Kkyi Securities: China Led The Men's Clothing Industry &Nbsp; &Nbsp; Recommended Increase.

　　 China Lee Founded in 1995, Popular men's wear brand In 2009, the market share was 4.2%. The company provides high-quality men's clothing, its own brand LILANZ specializes in a more mature customer market, while the sub brand L2 caters to the young style of 20-30 years old. By the end of August this year, the company has 2674 retail outlets in 31 provinces, mostly in the second to four tier market. The main products include suits, T-Shirts, trousers, accessories and so on. 60% of the revenue comes from business casual wear categories. From the product composition, tops, trousers, suits and accessories contributed 69%, 20%, 9% and 2% of the first half revenue respectively.

　　 Men's clothing market is expected to grow strongly in the future

According to Frost & Sullivan estimates, in 2009, the size of China's men's clothing market reached 44 billion US dollars, and in 2013 it was expected to reach US $84 billion, showing a compound annual growth rate of 18%. Business casual wear accounts for 41% of the total market value of men's clothing in 2008, and is expected to grow by 44% in 2013. With the increase of urbanization and income in the two or three tier cities, Chinese men became richer and began to pay attention to appearance and preferred high quality and popular fashion styles. As Chinese consumers are getting richer, they are more concerned about the brand and quality of clothing they choose.

　 Gradually expanding the market in the scattered men's wear market.

China's men's clothing market is low in concentration, and no leading industry has yet to emerge. The top ten brands account for about 30% of the total market share. Therefore, we believe that the main men's clothing companies with stable brand strategy and effective marketing practices will continue to expand their market share in the next few years, especially those of the top three companies, namely 35.30,0.37,1.06% and Septwolves, and 3.4% of the top 3.4% companies in 2008.

In order to enhance the brand image of LILANZ, the company hired Chen Daoming, a well-known mainland actor, to endorse. Most consumers think LILANZ brand is mature without losing popularity. At the same time, Daniel Wu endorsed the new group second brand L2, specializing in 20-30 years old between the younger customer market. The characteristics of these two endorsements stars are different. We think each characteristic is enough to represent the individual styles of the two brands, so it will effectively enhance the product image.

　　 Publicity can enhance pricing power

Due to the successful increase of wholesale prices in the past few years, we believe that wholesale discounts are expected to remain stable at 40% of the retail price in the future. In 2008 and 2009, the average wholesale price will increase by 12-18%. In the future, it is expected that the price will continue to rise with higher visibility. {page_break}

　　 Pricing strategy caters to mainstream consumers in mainland China

Li Lang specializes in middle class clients. In the second half of the year, the company launched the sub brand L2, playing the main role of young customers between the age of 20-30. The product range is mainly smart casual clothing. At present, the company has 55 L2 stores in the first tier cities. The price band is between 400-1500 yuan (RMB, the same below). However, considering the start-up cost derived from the new brand, we estimate that the company lost 20 million yuan in 2010 and is expected to turn a profit in 2011. The positive expansion plan and the sharp increase in orders will help to maintain high growth in same store sales.

This year, strong orders grew and store sales grew at a high growth rate. Orders for the winter trade show grew by 33% over the same period last year, while the autumn trade show grew by 25% year-on-year. Sales in the same store grew by 15% in the first half of October this year, and the growth rate is expected to maintain a similar rate in the light of the fact that more stores will be opened in the two or three tier cities.

　　 Profit growth is expected to increase in 2010.

2010 in the first half of the year (fiscal year ended June), its revenue was 787 million yuan, up 31.1% over the same period last year. We expect revenue growth in 2010 and 2011 to grow by 25% and 30%, respectively, with the growth of strong orders and high unit prices. The gross profit margin in the first half of this year was 34.7%, which was 29.5% higher than that in the first half of last year.

The gross profit margin is expected to reach 37.5% with the expansion of the economic scale, with a 20.3% interest rate, which is better than that of the first half of last year due to further expansion of gross margin and leverage. However, the company's self assessment of the launch of the new brand L2 resulted in a loss of 20 million yuan. Earnings per share were 11.7 yuan in the first half. We estimate that earnings per share in 2010 and 2011 were 0.38 yuan and 0.48 yuan respectively.

　　 Company evaluation and investment suggestion

For the first time, we rated Li. Increase Holdings "And the target price of 12 months is 13 yuan, which implies 27 times earnings in 2011, equivalent to 1 times earnings growth. We believe that the company is well positioned and will grow significantly with its strong reputation, further expansion of the market share, increased gross margin and complete sales network. We believe that the target price valuation multiplier and the same growth kinetic energy of the same industry should be reasonable.