American Apparel: The Stock Will Be Reduced By 15% In The Future, And The Gross Margin Will Rise.

In 2011, the operating income reached 9 billion 945 million yuan, an increase of 32.59% over the same period last year, and the net profit of shareholders belonging to the listed company was 1 billion 206 million yuan, an increase of 59.14% over the same period last year, achieving a profit of 1.20 yuan per share, which is in line with our expectation. The company plans to send cash 0.84 yuan per share in 2011, with a dividend yield of 3.63%.

In 2012, 1Q realized operating income of 2 billion 639 million yuan, an increase of 27.17% over the same period last year. The net profit of shareholders belonging to the listed company was 237 million yuan, an increase of 16.90% over the same period last year, achieving a profit of 0.39 yuan per share, which basically met our expectations.

Because of the steady price of cotton, the prices of products in 2012 were unchanged from last year, 1Q in 2012.

A drop of 3 percentage points was mainly due to increased inventory digestion and increased sales discounts at the end of the year, making profit growth less than revenue.

From 1Q

The amount is 9% lower than the end of 2011.

At present, the old stock before 2010 has been digested fairly well, most of which are stocked in 2011 and new products in spring and summer in 2012.

The company thinks that the stock will be reduced by 15% to 2 billion yuan in the future, and the turnover time will be reduced to about 100 days, which will be a reasonable standard.

So it is estimated that 2Q will remain the main stage of inventory digestion in 2012. The gross profit margin of 2Q will also decline year by year, and the gross margin will rise in the second half of 2012.

According to the previous orders in 2012 (6 times a year), the growth rate was basically 20%, considering that the proportion of spot compensation increased from 20% to 30% this year. The annual revenue growth is expected to be around 25%.

According to the exhibition shop plan, the growth rate of 20% shops remained in 2012.

We expect net profit of 1 billion 480 million yuan and 1 billion 880 million yuan respectively in 2012 and 2013, an increase of 22.74% and 27.01% over the same period, corresponding to EPS of 1.473 yuan and 1.871 yuan respectively.

At present, the PE corresponding to the stock price is 15.7 times and 12.4 times respectively, giving investment advice for buying.

Risk warning: 1.ME&CITY's market recovery is lower than expected; 2. inventory digestibility is lower than expected; 3. executives' risk reduction of lifting shares.