How Far Is The Rebirth Of Lining From The Nike ADI In The Tide Of Chinese Goods?

Lining's rebirth in Nirvana tide

Lining's market position in China's sporting goods is much more than that. According to the market share, it ranks second. But because Anta has the influence of the Fiji brand, if it is only the influence of the main brand, Lining is undoubtedly the first sign of the domestic sports brand.

Lining was founded in 1990 by Jianlibao group, and was formally renamed in 1994. In the early days, we decided on the general direction of sporting goods, and began to design and develop our own brands. Through 1992, 1996 and 2000 three Olympic Games, the status of "national sports brand" was determined.

After entering 2000, Lining entered a period of rapid development and was listed on the Hong Kong Stock Exchange in 2004. After listing, Lining continued to expand stores nationwide, expanding by more than 900 a year before 2009. The company's revenue growth also reached an average of 34% this year, the highest in the domestic sportswear shoes market share of nearly 10%, more than Adidas, second only to Nike.

Perhaps it is too much expectation. Lining's "master" has begun to gain more criticism in 2008, and the biggest criticism is that the product is "too plain and lacking in characteristics". This also makes the new generation of NBA know how to talk about the colorful youth, while ignoring the Lining brand. And Adidas, Nike and other international big names are always on the top of design and stars.

After 2010, the level of domestic consumption is also recovering. More and more wealthy consumers are also dissatisfied with the "rustic" of domestic goods. Lining, a former loyal consumer, began to defer, which made Lining lose 2 billion in 2012 and fell to the bottom. Anta, who had never looked at it before, also surpassed Lining in that year.

Next, brand remolding is imminent. After 2010, Lining underwent two adjustments and reforms. In addition to repositioning the product, it also introduced external strategic investors to reform the products, channels and management in all directions.

The real turning point took place in 2015. In addition to streamlining costs and increasing efficiency in operation, Lining kept pace with the development of the Internet, from the traditional "sports equipment providers" to the "Internet + sports life experience". At the same time, from the beginning of the design, the product was reinvented and dug up, and at last it gradually returned to the market. In 2015, the company lost its profits, and its revenue and profits grew rapidly in 2018.

Nowadays, Lining has brought the "tide of domestic goods" under the promotion of consumption upgrading, forming a certain scale and trend online and offline.

Center of gravity shift Lining no longer "single foot" forward

2018 annual report shows that Lining's revenue reached 10 billion 511 million yuan, an increase of 18.4% over the same period last year. Net profit increased 39% to 715 million, net interest rate increased from 5.8% to 6.8%, gross margin increased from 42% in 2015 to 48.1%.

Lining's main source of income is footwear and clothing. Early footwear is dominant, and in recent years, the proportion of clothing revenue has been rising. In 2018, footwear accounted for 43.8% and apparel was 50.6%. The four core categories of the company are basketball, running, training and sports fashion.

On the other hand, the company's early reliance on distributor channels has gradually shifted to self employment. The proportion of self retailing has increased from 12.8% in 2008 to 29.8% in 2018, and the distribution of store revenue has even dropped to half and half.

In recent years, the sudden rise is the electricity business, since the 2015 annual report began to record separately, the electricity business channel revenue share has increased from 8.6% to 21.1%. This growth is also the most obvious growth of Lining in recent years.

In addition, the share of the company in the international market is still low. Only 2.4% of revenue in 2018 came from the international market. Tiger Group's investment and research team believes that this is closely related to the internationalization of the brand. Although it is already the best among the similar products in China, the gap is quite small compared with other international sporting goods giants.

In terms of cost, gross profit margin slowly increased, indicating that the proportion of high-end products is also rising. The expense rate of advertising expenditure has dropped significantly. On the one hand, the competitiveness of products has been continuously strengthened, and on the other hand, the brand image has been constantly rising. The proportion of advertising expenses to main business income has dropped from 20.3% in 2014 to 10.4% in 2018.

At the same time, the company's inventory structure has been improving, and the inventory turnover days in 18 years are 78 days, down 2 days compared with the same period. The turnover days of accounts receivable also fell from 70.4 days in late 2014 to 35.4 days at the end of 2018. Total assets turnover increased from 1.12 in 2014 to 1.31 in 2018.

At the same time, the proportion of new products in inventory within 6 months is gradually increasing, while the retention rate of new products on the channel side has stabilized in 2017. Tiger Group's investment research team believes that this means that the current consumption of new products is faster, and the rhythm of users accepting Lining's new products is faster and faster.

"Chao chao" VS Nike, Adidas

Although clothing is already a relatively mature industry, the compound annual growth rate is only 0.5% in the past 5 years, but the sportswear market still has strong growth momentum, with a compound annual growth rate of 4.1%. Although this figure is not as large as Internet Co's growth rate, it is quite good compared with most countries' CPI, global GDP growth and the growth of many consumer company, so its proportion in clothing products has also increased year by year.

China is the main growth market for sports apparel products, rising from about $20 billion in 2014 to US $40 billion in 2018, with a compound annual growth rate of nearly 10%, which is higher than that of other countries. It is estimated that the average annual growth rate in the next 5 years will be around 10%, higher than the global average.

Although technical barriers to sports production are not very high, brand building is not overnight. Therefore, the concentration of this industry is relatively high. According to the data in 2018, the top 10 of the enterprises accounted for 70% (CR10 70%).

For the sake of seniority, Nike and Adidas are in the leading position both internationally and domestically. In 2018, the market share of the two companies reached 27%. Among them, Nike has a compound annual growth rate of 6.5% over the past 2015-2018 years and a compound annual growth rate of 12.6% over the same period of Adidas. The products of the two companies are rich in "fashion" and "technology" elements, which can satisfy consumers' aesthetic requirements and fulfill the requirements of sports.

Tiger Group's investment research team believes that another advantage of the top brand enterprises with obvious brand effect is higher profit margins. Both companies are bloodletting in the star market in a bid to detonate market concerns. The individualized enthusiasm, coupled with the company's marketing strategy, makes consumers resist incompetence.

At the same time, another sporting goods giant Anta in China went with Lining. In the years when Lining was at its lowest point, Anta succeeded in surpassing Lining as the biggest sports brand seller in the country, and then it acted frequently in mergers and acquisitions, and brought the influential medium and high-end brands, Phil. Lining pays more attention to endogenous growth. After experiencing a low ebb, he pays more attention to the shaping of his own brand.

In 2011, Anta adjusted its industrial inventory squeeze period significantly better, so it was also faster to get out of the bottleneck.

Of course, it clears up inventory and also allows channels and distributors to share a lot of pressure. The profit distribution link with distributors is not transparent enough, and it is also one of the key points that Anta has been repeatedly eyed. In addition, the contribution of fie brand to Anta is amazing. On the one hand, the bonus of consumption upgrading is more conducive to the sale of high-end products. On the other hand, the performance of "not too real" is also questioned by short selling agencies.

In contrast, Tiger Group's investment research team believes that Lining's growth is more based on the re emergence of its own brand influence, especially the rising tide of domestic goods.

In 2018, the products of women and children began to shine. Even the Nike and Adidas of the head also paid more and more attention to the design and promotion of women's sports products. On the one hand, similar to Lululemon, a company that started with yoga products, became a unicorn in the sports product market. Both the audience and the profit of its sales have gone far beyond its peers. On the other hand, more and more attention has been paid to products in the field of professional segmentation. The consumption of minority sports has also been accepted by the middle class more and more, and the potential of ice and snow and other items is gradually showing up.

Anta was shorted or benefited from Lining

From the recent cycle of earnings, tiger securities research team found several advantages of Lining.

1. the same store growth rate has been improving, especially in the same store.

2. continuous improvement in inventory turnover

3. the rising proportion of new products

4. continuous improvement of operational efficiency

5., the scale of electricity supplier operation is bigger and bigger.

Tiger Group investment research team believes that as long as we take advantage of these advantages, Lining's profit margin is still very room for improvement.

In June 24th, Lining also mentioned the impact of the joint venture's non operating earnings. In addition to red double happiness, which has been disclosed in the company's earnings report, Lining is mainly associated with some outdoor sporting goods, dance, yoga fashion fitness products and other companies, and this kind of product is just the rapid development of subdivision sports products company in recent years. Lining's sub brands, especially children's clothing and teenage part of "Lining Young", have great potential for growth. With the stimulation of the second child, the demand for children's clothing is also growing.

In addition, Anta has recently been questioned by the short agency, and it will also shift the target of investors to some extent. Lining can benefit from it.

Although the overall product is related to sports, it will show the cyclical nature of consumer products. But in anticipation of Lining's revenue and profits in the future, it is also possible to expect some of this revenue.

If the growth rate of revenue in the next three years reaches 17%, 15% and 13%, the net profit may rise to 960 million, 1 billion 210 million and 1 billion 500 million according to this trend while maintaining the same operational efficiency. The EPS from 2019 to 2021 is 0.43, 0.57, 0.7, respectively, corresponding to the earnings per share ratio of 0.7, 0.7, and higher than the median value of the industry.

risk factor

The total retail sales of social retail sales have been decreasing this year. The clothing part of CPI is negative growth. Although the growth of sportswear is bigger than that of the whole clothing, if the whole industry continues to languish, both the price and the overall income will exert pressure on the whole industry. Lining is no exception.

Consumer goods are cyclical, and Lining's current expansion of their products is good. But the trend of consumers' aesthetics and fashion trends is changing. This will bring pressure to growth as well.

The expansion of stores will attract more attention in the rising period, but it will also bring financial pressure. Similarly, the extrusion of goods will also affect the company's performance.

The expansion of women's sportswear and children's clothing is also facing fierce competition from the whole industry. Although this growth potential is huge, other giants are also willing to work hard.