Tianfeng Securities released a research report stating that it is initiating coverage of JNBY (03306) with a "buy" rating. JNBY is a leading Chinese designer brand fashion group with significant first-mover advantages and a focus on three global strategies. It is expected to have revenues of RMB 5.19/5.92/6.50 billion for FY24-26 respectively, with net income attributable to the parent company of RMB 840/960/1070 million and EPS of RMB 1.63/1.86/2.06 per share. The target price is HKD 19.3.
Tianfeng Securities' main points are as follows:
Building a diverse brand matrix.
Jiangnan Fashion was founded in 1997 and went public on the Hong Kong Stock Exchange in 2016. It is a influential designer brand fashion company. The company's main business is the design, promotion, and sales of fashionable outfits, footwear, accessories, and home products. The brand portfolio includes one mature brand, three growing brands, and several emerging brands.
Steady growth in revenue and profits, optimization of fee rates, and high payout ratios.
From FY19 to FY23, the company's revenue increased from RMB 3.358 billion to RMB 4.465 billion (CAGR of 7.38%), while net income attributable to the parent company increased from RMB 0.485 billion to RMB 0.621 billion (CAGR of 6.37%). This was primarily due to the growth in comparable-store sales in physical stores, the rapid growth of online sales channels, and the expansion of offline stores. In the first half of FY2024, with the overall growth in revenue and operational efficiency, all expense ratios decreased significantly.
In recent years, the company has used about 75% of its net income for shareholder dividends, leading to a high payout ratio.
The designer brand market is expanding with prominent head effects: 1) Scale: According to China Industry Research Institute and Co-Research Network, the market scale of China's clothing industry is RMB 2.6 trillion, and the market scale of designer brand industry is RMB 177.6 billion in 2022. We believe that the market scale of the designer brand industry will continue to expand with the growth of per capita disposable income, improvement of policy environment, and changes in consumption concepts. 2) Pattern: Currently, the pattern of the designer brand industry is relatively dispersed, with high barriers to entry, significant head effects, and first-mover advantages. JNBY, as the industry leader, will take the lead.
Driven by three strategies: design, multi-brand, and fan economy, the company is expected to maintain sustainable growth.
1) Design-driven: The company advocates original design, with a large investment in the design team and R&D capabilities. Its flagship brands have won several awards, and its brand concept and core values lead consumers to increase brand awareness.
2) Multi-brand-driven: The company currently has one mature brand, three growing brands, and several emerging brands. The diversified brand matrix targets different target customers, with mature brands as the core of revenue and growing brands showing faster growth.
3) Fan economy-driven: The company strengthens the membership system construction, enhances fan stickiness, and cultivates "fan economy." Through creating new consumption scenarios or product value-added services, intelligent channels have shown faster growth.