【行业研究报告】江南布衣-Eyes on the recovery and risk-reward

1Mar2023
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
JNBYDesign(3306HK)
Eyesontherecoveryandrisk-reward
Wedothinkthemarketshouldhavecertainexpectationaboutthemissin
earningsandcutinguidance,andwouldfocusmoreontherecovery.
Supportedby:1)decentreboundinJan2023,2)JNBY’scompetitiveedges
and3)industryleadingdividendyield,westillfinditsrisk-reward
attractive.
1H6/23resultdraggedbythepandemicinlate2022.For1H23,JNBY’s
saleshasdeclinedby5%YoYtoRMB2.4bn,andnetprofithasdroppedby
saleshasdeclinedby5%YoYtoRMB2.4bn,andnetprofithasdroppedby
16%YoYtoRMB372mn,missingCMBI’sest.by~12%and18%.Butthis
istotallyunderstandablegiventhepandemicduringOct-Dec2022.
However,webelievetheresultisresilientenough,asSSSdropwasonly
3.9%,alreadybetterthanthe4.4%SSSdropin2H22(CMBIest.),helped
by43%YoYsurgeindigitalandsocialretailchannelsales.Eventhough
GPmarginwasbetterthanexpectedat64.7%in1H23,butitwasoffsetby
surgeinstaffcostsandA&Pexpenses.BasedontheHK$0.3dividend
proposedandthehistoricalratiobetween1Hand2H,theimpliedFY6/23E
yieldcouldbeat~9%.Inventorydayshaveincreasedto191daysin1H23,
comparedto147daysin1H22,stillwithinacomfortablerange.
RevisingdowntheFY6/23Eguidanceandextendingthelong-term
targettoFY26E.Afterthethree-year-longpandemic,management
believestheconsumptionbehaviorhavealreadychangedinmanyaspects
andwouldliketostayconservativeaboutthecustomertrafficresumption.
Therefore,theyareexpectingabumpyrecoveryaheadandrevisingdown
theFY6/23Eguidance(LSDsalesgrowthandlow-teensnetprofitdrop).In
fact,thiscutisnotsurprisingatalltous.Moreover,theyarealsoshifting
theirlong-termtarget(RMB10bnretailsales,RMB6.0bnlistedcosales,
65%+GPmarginandRMB0.9listedconetprofit)fromFY25EtoFY26E.
ButwearemorepositivegivenrecoveryinJan2023andvarious
initiatives.Despitetheconservativeoutlook,wetendtobemorepositive
aboutFY6/23E,thankstodecentreboundlately(SSSGalreadyturned
positiveandretailsalesgrowthreached20%+inJan2023).Moreover,we
arecertainlyencouragedbyvariouspositivefactorsandgrowthdriverssuch
as:1)lowbaseinFY22E,2)revampofstoreimages(doneformoststores),
3)productandbrandsupgradesthroughmorecollaborationwithdifferent
artworksandcreativemarketing,4)furtherimprovementinmembers
managementandcustomerexperienceand5)furtherpenetrationintoto
varioussocialmediaplatformssuchasTikTokandXiaohongShu,etc..
MaintainBUYbuttrimTPtoHK$11.76.WearerevisingdownFY23E/
24E/25Enetprofitforecastsby15%/17%/14%,tofactorin:1)dragsinlate
2022,2)delayinstoreopening,3)slowerthanexpectedrecoverybut4)
betterGPmargin.However,westillmaintainBUYandremainpositivegiven
theturnaroundandattractivevaluationof9xFY6/23EP/Eand9.0%yield.