Heilan Home's clothing categories range from infants and teenagers, from men to fashionable women, Heilan Home is also transforming from "men's wardrobe" to "the family's wardrobe".
From the perspective of the diversified product matrix, Heilan Home seems to send investors a signal that it is "worth looking forward to".
However, in the view of Hua Jiejun, the story of the transformation of the whole category of Heilan Home is not sexy, and the confusing financial report data requires investors to be highly vigilant.
In the investment framework of Huajiejun, it is often divided into three steps, that is, the first step is to identify the true and false, the second step is to identify the good or bad business model, and finally choose the right time to buy. After passing the first two steps, Huajiejun will generally be selected into the self-selected stocks, and the financial report of Heilan Home makes Huajiejun stop at the first step.
When reading this article, Hua Jiejun recommends that readers remember the following three questions for reading and thinking.
1. Is it really needed for huge monetary funds to precipitate books?
2. How to digest the huge inventory?
3. Asset-light model and comprehensive transformation, is the story still sexy?
The mystery of 12 billion funds
From the book alone, Heilan Home's monetary funds can be described as very sufficient, and in recent years, monetary funds have maintained more than 10 billion yuan, reaching nearly 12 billion yuan in the first quarter of this year.
Generally speaking, the book precipitates such a huge amount of monetary funds, most companies will do cash management such as short-term financial management, etc., to improve the efficiency of the use of funds.
However, what puzzled Hua Jiejun was that in the case of such sufficient book funds, heilan home's short-term financial funds were pitifully small.
From the stock point of view, the company's trading financial assets at the end of the reporting period in 2020 were only 198 million yuan.
From the perspective of capital dynamics, if short-term financial management rolls, traces can be found in the cash flow statement. For the investment and recovery of wealth management funds, it is generally rolled over the two accounts of "cash paid for investment" and "cash received from investment recovery" of investment activities. However, the two subjects of Heilan Home have been rolling in single digits in recent years, which seems to be in great contrast to its tens of billions of book funds.
At the same time, it was found that the cash paid and recovered by Heilan Home's investment has fallen to single digits since the order of billions of dollars in 2017, and has continued to this day.
So is the book precipitation funds of the clothing industry not for short-term financial management? Hua Jiejun temporarily chose the seven wolves that were partial to men's clothing and compared with the Nine Mu King.
Through comparison, it was found that there were obvious differences between Heilan House and the Seven Wolves and the Nine Mu King. Taking fiscal 2020 as an example, the sum of the monetary funds and trading financial assets on the accounts of Seven Wolves, Jiumuwang and Heilan Home was 2.825 billion yuan, 1.194 billion yuan and 10.714 billion yuan respectively, while the cash received for the recovery of investment was 4.464 billion yuan, 3.075 billion yuan and 698 million yuan, respectively.
Heilan Home has a huge amount of book capital precipitation, not only has little financial management, but also shows that it is extremely in need of money.
In July 2018, Heilan Home raised 3 billion yuan for project investment through the public issuance of convertible corporate bonds, of which 1.95 billion yuan was used for logistics projects, 620 million yuan for industrial chain informatization projects, and 430 million yuan for Aiju Rabbit R&D office building.
It should be pointed out that for convertible bonds, if the shares are converted on schedule, the spot return will be diluted to varying degrees, which is obviously not good for minority shareholders.
In addition, about a year after the issuance of heilan home convertible bond project, the company spun off the Aiju rabbit business in May 2019. Subsequently, the company quickly raised 1.434 billion yuan of funds for Aijutu-related projects to supplement the liquidity of listed companies in perpetuity.
As for the rhetoric of supplementing liquidity, the company said that it was to improve the efficiency of the company's use of funds. However, Heilan Home's book precipitation of tens of billions of funds, short-term financial management is only lost, and the efficiency of the use of funds seems to be ignored by the company.
In recent years, the monetary funds of listed companies have been frequently thunderstormed, and the most notorious is not Liangkang (Kangdexin, Kangmei Pharmaceutical). How should investors view Heilan Home's monetary funds?
Guess one, is monetary money a time point?
By comparing the quarterly changes in Heilan Home's monetary funds in recent years, its monetary funds have shown a sharp increase at the end of the year. In addition, from 2016 to 2020, Heilan Home has regularly shown a sharp increase in monetary funds at the end of the year.
Does that peer also exhibit such characteristics?
Through comparison, it was found that the Seven Wolves and the Nine Mu King had not regularly shown a sharp increase in monetary funds in the fourth quarter in recent years, and only occasionally some fiscal years showed a sharp increase in monetary funds in the fourth quarter.
Guess two, do not do short-term wealth management, the yield of bank deposits is also considerable?
We use bank interest and monetary funds to roughly calculate the rate of return on their funds. We found that in 2018 and 2020, the company's yield performance was lower. Interest income and monetary funds over the years are as follows:
According to relevant information, since 2010, the benchmark interest rate of the RMB call deposit rate (7 days) has been between 1.35% and 1.49%, and has been 1.35% since July 2012. The call deposit is not a fixed term, but the depositor must notify the bank in advance that it is generally higher than the demand period and lower than the time deposit. In addition, according to relevant statistics, the average deposit cost of state-owned banks of listed companies is about 1.54%, and the average of joint-stock and urban commercial banks exceeds 1.86%.
Guess three, is the maintenance of monetary funds high to meet the needs of daily operating funds?
In 2020, Heilan Home's monetary funds exceeded 10.5 billion yuan. What is the minimum capital requirement for Heilan Home's daily operation in 2020?
According to the Interim Measures for the Administration of Working Capital Loans issued by the CBRC, the amount of working capital = the sales revenue of the previous year× (1 - the sales profit margin of the previous year) × (1 + the expected annual growth rate of sales revenue) / the number of working capital turnover.
According to this rule, according to the growth rate of -18.26% of actual revenue in 2020, heilan home's real capital demand in fiscal 2020 is about 5 billion-6 billion yuan. In addition, the company's Aiju Rabbit business was stripped out of the table, and the related fundraising project funds released more than 1.4 billion yuan. The company's book tens of billions of funds are obviously far more than the daily operation needs.
From the perspective of the company's dynamic cash flow, the cash flow of operating activities has performed super well over the years, and even as high as 3.4 billion yuan in 2019.
Whether it is static monetary funds or dynamic operating cash flow, it seems that the funds required for the company's operation do not need to maintain tens of billions of book funds.
Whether there is a problem with heilan home's monetary funds is at the discretion of investors. However, for the problem of monetary funds, Huajiejun reminds investors that they need to be vigilant in two aspects: one is that monetary funds are occupied; the other is to inflate monetary funds to cooperate with income.
For the appropriation of funds, Kangde Xin adopts the "modern means" of "capital collection" to raise the fraud of monetary funds and the occupation of funds of listed companies by controlling shareholders to a new height. Hua Jiejun here reminds the majority of investors that they need to look at the overall situation to see the financial report, that is, they also need to pay attention to the outside of the listed company. It is necessary to pay attention to whether there are money-burning projects outside the body of the listed company or whether the in vitro projects of the major shareholders have been "wasted materials", or the major shareholders have exposed the traces of lack of money (such as large-scale pledges, high debts outside the body, etc.).
There are various forms of capital occupation, such as transferring funds by investing in entities actually controlled by the controlling shareholder, such as investing in multi-layer limited partnerships, using bills of exchange transactions, or fictitious bills of exchange endorsement to transfer in and out, etc., to cover up the capital occupation of controlling shareholders.
It is worth mentioning that heilan home listed companies also have ship investment projects, Pegasus water city projects, shopping plazas and so on.
According to public reports, former chairman Zhou Jianping built a horse farm in Jiangyin, which is full of precious horse breeds from all over the world, and the entire cost costs billions, and the report pointed out that it once spent 1.6 billion yuan to build a horse farm.
For the combination of funds to do income, generally the purpose of financial whitewashing is to enlarge profits or assets to support stock prices and gain the favor of the capital market. While inflating income, in order to meet the accounting equation, enterprises need to inflate assets or undercount liabilities accordingly. Short selling agency GMT has questioned an a large amount of cash flow derived by ANTA Sports to match the inflated income.
Alternative destocking of 9 billion inventories?
From the perspective of asset structure, Heilan Home's monetary funds and inventories have remained high for a long time. In the past five years, the sum of Heilan Home's monetary funds and inventories has been between 62% and 72% of total assets. In the first quarter of 2021, the sum of monetary funds and inventories was 19.255 billion yuan, accounting for 64% of total assets.
Therefore, the core problem of Heilan Home is monetary funds and inventory.
In addition to the above monetary capital problems, Heilan Home's inventory problems have also been criticized by the market. Heilan Home's inventory exceeded 9 billion yuan at its peak, and it declined in the higher peak period of 2020.
The inventory of Heilan Home is divided into returnable and non-returnable.
In the returnable mode, the company signs a purchase contract with the supplier with the return clause of the unsalable goods, and after the product is sold, it settles the payment with the supplier month by month, and the product that has not been sold after the end of the marketable season can be cut and returned to the supplier after the label is cut, and the product bears the risk of slow sales. Such inventories are not subject to any impairment provision.
Under the non-returnable mode, the company signs a non-returnable purchase contract with the supplier, and settles the payment in accordance with the purchase contract, and the products that have not been sold after the end of the marketable season are not returned to the supplier, and the company bears the risk of slow sales of the products.
At the end of the reporting period in 2020, the balances of inventory with non-returnable clauses and inventory with returnable clauses were 3.574 billion yuan and 4.216 billion yuan, respectively, the proportion of the book value of the two items to the carrying amount of the inventory at the end of the period was 36.70% and 56.85%, and the combined book value of the two items as a proportion of total assets was 25.07%.
1. Cut the label to go to inventory
Although the returnable clause can avoid the problem of inventory impairment, it cannot avoid the problem of unsalable returns.
According to the available information, the return amount at the end of 2011 was about 240 million yuan, and in 2017, the return scale of Heilan Home's unsalable goods was 3.024 billion yuan, an increase of more than 10 times.
For returned goods and Heilan Home's own products, Heilan Home selects some of the suitable goods for secondary purchase. The products purchased for the second time are sold to the outside world under a brand in Hai after the standard is cut and changed. Haiyi products are re-divided into inventories after procurement, and are divided into warehouse age within one year within 12 months, and 12 months to 24 months after procurement are divided into 1-2 years.
Haiyi carried the problem of Heilan Home cutting the label to inventory, while San Kaino undertook the group purchase business of Heilan Home's professional clothing. However, San Keno's high gross profit margin but declining net profit margin are very puzzling to Hua Jiejun.
2. The mystery of profit
The company's main brand Heilan Home, its gross profit margin in 2020 is 35.99%, while San Kaino's gross profit margin is as high as 52.71%. Gross margin somehow reflects market competitiveness. This also indirectly reflects that San Keno's profitability is stronger than other entities.
In 2020, the overall net profit margin of listed companies was 14.96%, while the net profit margin of San Keno was only 3% in the same period. Although the gross profit margin of San Keno is the strongest among the brands, its net profit margin is actually lagging behind!
Flower Street is puzzled that San Kaino's gross profit margin in 2020 will enhance its net profit margin and decline. Its net profit margin plummeted from a maximum of 16% to a minimum of 3%, and its net assets plummeted from 1.48 billion yuan in 2015 to 289 million yuan in 2020.
From 2015 to 2020, San Kaino's revenue exceeded 11.7 billion yuan and cost more than 5.8 billion yuan, and whether its group purchase business can also effectively share the company's inventory pressure is unknown, but the abnormally fluctuating net interest rate is very puzzling.
It is worth mentioning that the subsidiary of Heilan Home has an inversion of revenue and net profit. At the end of 2020, its Jiangyin Heilan Home Apparel Co., Ltd. had revenue of only 458 million yuan, but its operating profit was as high as 2.117 billion yuan. This inverted imagination usually occurs in companies with diversified businesses, or is caused by the existence of other investment returns.
It's just that Flower Street is puzzled that the net profit margin of San Kaino, which has the strongest gross profit margin, has fallen sharply, and what is the real situation of the net interest rate of the main brand? Is it a sharp decline or an upswing? Where should investors identify?
The above is about the true and false questions of Heilan Home, and we will explore the quality of its model below.
The story is not sexy
When Heilan Home was listed on a backdoor listing, the first story told to investors was the story of asset-light operation at both ends.
Heilan Home will be the production link and part of the sales channels mostly or completely outsourced, the company's operations focus on brand operations, product design and supply chain management links, is a typical "light asset" operation. This model is known by the company as the "dumbbell" model.
For the upstream, that is, the purchase end, the payment of Heilan Home's goods is based on retail-oriented settlement of the payment, and the purchase contract with the return clause of the unsalable goods is signed. The essence of this model can be summarized as Heilan Home can not only occupy upstream funds, but also allow suppliers to bear the risk of return loss.
For the downstream sales end, mainly through the franchise store entrusted sales, partly through the mall store entrusted sales, franchisees bear the rent, decoration, labor costs and other large operating costs, while Heilan Home only exports goods and related management experience. The ownership of the goods is still owned by Heilan Home, and the company has also received a deposit from the franchisee. The essence of this model can be attributed to the fact that franchisees bear the main costs of offline operations, and Heilan Home can not only obtain the right to use the margin, but also share the related benefits generated by store operations.
When the products are selling well, Heilan Home may be able to maintain this community of interests (Heilan Home, suppliers and franchisees) with its strong ability to integrate resources. However, once the product is seriously unsalable, this community of interests composed of all parties may face challenges, and this hidden operational risk has to be paid attention to.
Heilan Home grew rapidly when it was listed on the backdoor listing, and then the growth slowed down significantly. In Huajiejun comparing the data of the past years, it was found that the two sets of key data diverged.
Group 1: Divergence between accounts payable and operating income;
The second group: the number of franchisee stores deviates from the revenue of a single store.
Accounts payable reflect Heilan Home's ability to occupy upstream funds. Before 2015, Heilan Home's accounts payable and operating income trended upwards, while after 2015, although its operating income continued to rise, its accounts payable declined year by year. Heilan Home's ability to occupy upstream funds is weakening, does this mean that there has been a "rift" in the community relationship in the upstream of Heilan Home?
From 2014 to 2015, heilan home increased its single-store revenue as the number of stores increased; after 2016, the number of stores increased year by year, but the overall trend of its average revenue per store was downward.
The revenue of the company's self-operated stores has also declined significantly.
According to the announcement, the average operating income of heilan home stores that have been open for more than 12 consecutive months has reached an average revenue of 21.98 million yuan in 2017, plummeted to 7.51 million yuan in 2018, 4.41 million yuan in 2019, and further decreased to 3.35 million yuan in 2020.
In addition, after September 2016, the company will no longer charge a franchise deposit for newly signed "Heilan Home" franchise stores and franchise stores with subsequent expiration contracts. This must not make Hua Jiejun wonder, without the blessing of the deposit, is the safety of the inventory entrusted by Heilan Home guaranteed to be guaranteed?
The loosening of the above two sets of key data seems to indicate that the first story may be difficult to impress investors.
Heilan House then began to tell a second story, turning from the man's wardrobe to the family's wardrobe.
During the 2020 reporting period, Heilan Home has heilan home, San Kaino, boys and girls, OVV and other clothing brands, including men's wear, women's wear, accessories, etc., and the categories are covered by almost all ages except for the elderly. Its San Kaino brand is a professional group buying business, and the rest of the brands are in the form of clothing chain operations.
Heilan Home store is still the main store. According to Baidu Map verification, the second most numerous brands are boys and girls (Baidu Map shows 1317 stores, with an average income of about 340,000 yuan per store), followed by Ying's Yeehoo (Baidu Map shows 267 stores, with an average revenue of about 2.35 million yuan per store). The revenue of these two companies has risen, but their losses are further expanding, with boys and girls expanding from a loss of 76.65 million yuan in 2019 to a loss of 113 million yuan, and Ying's expanding from a loss of 31.89 million yuan in 2019 to a loss of 57 million yuan.
In terms of income structure, the second largest income is San Keno.
However, San Keno's net profit continued to deteriorate, with net profit falling from $301 million in 2017 to $63 million in 2020.
It is worth mentioning that the former chairman of Heilan Home has abdicated and passed the chairmanship to his son. In the first annual report handed over by the new chairman, he put forward three major strategies of "multi-brand, multi-category and group". However, in front of the two mountains of monetary funds and inventory, can he continue to write the story of the clothing legend in Jiangyin Town?