Why Would The Capital Market React So Positively To This Old Men'S Clothing?

After a cold winter, the first half of 2017

The market as a whole is on the warmer trend.

Some clothing enterprises are also constantly releasing positive signals to the capital market.

China

(01234) is one of them.

According to the world clothing and shoe net, in mid August, China released the first half of 2017.

During the period, the group earned 1 billion 22 million yuan (if not marked, the same below), a decrease of 12.9% compared to the same period, and a 271 million profit in the period, an increase of 1.6% over the same period.

Although revenue declined and profits were basically flat in the first half of the year, after the interim results were released, China's Le Lang ended nearly half a year ago, and its share price continued to rise, hitting a new high this year.

Why would the capital market react so positively to this old men's clothing?

Ups and downs of performance

Let's first look at the Chinese enterprise.

Speaking of China, many people will think of Chen Daoming, who is calm and reserved, and the slogan "simple but not simple".

Statistics show that the Chinese Li, born in 1987, is a collection.

The Chinese business men's clothing enterprise, which is integrated with production and marketing, is located in the high-end brand. Its products include suits, casual suits, jacket shirts and shoe accessories.

The group landed on the Hong Kong stock market in 2009.

In the early stage of the listing, the performance of China's rapid growth increased from 1 billion 560 million to 2 billion 708 million in 2009 and 2011, and the annual profit increased from 303 million to 623 million.

It didn't last long. After 2011, like many of the domestic apparel industry, China also experienced a bottleneck period.

In 2013, China's first performance fell since its listing, and its turnover decreased by 17.7% to 2 billion 299 million yuan.

In response, the group's explanation is that retail sales have not improved significantly, as well as the company's digestion of old product channel inventory.

At the same time, its annual profit decreased by 17.7% to 516 million yuan.

Since 2013, China has improved its overall sales situation by optimizing the store network, closing down low benefit shops, setting up international R & D teams for the main brand "LILANZ", and enhancing product research and development.

In terms of performance, the group's initiatives have been effective, and revenues and profits have climbed.

However, the path of China's recovery is not smooth.

In 2016, the group's performance was hit by Waterloo's channel inventory problems and the impact of its closure. Its revenue fell 10.3% to 2 billion 412 million compared with the same period last year, and net profit fell 13.6% to 540 million over the same period last year.

It should be noted that since 2013, China has been trying to improve its overall efficiency by closing down inefficient stores.

As of June 30, 2017, the group had a total of 2393 stores, representing a decrease of 1062 compared with the end of 2013.

China Daily releases recovery signal

So why is the stock price going up continuously after this year's interim results? Let's look at the interim results of China's real estate.

According to Zhitong finance, the group's overall revenue declined in the first half of the year. On the one hand, the main brand "LILANZ" ensured the health of channel stock and reduced the sales of products in spring and summer in 2017. On the other hand, the sub card "L2" will begin to stop business this autumn.

Although China's revenue declined in the first half of the year, its performance still released many signs of recovery.

The first is the rise in gross margin.

During the period, the gross profit margin of the group was 42.7%, an increase of 1.8 percentage points.

The main reason for the increase in gross profit margin is the decline in the sales revenue of the "L2" sales card with lower gross margin, and the "LILANZ" in raising the quality without raising the price. Because the proportion of original products increased and the supply chain management increased, the cost of sales decreased.

Second, the same store sales data performed well.

During the period, China continued to expand the number of units in the same store.

In addition, the "LILANZ" 2017 autumn and winter orders were significantly improved compared with 2016.

Among them, the order amount of the autumn order meeting ended the decline in the past four seasons, recorded a high number of units growth; the total amount of the order in winter will be recorded a low double-digit increase.

The average unit price of products in autumn and winter also changed to a steady decline in 2016.

Look at the operational indicators again.

Although the group's inventory turnover days increased 23 days to 80 days compared with the same period in 2016.

However, in inventory terms, we can see from the table below that the group has only increased the stock of raw materials, and the inventory of WIP and finished products has been reduced to varying degrees.

Usually, this may lead people to think of whether the company has launched a series of sales promotion activities.

In fact, the gross profit margin of China's Le Lang is still growing during the period.

This also shows that the inventory of Chinese products is not large, and sales of new products are also optimistic.

In terms of accounts receivable, the average turnover days of accounts receivable in China were 99 days, down 4 days from the same period in 2016.

The balance of trade receivables for "LILANZ" decreased by 14.5% to $621 million over the same period in 2016.

To a certain extent, this reflects the decline in sales and the improvement of channel inventory.

Sales continue to improve, valuations are still low.

The question is coming again. Is the next performance of China's Le Lang still having a look after the satisfactory Chinese newspapers are delivered?

You can look at the industry first.

Since 2013, the apparel industry has been in a state of de stocking.

Almost all clothing companies including China, such as China, have gone through a wave of shops, and companies that cut nearly half of the number of stores are everywhere.

The industry as a whole has already contracted a lot at the supply side.

Even though demand has not been raised, the whole industry has been losing weight in recent years, and enterprises that have successfully passed the winter have made a marked improvement in their efficiency and cost.

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Meanwhile, the retail industry in the mainland is in the recovery stage.

In the first half of this year, retail consumption grew by 10.4% over the same period, of which clothing grew by 7.3%. The growth rate was 0.3 percentage points higher than that in the same period in 2016.

From this we can see that the demand side of the industry is not improving.

Let's look at China's own right now.

According to the latest data, the total amount of orders for its "LILANZ" brand in 2018 spring and summer will reach 21% year-on-year, and the average price per product category in spring and summer is similar to that of last year.

In August 2017, the same store sales of the group's first tier distributors and two tier distributors operating and operating for more than 18 months over the past 18 months compared with the same period in 2016, the average number of units increased.

Moreover, China will cut off its "L2" from this autumn.

This means that the negative effects brought about by the poor sales of the brand will no longer exist.

This will help the group further raise its gross margin.

In addition, the group plans to enter the second tier city with the "LILANZ" leisure fashion and light business series, with shopping centers as its main channel.

According to China's introduction, it will increase the number of light business series stores to about 100 by the end of the year.

If this part of the business performs well, it will bring new growth points to the group.

It is worth mentioning that after the China Daily, the group has been actively buying back.

As of September 5th, the group spent 70 million 914 thousand and 800 to repurchase 11 million 660 thousand shares, representing 0.97% of the group's total share capital.

The company uses real gold and silver frequently to buy back through the two level market, or is worth noticing.

After all, companies know best about their data and situations. Buyback is usually the best way to maximize profits.

Moreover, since August, it is not only China, but also fashion companies such as Si Jie, CABBEEN, Giordano and so on.

Many companies in the industry are buying back, reflecting their data from the side may be better than expected.

It shows that the group's dynamic P / E is 12.13 times, and it is still in a low position compared with its counterparts in Hong Kong stock market.

More interesting reports, please pay attention to the world clothing shoes and hats net.