In 2015, The Profit Growth Of China's Sports Apparel Enterprises Exceeded 20%

2015 China Sportswear The company achieved better performance, double digit income growth, and profit growth of more than 20%. Sales of more functional products drive profit margins. The rapid growth of e-commerce is beyond expectations. We expect diversification of channels to boost revenue growth. R & D spending has increased gradually, mainly for improving. Design And the enhancement of product functionality. Although the impact of a relatively high base on the 16 year revenue growth is expected to slow down, but we predict that with stable profit margins and brand / channel diversification driven, profits will continue to maintain a healthy growth of 10-20%. Our first choice in sportswear industry is 3813HK. Lining (2331HK).

　　 Key points of supporting rating

Gross profit margin and effective cost control: the overall gross profit margin increased by 0.1-2.0 percentage points in 15 years as a result of high average price of functional products and increased input costs. We expect continued brand investment to drive average price and sales volume. At present, companies are increasing R & D expenditure. We think this is very important for shaping brand image. And because the overall operating cost is well controlled, the operating profit margin is between 15-20%.

Robust industry growth: most of the 16 year 3 quarter orders growth in most companies slowed down compared with the first half of the year, mainly due to the relatively high base and slow growth of same store sales in the 4 quarter of 15, which made market expectations cautious. However, under the condition of strict inventory control and fewer stores, the order growth rate of 5-15% has been relatively steady. Most of the company's inventory sales ratio is controlled within five months. That is to say, the growth rate of orders is mainly driven by the improvement of product mix.

Optimistic about the positive progress of digital marketing: we are optimistic about the positive development of e-commerce, which is crucial to the establishment of an omnidirectional digital system. For example, XTEP's current e-commerce revenue growth has reached 10-15% (Lining is 8.6%). We expect that e-commerce will gradually become an important sales channel for special offerings and new products, and no longer serves the emptying of inventory. For example, Lining is working with Jingdong and millet to cooperate with Baidu and music TV 360 times. XTEP and SF EXPRESS cooperate to strengthen logistics and launch smart products.

Multi brand: in addition to channel diversification, we notice that the brand strategy adopted by the company helps to strengthen the professionalism or fashion of the sub brand. For example, Anta has Fila (high-end fashion) and Desanto (high-end outdoor sports), 361 of which have OneWay (high-end outdoor sports), and Lining has LNG (high-end fashion). At the same time, children's category is growing rapidly, which is the next generation of strategic layout.

Valuation

Our first choice in China's sports apparel industry includes Lining and Baosheng. We believe: 1) for Baosheng international, China's strong demand for Nike and Adidas products will continue to support the growth of sales revenue in the same store, and will drive the expansion of profit margins. New brand cooperation will become a new driving force for network expansion. 2) Lining's recovery process is slower than expected, mainly because the channel inventory is higher than the industry average level, but the logic of investment deficit is still in existence. We expect that the inventory and gross margin increase in 2016 will be improved significantly. 3) Anta's excellent execution and multi brand strategy will continue to drive steady growth in revenue and profitability, even though industry growth is slowing down. 4) for BELLE international, footwear business growth is expected to grow slower, but sports apparel business will achieve double-digit growth; 5) Shenzhou International product mix optimization and devaluation will support its double-digit revenue growth and profit margin expansion. The company is now planning to allocate more resources for women's underwear business, which has huge potential and is expected to boost future revenue growth.