e-commerce presence, with flagship stores on Tmall and VIP.com, and a WeChat-based EEKA Fashion Mall launched in 2020.

• Retail stores:

  • Self-operated stores: 1,422 (contributed 82.3% of total revenue in 2020)
  • Distributors: 414 stores, contributing 5.9% of total revenue in 2020 (down from 11.5% in 2019)

• E-commerce:

  • Total e-commerce revenue: RMB 612.4mn (11.5% of total revenue in 2020)
  • Tmall: RMB 281.7mn (46.0% of e-commerce revenue)
  • VIP.com: RMB 293.9mn (48.0% of e-commerce revenue)
  • EEKA Fashion Mall: RMB 32.7mn (5.3% of e-commerce revenue)
  • Other platforms: RMB 4.2mn (0.7% of e-commerce revenue)

Financial Performance

• 2020 Net Sales: RMB 5,325.1mn, representing a 28.4% YoY increase
• Gross Profit: RMB 3,910.1mn
• Gross Margin: 73.4%
• Net Profit: RMB 440.1mn
• EPS: RMB 0.674
• P/S: 13.0
• P/E: 2.4 (2020), 2.2 (2021E), 2.0 (2022E), 1.7 (2023E)
• ROE: 13.2% (2020), 21.1% (2021E), 21.0% (2022E), 21.7% (2023E)

Investment Rating

• Stock Rating: BUY
• Target Price: HK$14.80
• Current Price: HK$9.88
• 52-Week Range: HK$8.14 – HK$19.12
• Market Cap.: HK$7.0bn

Key Information

• Brand Diversification: The company's diverse brand portfolio allows it to target different customer segments, which can expand the customer base and build brand recognition.
• Distribution Channel Optimization: The expansion of self-operated stores and the adoption of e-commerce platforms have improved the company's revenue contribution from retail stores to 82.3% in 2020.
• E-commerce Growth: The e-commerce channel has seen significant growth, especially post-pandemic, with a 52.9% YoY increase in 2020.
• Acquisitions: The acquisition of Keen Reach in 2019 added several brands, contributing significantly to the company's revenue and growth.
• Valuation: Based on DCF and P/E methodologies, the fair value is estimated to be HK$14.80/share, implying forward P/E ratios of 11.0x, 10.0x, and 8.6x for 2021–2023.

Risk Factors

• Slow Recovery: The women's apparel market in China may take time to recover from the impact of the pandemic.
• Intense Competition: The apparel market is highly competitive, with both foreign and local brands.
• Failure to Introduce New Products or Brands: The company's growth may be hindered if it fails to innovate or acquire new brands.
• Re-outbreak of COVID-19: Any resurgence of the pandemic could negatively impact sales and operations.