This Year'S Lining Group'S Top Priority Is To Maintain Profitability.

After a strong 17.2% increase in revenue,

In the 2015 fiscal year of 2331.HK, the net profit of 14 million 300 thousand yuan (RMB) has been realized since the 2012 fiscal year.

Lining, executive chairman and interim CEO of the group, said in a performance press conference that the group's top priority this year is to maintain profitability.

At the beginning of January, when Lining issued a profit preview, he expected the profit and loss to be flat throughout the year. Now the net profit of 14 million 300 thousand yuan is better than that of the group. In the 2014 fiscal year, the Group recorded a huge net loss of 781 million 500 thousand yuan.

The core profit, EBTIDA, has also increased from -4.562 billion to 394 million yuan.

Thanks to e-commerce sales skyrocketing 95% and core Lining

The recovery of the group increased from 6 billion 47 million 200 thousand yuan in the previous year to 7 billion 89 million 500 thousand yuan.

The Lining brand, which accounts for 98.3% of the total, began to grow steadily in the second half of 2014. In 2015, the revenue increased by 17.5% to 6 billion 971 million 900 thousand yuan, which was mainly due to the rise in the price of orders, the sales of all kinds of products, the increase in electronic channel sales, and the growth of direct sales outlets and same store sales. Among them, the same store sales had been growing steadily in the four quarters, and the annual growth rate of same store sales was one digit.

However, as the fourth quarter sales growth in the same store declined from the median figure in the three quarter to the low single digit market, the market worried that Lining sales would slow down again.

Ceng Huafeng, chief financial officer of the group, pointed out that the growth rate slipped because of the exceptionally warm weather. The same store sales have improved in the first two months of this year, and the median growth rate is expected to be recorded in 2016.

Chairman Lining revealed that the sales of the mainland's e-commerce channel increased from 4.9% to 8.6% last year, and he pointed out that the gross profit margin of the electricity supplier business was higher (slightly less than 50%), and the profit generated by the brand was two times of that of the entity channel.

According to category, 24.5% sales growth, footwear sales of 3 billion 411 million 500 thousand yuan to exceed clothing to become the largest category, clothing sales increased 10.9% to 3 billion 118 million 300 thousand yuan, and sales of equipment and accessories also rose 16.1% to 442 million 100 thousand yuan.

Last year, Lining brand launched the first joint millet.

The group said that its sales reached 300 thousand from the end of July to the end of the year. This year's brand plan continues to introduce new smart running shoes, and it may also introduce intelligent products for basketball, badminton and fitness.

Gross profit margin increased slightly by 10 basis points to 45% throughout the year.

Total inventory value fell 25.6% to 959 million 700 thousand yuan over the same period.

Working capital improved significantly and cash turnover period shortened by 26 days.

Operating cash flow improved over 1 billion yuan to 687 million yuan.

In 2015, Lining re expanded the sales network, with a net sales increase of 507 sales points throughout the year, meeting the established target. The sales outlets and distributors' sales sites accounted for 313 and 194 respectively. This is the first time that dealers' sales outlets have resumed growth since 2011.

By the end of the year, the total number of sales outlets increased to 6133.

The group pointed out that in 2015, the support of national policies for sports has created a favorable environment for the development of the industry as a whole. At the same time, the participation of consumers in sports has been increasing with increasing popularity and the popularity of the two major factors has promoted the sporting goods industry in China to maintain a favorable trend in the overall downturn of the consumer goods sector.

Lining's main domestic competitor, Anta sports (2020.HK), has increased 24.7% to 11 billion 120 million yuan in annual revenue. Driven by children's clothing and e-commerce, it has become the first Chinese sporting goods group with a revenue of tens of billions, and its net profit has risen 20% to 2 billion 41 million yuan a year.

The smaller brands of the same industry, 1361.HK, and XTEP International (1368.HK) net profit respectively increased by 30%, while PEAK sports (1968.HK) net profit increased by 28%.

The group revealed that orders for orders in the three quarter of 2016 were 10%-20% low growth, slightly slower than the two quarter 10%-20% growth.

Ceng Huafeng, chief financial officer, points out that the group's revenue growth target is double digits this year, while operating expenditure is expected to grow to a median figure. However, the group has already strictly controlled the costs. For example, last year, advertising sponsorship dropped significantly, and the share of distribution expenses and administrative expenses dropped sharply.

This year's group capital expenditure budget is 3-3.5 billion yuan, basically flat in 2015, including a net increase of 300-500 sales point expenditure, about half of the new sales point is group self.

President Lining hopes to complete the pformation in two or three years through direct retail expansion and electricity supplier growth, when the proportion of direct retail business will increase to 50%, and the electricity business channel will account for 20%. He said that the group pformation has only completed 30%.

As a result of continued losses in 2015, the group maintained no dividend payment.

Ceng Huafeng, chief financial officer, said that the group would continue to make profits before resuming dividends, and this year it has yet to decide whether to pay dividends.

Lining (2331.HK) closed at HK $3.71 on Friday, down 0.54% from a day ago. The stock has fallen 11% since 2016, and the 5.5% decline in Hang Seng Index.

After the annual results were released, only Citigroup Inc. (NYSE:C), Citigroup raised the target price of Lining (2331.HK), from HK $5.25 to HK $5.53, and maintained a "buy" rating.

The bank pointed out that Lining has strengthened the inventory channel, and the dealer's cash flow and profitability have been improved, and the sales performance of the electricity supplier is bright, so we have confidence in its profit and progress.

However, Fu Rui and Da he both lowered the target price of Lining (2331.HK), down from HK $4.1 and HK $4.6 to HK $3.9 and HK $4.2 respectively, and two brokerages maintained their "hold" and "buy" rating respectively.

Credit Suisse Group AG (VTX:CSGN) Credit Suisse also maintained a target price of HK $2.1 and a "sell" rating unchanged.