Trend Analysis Of China's Apparel Stocks

　 Hong Kong stocks reported on November 25th, according to Hong Kong media, more than 00448 local shares were sold on the "double dip" in the mid-term net profit of Han Deng (middle). On the other side, China's trend (market, information, commentary) (03818) the growth of orders has lost color, but the mainland sports stocks have fallen sharply, but the decline has not yet spread to other mainland stocks. Both are "selling shirts". Why are they so different? What are the prospects for stocks and sports stocks?

Local stocks continue to look good.

Local retail stocks have been a hot market this year, covering a wide range of products, including cosmetics, jewelry, watches and so on. Credit Suisse has written reports that local retail stocks are broadly divided into three categories: middle, low, medium and high grade, and luxury goods. From table 1, many local stocks belong to medium and high end retail stocks.

　　 Favorable environment for inflation and sales

Under the optimistic expectation of economic and personal income growth, the prospects for the retail industry are promising, and inflation is also a major driving force for the consumption of people (the value of holding money will be eaten up in an inflation environment). In fact, the inflation environment also has another advantage for the retail industry, that is, retailers will be more likely to raise their prices. Credit Suisse expects inflation in Hong Kong to rise from 2.8% this year to 5.3% next year, which is favorable for retail business.

The bank has concentrated on the performance of 18 local retail stocks in the past 10 years. It found that during the inflation accelerated period of 06 and 07, retailers had recorded nearly double turnover growth, and sales volume grew more strongly than luxury goods and medium and low grade products. In fact, whether inflation is beneficial to retail stocks depends on the company's ability to raise prices. Generally speaking, the higher the product scale and the stronger bargaining power, investors should concentrate on selecting higher grade stocks when picking stocks.

Inflation, however, is not entirely conducive to retail business, because operating costs will rise as inflation rises, and rents have always been a big cost for the retail industry. According to Credit Suisse, the consumer price index rose by 13% in the last inflation cycle in Hong Kong, but the retail rent rose by 43% to 55%.

Pay attention to rent trend in the future

Since the lease of local retail businesses is mostly 3 years, the lease signed during the 08 to 09 financial tsunami period will expire in the coming months, and the rent will increase substantially when the tenants renew their contracts due to lower rent. Among the three types of retail stocks, Credit Suisse refers to the highest cost of rentals for high end retailers (mainly shares) and high sensitivity to rents, so investors should pay attention to future rent trends.

Some stocks are still buying.

Credit Suisse has used the Price/Earnings to Growth Ratio (PEG Ratio) to measure the attractiveness of the valuation of shares. Investors can get PEG by dividing the PE of shares by predicting the profit growth rate. In short, PEG is more expensive than 1. If it is below 1, it will be a buy. According to the information released by Credit Suisse on the 11 th of this month, with the closing price of shares yesterday, the Joyce (00647), Giordano (00709) and I.T (00999) PEG were 0.37 times, 0.6 times, and 0.8 times respectively. In addition, Credit Suisse refers to jewelry and watch shares with investment value.

　 Mainland shares favored by big companies

As the market generally optimistic about the mainland industry, coupled with its Compound Annual Growth Rate (CAGR), 2010 sales and 2011 spring and summer orders are better than expected, many large banks have raised the target price of the mainland stock.

　 Li Bang (market, information, commentary) compound growth rate of 18%

Take Li Bang (00891) as an example, its business is mainly high-end men's clothing. Jian Yin international pointed out that from 2001 to 2008, its annual compound growth rate was 18%. It is expected that there will be a CAGR of 2009 to 2013. The bank also points out that by developing different brands, Li Bang helps to break into different markets to reduce risks. The proposed target price is 8 yuan, while Standard Chartered has raised its target price to 8.5 yuan (yesterday's closing price was 7.92 yuan).

BELLE profits continue to grow

Another mainland stock BELLE (01880), the main business is R & D, procurement, manufacturing, retail and wholesale footwear (about 60% of revenue) and sales sportswear (about 40% of revenue). Because the market is optimistic about the prospects of China's retail industry, and BELLE is currently the market leader of senior and senior footwear, Goldman Sachs believes that BELLE's profit can continue to grow for a long time. In fact, BELLE's same store sales in the first three quarters of this year increased by 18% year-on-year, higher than market expectations. Goldman Sachs also raised its target price from 15 yuan to 18 yuan (yesterday's closing price was 14.52).

Competitive strength of mainland sports stocks

Trends in China (03818) in the second quarter of 2011, only 2.8% of the orders were recorded year-on-year growth, compared with 11.8% in the first quarter of 2011 and 22.9% in the fourth quarter of this year. China's stock market plunged 12.6% yesterday, and bad news made the entire mainland sports sector lower. Anta (02020) and Lining (market, information, commentary) (02331) fell 5.78% and 3.35% respectively.

Growth trend reduction in China

The growth of orders in the "order meeting" has slowed down considerably, not because products are not popular, but rather a large accumulation of inventories. Management has therefore reduced orders to clean up inventories. The trend of mdrc's sharp reduction is expected to be 12% in 2011, and the net profit growth in 2011 is expected to be zero.

In operation, the company purchases inventory and resale it to customers for cash. The more cycles, the more times the company succeeds in doing business. Inventory turnover, sales cost, average stock, and average inventory = (beginning inventory + year-end inventory) 2 can calculate how many cycles the company has achieved in one year or quarter. The higher the number, the faster the stock will sell and earn more profits.

The large volume of stock will drag up the average stock value, thereby lowering the inventory turnover. According to the annual report of China's trend from 2007 to 09 years, its inventory turnover rate dropped from 8.61 times in 08 years to 6.9 times in 09 years, indicating that the number of profits earned through inventory turnover declined and profitability weakened.

Lining and Anta have their own worries.

Although Anta and Lining did not have a drop in inventory turnover, they also had their own worries. Goldman Sachs pointed out that Anta's number of branches is larger than that of its peers, and there is little room for further growth. As for Lining, the management announced earlier that it would increase the wholesale discount by 3 percentage points to 53% from 2011. Citigroup It is believed that this will reduce Lining's growth in wholesale revenue and profit in 2011.

The mainland sports brands face different worries because of fierce competition in the industry. Goldman Sachs pointed out that Anta has a saturation risk with other mainland sports brands. HSBC pointed out that the mainland's high-end sporting goods and needs and other international well-known. brand Competition is full of challenges in the short term. On the whole, there is a hidden danger in the prospect of sports stocks in the mainland.

China's retail industry has big room for growth.

The mainland's economic momentum has been improving, people's incomes have risen, and the consumption sector has been favored by many investors. Goldman Sachs believes that the United States retail The development of enterprises can be a reference for mainland enterprises, showing that China's retail sector still has much room for growth.

Reference to retail development in the US

Goldman Sachs pointed out that the retail sales of China's top 50 retailers accounted for only 5% of the total retail sales of the country. Compared to the 41% of the US, the retail industry in China has great integration space, and most of the retail industry integration in the past 30 years. Goldman Sachs therefore expects that the integration of China's retail industry in the next ten years may accelerate.

At present, China's retail enterprises have a market share of 1 to 2%. Goldman Sachs pointed out that US retailers such as GAP had double-digit growth before their market share reached 7 to 8%. The bank expects that leading enterprises in the mainland will develop along with this trend, for example, BELLE, the shoe leader in the mainland, is expected to have double-digit growth in the advanced footwear market. The growth potential also explains the current valuation of retail stocks in the mainland. The current forecast price earnings ratio is about 21 times, which is not far from the forecast price earnings ratio of the leading enterprises in the United States during the period of rapid growth.

However, investors still need to pay attention to risk factors, such as fierce competition in the retail industry, and real earnings growth can be slower than expected.