Huaxi Securities: Give Hongdou shares an overweight rating

2021-10-28Tang Shuangshuang of Huaxi Securities Co., Ltd. conducted a study on Hongdou shares and released a research report "Looking forward to the transformation and upgrading after cooperation with Junzhi", this report gives an overweight rating to Hongdou shares, and the current stock price is 2.89 yuan.

Hongdou Shares(600400)

Event overview

The company released three quarterly reports, in the first three quarters of 2021, the company achieved revenue of 1.619 billion yuan, down 4.7% year-on-year, and achieved a net profit attributable to the mother of 76.6685 million yuan, down 41% year-on-year. In a single quarter, 21Q3 Company achieved revenue of 587 million yuan, an increase of 23.24% year-on-year, of which the main garment business achieved operating income of 485 million yuan, an increase of 57.65% year-on-year; 21Q3 net profit attributable to the mother was 1.56 million yuan, down 94% year-on-year.

Analytical decisions:

After deducting the impact of 390 million yuan of epidemic prevention materials, the revenue in the first three quarters of 21 years increased by 23.99% year-on-year; of which the main clothing business achieved operating income of 1.412 billion yuan, an increase of 20.22% year-on-year. In terms of splitting, (1) men's clothing achieved revenue of 1.114 billion yuan in the first three quarters, an increase of 6% year-on-year, OEM processing achieved revenue of 298 million yuan, an increase of 142% year-on-year ;(2) directly operated stores achieved revenue of 350 million yuan, an increase of 751% year-on-year, franchise stores achieved revenue of 368 million yuan, a year-on-year decrease of 50% ;(3) online high growth: online / offline revenue of 305 / 1.107 billion yuan, an increase of 56% / 13% year-on-year.

The decline in the company's net profit was mainly due to the impact of the flood situation in Henan, a key sales area of the company, the impact of the epidemic in some cities in Jiangsu, the increase in the company's consulting expenses and R&D expenses in the early stage of high-end transformation and upgrading, and the reduction of epidemic prevention materials.

Investment advice

The company's management has undergone positive changes in the past two years, following the appointment of Wang Zong, who has rich experience in home, underwear and children's clothing management in 2020, on April 28, it was announced again that Ms. Dai Minjun, a director of the company, was appointed as the chairman of the board, and Dai Zong made great contributions to the rapid development of the foreign trade business and business sector of Hongdou clothing during his tenure as chairman of Hongdou International. In addition, several senior designers and craftsmen have joined Hongdou in June. At present, the company has signed a strategic consulting service agreement with Shanghai Junzhi Enterprise Management Co., Ltd. and hired it to provide strategic consulting services according to the company's development needs.

We analyze that the company's future highlights are: (1) online, the company expanded the live broadcast business, to create red bean 3D high elastic pants, small white T, light bullet knit shirts and other explosive products, and the company's new executives are expected to further increase the excavation of explosive models and strengthen category expansion after joining; (2) offline, the super shopping guide system is online, and newly hired Italian designers, since the autumn and winter of 20 products have been significantly improved in product design. Maintaining the 21/22/23 revenue forecast of 2.419/29.32/3.638 billion yuan, considering that the Q3 net profit is less than expected, the 21/22/23 net profit forecast attributable to the mother is lowered from 1.47/1.82/229 million yuan to 1.03/1.27/166 million yuan, corresponding to EPS from 0.06/0.07/0.09 yuan to 0.05/0.06/0.07 yuan, The closing price of 2.89 yuan on October 27, 2021 corresponds to PE of 64/52/40 times, respectively, maintaining the "overweight" rating. On January 25, the company announced the repurchase of 150-300 million yuan, and the price did not exceed 4.65 yuan / share. On June 30, 2021, the company completed the repurchase and has actually repurchased 58.97 million shares of the company's shares, with an average repurchase price of 3.15 yuan per share; previously, the company also repurchased 86.87 million shares with an average price of 3.55 yuan in August 2020, and the current stock price is inverted with the repurchase cost.

Risk Warning

Uncertainty affected by the pandemic; lower-than-expected recovery from same-store; systemic risks.

A total of 4 institutions have given ratings and overweight ratings in the last 90 days; the average target price of institutions in the past 90 days has been 3.63; the Securities Star Valuation Analysis Tool shows that Hongdou Shares (600400) has a good company rating of 2.5 stars, a good price rating of 2.5 stars, and a valuation comprehensive rating of 2.5 stars.