Seven Wolves Maintain "Buy" Rating And Establish Direct Camp

　　 Continue to promote flat channels. Company around Distributor Two aspects of management optimization and steady expansion of Direct stores, and promote the integration of company sales channels.

Since 2008, the company has been promoting the flat work of the channel. The six major marketing management centers in East China, Southern China, North China, central China, Southwest China and Northwest China have been set up, and the promotion of dealer flat will effectively enhance the company's ability to control the channel and enhance its control over the distributors. At the same time, the company has also expanded its direct operation system, increased three sales subsidiaries in Wuhan, Xi'an and Shenzhen, and increased the company in Xiamen.

In December 31, 2009, the company had 3249 terminal outlets, a net increase of 480 compared to 2008, an increase of 17.33%, and channel development continued to be stable, and the total control effect was obvious. Among them, 220 direct and joint terminals, a net increase of 122 over 2008, and a growth rate of 124.49%. The construction of direct channel has become the focus of the company; 3029 agents terminal, a net increase of 358 over 2008, the growth rate is 13.40%, the growth rate has slowed down significantly. The company is committed to increasing the construction of large stores such as life hall and flagship store. In 2009, the life hall and flagship store were 34 and 311, respectively, which increased by 54.55% and 32.91% respectively compared with that of the previous year.

We believe that in 2010, the company will steadily push forward the upgrading and integration of distribution system channels, accelerate the construction of direct operation system, and continue to increase investment in living and flagship stores.

The brand is further broken down. We should further stabilize and expand the red label, green label and blue label (SWJEANS). Children's wear (SWKIDS), women's wear (SWLADIES) and Saint worth (SEPEWOLVES) six major products. In 2009, the green label was 87.24% and the blue mark was 6.54%. The blue label series developed rapidly in 2009. With the continuous expansion of the product's fullness, the blue label gradually expanded its separate sales channels. During the reporting period, there were 115 blue label stores. In the future, the blue label will contribute to the company's main sales revenue with the red label green label.

The company breaks through the long silence of the brand. Endorsement Strategy, enable Honglei Sun, Hu Jun, Zhang Hanyu, Chang Chen and other four red emperor to join in the heavy attack, and jointly deduce the seven wolves' pursuit of life men's more than one side of the brand values. At the same time, it puts forward the concept of "fame hall" innovatively, clearly defines the identity of spokesperson and group concept, precipitates the brand spokesperson assets, and widely accepts celebrities from all walks of life in the "Hall of fame", and brings together a large number of famous international personalities, such as Honglei Sun, Hu Jun, Zhang Hanyu, Chang Chen, Lu Chuan, Duan Yihong, Hai Yan, Hai Yan, and so on.

Earnings forecasts and investment proposals. We believe that with the breakthrough of 3000 channels, the scale effect is constantly emerging, the three cost rates in the future will probably gradually decline, further enhance the level of profitability. The continuous optimization of channels will gradually recommend flat management, and will also enhance the overall management level, which will bring about the improvement of net profit margin. We continue to look forward to the development trend of the seven wolves. We raised the earnings per share to 2010-2011 yuan per year to 0.94-1.24 yuan (pre forecast 0.88 and 1.16 yuan respectively). In 2010, PE was 30.26 times, relatively reasonable, but taking into account the company's sound operation and good development trend, we believe that the seven wolves can be regarded as a steady investment variety and maintain a "buy" rating.