Xin He Shares Core Brand Competitiveness Continued To Decline

The China Securities Regulatory Commission announced the latest list of IPO pre disclosure, and pleased the Limited by Share Ltd (hereinafter referred to as "Xin he shares") to be listed on the Shanghai Stock Exchange. The issue does not exceed 110 million shares. The total share capital after issuance is not more than 430 million shares, and the sponsor is the state securities Limited by Share Ltd. Hsing ho shares formerly known as Hsing Ho (Xiamen) Garments Co., Ltd., founded in June 2006, in April 2012 the company completed the share reform, officially renamed. Xin He Limited by Share Ltd, a Sino foreign joint venture Limited by Share Ltd, has a registered capital of 320 million yuan.

Core brand decline

There are many brands of Xin he shares, among which "JORYA" and "JORYA weekend" are the core brands of Xin he shares. In the prospectus, Hsin ho shares said that the above two brands are "the first group of independent high-end women's clothing brands in China, and to some extent, have the ability to compete with the international first and second tier brands in the domestic market".

During the reporting period, the total revenue of two brands accounted for about 45% of the main business revenue. However, when I browse the official website of "JORYA", I find that the number of "JORYA" shops is decreasing rapidly. Now the number of shops is 154, but the prospectus shows that the number of "JORYA" brand shops is 191 at the end of 2013. In fact, in recent years, the two core brands have already shown up. Declining trend 。

During the reporting period, the number of "JORYA" production warehouses was 770 thousand, 680 thousand and 530 thousand, respectively. The number of "JORYA weekend" warehouses in the same period was 390 thousand, 380 thousand and 200 thousand, respectively, showing a trend of significant decrease, and the decreasing proportion was increasing year by year. As the number of warehouses decreased significantly, sales volume was equally unoptimistic. During the reporting period, the number of sales of "JORYA" was 490 thousand, 700 thousand and 600 thousand, respectively. During the same period, the number of sales of "JORYA weekend" was 200 thousand, 380 thousand and 270 thousand respectively. In addition, the new garments of the two brands are decreasing year by year. During the reporting period, the number of clothing styles designed by Hsin ho shares for "JORYA" and "JORYA weekend" was 759, 823, 546 and 667, 687 and 450 respectively.

If the core brand continues to decline, it may lead to a decline in Future Ltd performance.

Risk of declining operating performance

Company operation during reporting period achievement Under the influence of macroeconomic downturn and cost and cost increase, the company's operating profit and operating profit rate in 2012 and 2013 showed a downward trend compared with that in 2011. In addition, in 2013, the net profit and net profit rate of the company decreased sharply compared with the previous two years, due to the effect of the preferential tax policy of enterprise income tax. Due to the macroeconomic downturn, the rise in costs and expenses and the impact of corporate income tax, Future Ltd's operating profit and net profit will not continue to decline, even if its operating profit will fall by more than 50% over the previous year.

The risk of inventory impairment. At the end of 2011, the end of 2012 and the end of 2013, the book value of the company's stock was 537 million 671 thousand yuan, 476 million 6 thousand and 300 yuan and 394 million 358 thousand and 700 yuan respectively, accounting for 26.47%, 30.93% and 21.71% of the total assets in the same period. The company has drawn up a prudent policy of inventory depreciation. As at December 31, 2013, the provision for inventory depreciation was 413 million 175 thousand and 700 yuan, accounting for 51.17% of the book balance. The size of the inventory will occupy the company's working capital and reduce its operational efficiency. If the company fails to accurately grasp the changes in the fashion trend of women's clothing or the adverse changes in the market situation, it may lead to a weak sales of the company's products and a low marketability, which will have a negative impact on the company's business performance.