Semir Clothing: Casual Wear Slowdown Results In Less Than Expected Performance

Rating changes: maintenance (first time) rating

Net profit in the first three quarters increased by 26.17% over the same period, and Q3 revenue and net profit growth dropped.

In October 28th, the company released the three quarterly report: the first three quarters.

From the quarterly growth rate, the three quarterly report dropped significantly over the Q2, of which three quarterly earnings were 2 billion 223 million, up 22.47% over the same period last year. Net profit was 371 million, an increase of 22.86% over the previous year, and EPS0.55 yuan per share.

At the same time, the company announced that the annual net profit growth of 20%-50%.

Gross profit margin increased three quarterly reports, increased management fees and increased impairment losses.

The first three quarterly gross profit margin of the company was 36.44% (increased by 1 percentage points); the selling expense rate was 11.23% (1.58 percentage points higher than the same period last year); the management fee rate was 2.80% (a slight increase of 0.09 percentage points); the loss of assets impairment in the first three quarters was 85 million 180 thousand, an increase of 81% over the same period last year.

Among them, we estimate that the main factor that drives the gross profit margin is product price increase, and the main factor that drives sales cost is the purchase.

Specific to the three quarterly report, gross profit margin is 36.15% (+1.62%); the selling expense rate is 9.94% (+1.51%); the management expense rate is 2.05% (-0.32%); as a result of the increase in inventory and receivables, the loss of assets impairment is 56 million 840 thousand yuan, up 129% over the same period.

Slow growth of leisure wear dragged down the company's overall revenue growth

In the first three quarters, we expect only 25% of casual wear SEMIR, while Bara's revenue growth is still around 50%.

The main reason for dragging down the growth of SEMIR revenue is the obvious diversion of women's clothing: Semir brand men's clothing is still relatively strong, while women's clothing is obviously divided by H&M and ZARA in the first tier market. The three or four line market is obviously affected by other popular low-end brands, which leads to a gradual decrease in women's clothing sales.

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We believe that the extensive growth of SEMIR's main brand relying solely on rapid expansion and channel driven has ended. The development of the sub brand has been pformed to lean management and upgrading.

Company in

Investment advice

In view of the three quarterly report lower than expected, we lowered the performance growth rate in 2011 and 2012. We expect revenue of 84.4, 109.7 and 14 billion 30 million in the 2011-2013 year. Net profit is 13.39, 18.22, 2 billion 361 million, EPS yuan 2, 2.72 and 2.72 yuan, corresponding to PE24.7, 2.72 and 2 times.

Although the three quarterly performance is lower than the market expectations, the company still has some bright spots that deserve market attention, such as the high growth of children's clothing, the cash on the account, the possibility of developing new brands and the support of franchisees, and the gradual improvement of Semir brand women's clothing. If we do not consider the new brand's expansion and short-term cost burden, and the increase in sales expenses brought by the buying shop, we can still achieve a 30% compound growth rate based on the original two brands, and maintain the "recommended" rating.