Jinwu Financial News | According to Guoxin Securities Research, China Lilang (01234) is mainly engaged in sales of commercial menswear brands. In 2023, the company's revenue increased 14.8% to 3.54 billion yuan, and net profit increased 18.4% to 530 million yuan. Among them, main series/light business revenue increased 11%/35%, respectively. Gross margin increased 2.2 percentage points to 48.2% year over year, due to inventory reserves of 26.66 million yuan and no distributor rebates. Sales and management expenses increased by 0.6 percentage points due to an increase in the share of light businesses, mainly direct management, and an increase in marketing investment. In addition, other revenue decreased by 0.9 percentage points.
According to the bank, the company's products are highly competitive, and the results of channel transformation are gradually showing. The original ratio of products was 75%, and the newly upgraded water-repellent down jacket 2.0 was launched during the year, driving the company's down jacket sales to increase by 30%. During the epidemic, light commerce was transformed into self-operation, and the main series was transformed into consignment sales to effectively achieve inventory interconnection and operational efficiency improvement. In 2023, about 40% of the main series of dropshipping stores contributed more than 60% of revenue; light business revenue increased 35% year-on-year, and profits have been achieved. Among them, Light Commerce opened 17% net stores throughout the year, and store efficiency improved rapidly.
The bank said that with a weak recovery in consumption in 2023, the company still achieved double-digit growth and increased profit margins, while improving inventory health. Looking ahead to the medium to long term, the results of the company's channel transformation into self-operation and consignment sales are gradually showing. New retail and light businesses still have a lot of room for growth, and are expected to maintain steady growth in the future. Since 2023 net profit was slightly better than expected, the profit forecast was slightly raised. Net profit for 2024-2026 is expected to be $5.9/68/750 million (previously 2024-2025 was $588/660 million), up 9.6%/13.7%/11.6% year on year. After the valuation switch, the target price was raised to HK$5.2-5.5 (originally HK$4.8-5.0), corresponding to 9.5-10xPE in 2024, maintaining the “buy” rating.