Smith Barney Clothing: 2011Q1 Revenue Increased By 27% Over The Same Period

2011Q1 revenue increased by 27% over the same period, resulting in sales promotion due to diversification of products and channels, and increased sales discounts to boost sales growth. There are several main reasons for the promotion of income: (1) the products of the company form a multi brand, multi series, three-dimensional structure, and the product richness and fashion are greatly improved; (2) the channels are developing rapidly, and the forms of opening stores are more diversified, increasing the number of boutiques which only contain some products, increasing the number of shopping malls and children's clothing stores; (3) in 2011, many new shops have been gradually matured, so that the company's income has maintained a relatively rapid growth in the overall scale.

The increase in discount rate has led to a certain decrease in gross margin, and net profit growth is lower than income growth. The gross profit margin of the company decreased by nearly 3 percentage points, down from 45.86% of 2011Q1 to 42.9%. On the other hand, the company continued to strengthen the cost control and control, the three period of the cost rate has a certain decline compared with the same period last year. The company will continue to implement a higher discount rate this year to digest terminal inventory, and the gross profit margin will be affected. Inventory level further declined, the first quarter inventory digestion 240 million, 9% lower than the beginning of the year, stock structure continued optimization, 2011 and before further digestion of goods. The cash flow situation of the company has improved significantly, and the net cash flow of operating activities is nearly 1 billion yuan, which is significantly improved compared with the net outflow of about 7000000 in the first quarter of last year, of which the cash inflow of goods sold is 2 billion 971 million yuan, which is obviously higher than that of the company's revenue. At the same time, we try to digest the inventory, strictly control the production scale of new products, and only 1 billion 65 million of the cash flow of goods purchased, which is 1 billion 507 million lower than the operating cost.

In 2012, the efficiency of newly opened shops increased and the +MC brand of children's clothing was more vigorous. The income level still maintained high growth, but the decline in gross margin would drag down the net profit growth rate. The company's product range is more fashionable and rich, and it is expected to make more efforts to maintain high performance growth. The greater discount intensity may affect the gross margin level. The company will continue to strengthen cost control and maintain a reasonable level of cost.

Investment rating: EPS is expected to be 1.46/1.90/2.32 yuan in 12/13/14, 22 times PE for 12 years EPS, target price of 32.12 yuan, and strong recommendation rating should be maintained.