The Stock Price Went Up 551% In Two Years.

Bosideng, as a 43 year old down garment company, has been sitting in the leading position in the domestic industry for many years. Its main business includes brand down clothing business, OEM management business, women's clothing business, diversified clothing business and so on. In 2018, the company launched the strategy of focusing on the main channel, the main brand and the diversification strategy. From the beginning of 2018 to the end of 2019, the stock price went up by 551%, and the leading brand of the old domestic down jacket was renewed.

Fangfeng Textile Group Feng Yi team analysis, on the one hand, China's clothing consumption has gone through 2000-2010 years of lifting stage respectively, 2010-2017 overseas brand competition intensified and operation reform stage, 2018 has entered the upgrading stage of the industry, and at this stage, the domestic brands with strong function and fashion are all entering the obvious competitive vacancy stage because of the limited entry of overseas brands. On the other hand, Bosideng brand does not lose overseas brands in terms of retail scale, functionality and market potential.

Performance: sustained recovery and better performance

In the 2013-2016 fiscal year of the company, due to the development of the stock market in the first half of the year, the performance was impaired for three consecutive years. The company took out measures to counter the quarterly sales promotion, reduce the production of new products and improve the efficiency of the overall supply chain. In the 2017-2019 fiscal year, the revenue grew faster, the average annual compound growth rate was 23.4%, and the net profit compound growth rate reached 58.3%. 2019H1 revenue and net profit to parent were 44.36 and 343 million yuan, up 28.8% and 36.4% respectively.

Company: product quality, focus on self operated channels

(1) business: the down jacket starts, and the multi-party layout still focuses on the main business. In 2018, the company refocused its main channel, cut down diversified clothing business, and vigorously developed the main business of down garment. At present, its business includes down garment, OEM production, women's wear, diversified dress (school uniform and children's wear).

(2) products: strong functionality, fashion and beauty. Bosideng down clothing has outstanding thermal insulation performance, and its properties such as down material, filling, cashmere and fluffy are all better than the national standard 20%. The fabric has reached the cooperation with the top international fabric supplier Gore company, and its overall performance is excellent. In recent years, it has been paying more attention to the fashion of products, continuing to ascend the fashion week of New York and Paris, and launching corresponding series products, and at the same time linkage with the current popular IP cooperation.

(3) marketing: attaching importance to traditional marketing and starting new media marketing channels. Since 1997, the company has sponsored the summit of Mount Everest and the north and south poles. It has become the only brand of winter clothing in the world. It has invested heavily in CCTV hard and broad, and has gained popularity. With the variety of China's hip-hop and running brothers, it has increased investment in the new media red book and jitter, and is close to the young consumer groups, reversing the company's image.

(4) channel: optimize the channel structure and enhance the image of the store. Below the line: since the 2017 fiscal year, the proportion of self-employed business income of the company's down garment business has increased by 2.9pct to 64.8% from 61.9%, and the proportion of wholesale business revenue has continued to decline. 1> increased the proportion of self owned stores: as of the end of September 2019, 1922 self-service stores were down, accounting for 37.2%, up from 32% in the 2017 fiscal year, and the number of stores in the 2> shopping center increased from 44 in fiscal year 2018 to over 200, accounting for double figures in the total number of shops, while developing flagship stores to enhance the image of stores. The number of stores in the 5.2pct stores increased by more than 200. 3> vigorously develops potential markets: there are fewer stores in the Northeast market, and is expected to become a new growth point this year. Second, online has reached strategic cooperation with Tmall and vip.com, and has set up a team to develop dedicated online contributions, which is expected to sustain high growth.

(5) supply chain: optimize inventory structure and enhance operational efficiency. During the period of high inventory, on the one hand, the company concentrates on clearing inventory by selling off-season, on the other hand, it actively reduces the production of 10%+ new products and evade the backlog risk of channel inventory. At present, the proportion of fast reverse accounts for up to 60%, and sales peak season can achieve two weeks' quality fast reverse supply.
 
Industry: down jacket industry has a large space and fierce competition.

In 2018, the size of Chinese market down clothing reached 106 billion 800 million yuan, an increase of 10.78% over the same period, the average annual compound growth rate of 2018-2022 years is about 11%, higher than the overall growth rate of the garment industry. Competition pattern: quality subdivision industry attracts a large number of participants, Bosideng's leading position is stable, and the high-end feather down market in Chinese market is blank.

[investment advice]

It is estimated that the net profit of the company will be 13.49/17.23/21.49 billion in 2019/2020/2021, and the growth rate will be 37.50%/27.66%/24.74% in the same period. The corresponding EPS is 0.13/0.16/0.20 yuan / share, corresponding to P/E for 28/22/18, the first coverage will be given "recommended" rating.

[risk hint]

Market acceptance of Bosideng price is lower than expected; diversification of clothing business development is lower than expected.

Author: Fang Yi Fang Feng Yi team