Haishu Home: The first step in the layout of UR fashion consumer industry

Securities Times Network August 15th

event

The company announced in the evening of 8/14 that the wholly-owned subsidiary Haishu Investment intends to increase its capital with its own funds, and the initial subscription of the shares does not exceed 10%. Haishu Investment will prepay investment of 100 million yuan to Fast Fashion, and Li Shangguang will undertake unlimited joint liability guarantee obligations.

Investment points

The main brand of Fast Fashion is “Urban Revivo” (UR). As a domestic fast and fast fashion brand system, it runs efficiently and quickly, and it is in a period of rapid development. The UR brand was founded in 2006 by Mr. Li Mingguang. According to the China Fashion Brand Network, UR, which has experienced 10 years of growth, has opened more than 160 stores in China and overseas, and its revenue in 2016 reached 2 billion yuan. Its products are related to women's wear, men's wear, children's wear and shoe bag accessories. The design is in keeping with the trend of fashion and cost-effective. As a leading brand of cheap and fast fashion, it has been very active in recent years:

Its overall operating system is similar to ZARA, specifically:

(1) Design side: a small number of small, pay attention to popular trend forecasting and retail data feedback. In order to minimize inventory and improve turnover, UR follows a number of small-scale principles, and develops 12,000 models each year, and actually puts over 9000 models. Its product development team of more than 300 people attaches great importance to browsing fashion websites, going abroad for exhibitions, showcasing styles, etc. The method predicts the popular surface accessories and design elements and applies them to the design. At the same time, it can quickly adjust the product fabric, cutting, color and pricing through the timely tracking feedback of the retail data of the terminal stores.

(2) Production end: shorten the product lead time, and the self-owned factory guarantees the ability to take emergency orders. UR products are mainly divided into three types: planned goods, emergency goods, and returned goods. The planned goods generally take 60 days from design to store display, and the emergency and return goods can be completed in 10 days at the fastest, and the speed is ahead of traditional clothing brands. In order to ensure the flexibility of the supply chain response, the company has its own factories to undertake emergency orders.

(3) Terminal: 1000 square meters store with rich SKU display + several times a week to bring new experience to consumers; “Direct-operated” mode of terminal store management, daily retail data analysis for store purchase and headquarters design Guidelines.

UR stores are preferentially located in the core business districts of first- and second-tier cities. At the same time, they are actively radiating to the emerging peripheral business districts where young people gather. Most of the stores are more than 1,000 square meters. The design-rich SKU supply is often updated several times a week. For example, Guangzhou Zhengjia Plaza store is updated every Monday, Thursday and Friday. The constantly updated store display gives consumers a continuous fresh shopping experience.

At the same time, the company expands its channels through the “direct class” model. At present, the participating channels account for about 60% of the total. The franchise channel is still sent by the UR to the store manager and controls the store image design, product operation, and clerk training. The store team analyzes each store daily. Commodity data, timely submission of return orders, extension design and transfer of goods, etc., for 1) timely adjustment of purchases, 2) timely adjustment of production arrangements in the supply chain, 3) designer timely adjustment of design style and other systematic work according to consumer preferences solid foundation.

With the close cooperation of design, production and retail terminals, UR operates efficiently and channels and terminal sales expand in an orderly manner. According to the company's official website, the future UR brand will expand its stores at a rate of 60-100 stores per year. It is estimated that the number of domestic and foreign stores will exceed 400 in 2020, and the business scale will exceed 10 billion.

Earnings forecast and investment advice

As the first national brand of business casual men's wear, this time participating in the fashion (UR), the synergy between the two industries is worth looking forward to: (1) Haishu's strong cash flow ability can protect the UR in the rapid growth period; (2) Haishu and UR are similar in channel mode. Haishu also has a deep supply chain in the men's field. It is expected to promote UR development from the perspective of industrial resource sharing; (3) UR is a leading brand in fast fashion and its excellent product planning. And the efficient fashion operation mode has great reference for the operation of Haishu's various brands. National men's wear and fast fashion ups and downs collide, the future synergy is worth looking forward to.

As the fashion has not disclosed the specific financial situation, we still maintain the original profit forecast: Under the background of relatively stable gross profit margin and effective control fees, it is expected that the company's 17-year performance will still maintain a 10% growth, 17/18/19 The net profit of the mother is expected to reach 34.3/37.7/39.5 billion yuan, corresponding to the current market value of 41.4 billion yuan, PE is 12.1/11.1/10.5 times respectively, and the dividend yield is 5.3% at current price and 16-year dividend, which is a high-value red low valuation white horse. . Considering the strong cash reserves of Haishu Home (as of the 17Q1 account, the monetary funds + transactional financial assets + other current assets totaled 9.159 billion yuan, 16 years of operating net cash flow of 2.928 billion yuan), we believe that this time the stock is fast Fashion (UR) should be seen as the first step in the field of corporate fashion consumer goods. At this point, Haishu's home has multiple attributes such as stable operation + high dividend red low valuation + fashion consumer goods extension imagination space, and continues to be optimistic, maintaining a "buy" rating!

Risk Warning: Terminal demand is less than expected, brand promotion and synergy are less than expected.

(Securities Times News Center)