Commented On The Annual Report Of Jiangnan Cloth Clothing: Revenue Growth Is Slowing Down, And High Dividend Payout Rate Is The Highlight.

3306.HK disclosed the performance report for the 2019 fiscal year (ended June 30, 2019).

Data show that the company achieved 3 billion 358 million revenue, an increase of 17.3% over the same period, and a net profit of 485 million, up 18.1% from the same period last year. Although the growth rate is not slow, it has slowed down compared with the previous two years.

In addition to the overall revenue changes, another investor is more worried about the same store sales growth has also declined, from last year 8.9% to the latest 3.4%.

However, it is worth mentioning that dividend dividends are still robust, with a total dividend of HK $415 million for the whole year, accounting for 75% of the net profit of the fiscal year. If the latest stock price is calculated, the dividend yield will be close to 7%.

It has ten brands, JNBY, CROQUIS and so on.

Jiangnan Buyi is a designer brand fashion group. Its main business is the design, promotion and sale of fashionable clothing, footwear, accessories and household products. The company has three stages of ten brands, namely, the mature brand JNBY, three growth brand CROQUIS (sketch), JNBY by JNBY (children's wear) and less, and six other new brands. In all 2018 retail stores, JNBY has 884 brands, accounting for over 40%, while three growth brands have 1038 stores.

According to the sales amount, the JNBY brand accounted for a higher proportion of revenue, reaching 56%; CROQUIS (sketch), JNBY by JNBY and less accounted for 19.2%, 14.2% and 8.5% respectively.

From the brand revenue growth rate, JNBY and CROQUIS (sketch) are near 15%. Relatively speaking, JNBY by JNBY and less grew relatively fast, exceeding 20%.

Earn more than 450 million a year, and inventory is relatively healthy.

According to the financial data, Jiangnan Buyi achieved revenue and net profit of 3 billion 358 million and 485 million in the 2019 fiscal year (ended June 30th), up 17.3% and 18.1% respectively over the same period.

If we go back to 2015, the company's revenue has risen from 1 billion 613 million to 3 billion 358 million, and the net profit of the parent has risen from 197 million to 485 million, and the compound growth rate is 20.12% and 25.26%, respectively.

In contrast to the performance of the main women's clothing enterprises listed on the A stock market in 2018, the revenues from Jiangnan Buyi and the scale of net profit to mothers are at the forefront.

As for clothing enterprises generally concerned about the inventory index, the total inventory in the 2019 fiscal year increased to about 860 million, an increase of 12.57% over the same period last year, lower than the growth of revenue. At the same time, inventory turnover increased from 1.56 to 1.60 in the previous year. These data indicate that the inventory level of Jiangnan cloth is relatively healthy.

Revenue growth slowed, same store sales slowed down

Close reading of the financial report found that the company is also facing some potential risks, including half year revenue growth decline, same store sales growth slowed down, gross margin decline.

Breaking the latest six months of revenue data, we can see that the company's revenue in the second half of fiscal 2019 was 1 billion 331 million, an increase of only 10% over the same period last year, showing a marked decline compared to the first half of 22.55% and 18.40% of the same period last year. Some investors are beginning to worry whether the slowdown will continue.

The letter also showed that the growth rate of the same store in the 2019 fiscal year was 3.4%, significantly less than 8% and 8.9% in the previous two years. For chain enterprises, the same store sales is a more important indicator, because the growth of business performance mainly comes from the growth of new stores and same store sales. If the same store sales growth slows down, it is necessary to open more new stores to maintain a certain growth rate, which brings great uncertainty to the business operation.

Generally speaking, the higher the sales growth of the same store, the better the competitiveness and growth of the enterprise, and vice versa. Therefore, a drop in the same store sales growth index may be a point to worry about.

　　 Changes in channel structure lead to lower gross margin

On the other hand, the company's gross profit margin also declined in the 2019 fiscal year, from 63.75% in fiscal year 2018 to 61.23%.

For this phenomenon, the company's explanation is mainly caused by the change of channel structure, that is, when the gross profit margin is higher, the proportion of self operated channels decreases, and the distribution outlets and online channels with relatively low gross profit margins increase. This can be verified by the gross margin form of the channel disclosed by the company.

Data show that the gross profit margin of self operated stores with gross margin of 70.9% is only 3.2%, while the gross profit margin of distributors and online channels with gross margin less than 60% has reached 20.7% and 36.7% respectively.

However, the net interest rate of the company in fiscal year 2019 has even increased slightly, thanks to the reduction in sales and marketing expenses, the increase in net income and other gains and gains.

Stable and high dividend payout rate

One of the more obvious features of checking the entire financial report is the high dividend payout rate of the cloth in the south of the Yangtze River.

The dividend payout at the end of the company's plan is HK $0.48 per share, amounting to HK $249 million. In the interim dividend, the company distributes HK $0.32 per share. As a result, the company paid a total of HK $415 million for the whole year, accounting for 75% of the net profit of the fiscal year. If calculated at the closing price of HK $11.70 / share in September 16th, the dividend yield will be close to 7%.

If we continue to trace back to the dividend payout since 2016, we find that the dividend payout rate is very stable. In the 2017 fiscal year, the total dividend yield was about HK $249 million, accounting for 75% of the net profit of that year. In the 2018 fiscal year, the dividend payout rate was HK $368 million, which also accounted for 75% of the net profit of that year.