Summary. Lilang has undergone two years of transformation, and its financials have been relatively stagnant during the period. However, with strong tr

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1 公司动态中国利郎 [1234.HK,.20 港元, 未评级 ] 更多复苏的迹象陆续浮现分析员 : 李嘉豪, CFA (tonyli@chinastock.com.hk; 电话 : (82) ) 2018 年 4 月 23 日摘要 : 利郎经历了两年的转型, 其财务状况在此期间一直相对平平然而, 随着公司在 2018 年订货会收到大量订单和推出了商务休闲系列产品, 公司开始恢复增长提质不提价的战略似乎在 2018 年于财务上取得了回报, 而公司也正在今年加快门店扩张步伐在最近股价反弹后, 其 2018 年市盈率仍低于 13 倍, 但根据彭博共识预测,201 年至 2019 年的每股盈利复合年增长率达到约 21% 公司还有净现金 20 亿元人民币公司亦有支付慷慨特别股息的长久纪录,2018 年股息率有望高于 % 中国利郎 [1234.HK, 未评级 ] (HK$) (HK$ million) 公司背景 : 中国利郎成立于 198 年, 是中国大陆领先的男装品牌之一公司设计制造和销售以利郎 LILANZ 品牌为主的商务和休闲男士服装, 主要针对三至四线城市中年龄介乎 30 至 40 岁的男士截至 201 年 12 月 31 日, 公司在中国拥有 2,4 间分店, 由 2 家分销商及 898 家二级分销商经营在财务方面,2016 年和 201 年是相对艰难的时期 2016 年对利郎来说是艰难的一年, 因为服装品牌之间的竞争加剧核心品牌利郎 LILANZ 从 2016 年秋季开始的订货会出现订单急降公司在 2009 年上市后不久推出了一个名为 L2 较为年轻的休闲服品牌, 但其表现较预期差利郎决定在 2016 年停运 L2 的业务, 导致 2016 年盈利能力下降在财务上,201 年的业绩尚未明显复苏总体收入仅增长 1.2% 至亿元人民币, 主要受到 L2 品牌停运拖累然而, 随着订货会的订单回升, 核心品牌利郎 LILANZ 的收入增长了.9% 期内利郎 LILANZ 录得增长, 部分是由于 201 年增加了广告及推广开支, 人民币达到 2.38 亿元, 占整体收入.4% (2016 年 :8.0%) 另一方面, 随着 L2 停止运营,201 年的行政成本下降, 导致整体行政及管理开支持平因此, 整体经营利润持平于人民币亿元,201 年经营利润率保持在 2.4%(2016 年 :2.%) 然而, 由于实际税率下降, 纯利增长 13.2% 至人民币 6.11 亿元 Turnover (RHS) Price (LHS) 市值 : 1.6 亿美元 ; 自由流通量 : 31.1% RMB 人民币 FY16 FY1 FY18E FY19E Revenue 收入 ( 百万元 (m) ) 2,412 2,441 2,92 3,499 COGS 销货成本 (m) ( 百万元 ) (1,416) (1,42) (1,44) (2,02) Gross 毛利润 ( profit 百万元 (m) ) 996 1,014 1,229 1,448 Gross 毛利润率 margin (%)(%) EBIT ( 百万元 (m) ) Net 净利润 profit ( 百万元 (m) ) 净利润率 Net margin (%) (%) EPS 每股盈利 ROE 股本回报率 (%) (%) Dividend 股息收益率 yield (%) (%) PER 市盈率 (x) ( 倍 ) PBR 市净率 (x) ( 倍 ) 来源 : 彭博截至 201 年 12 月 31 日, 利郎有 68% 的产品由自家设计, 其中 36% 的自主设计产品采用独有面料这使利郎能够提供与同业相比更具差异化的产品预计 2018 年出现好转迹象单看 201 年盈利, 利郎在 201 年下半年似乎未恢复增长动力而利郎于 201 年 8 月的 2018 年春 / 夏季订货会中, 订单同比强劲增长 21% 2018 年 1 月举行的 2018 年秋季订货会的订单令人更为鼓舞, 订单增长 31% 公司成功实施了一项名为提质不提价的战略, 其中包括以下措施 :(1) 聘请了具有领先服装品牌 ( 如 Armani 和 Levi's) 工作经验的外籍设计总监 ; (2) 在新设计团队的指导下, 利郎提供更多产品, 这些产品都使用更多种类的面料和材料 ;(3) 公司投入更多资源用于自己的材料和产品研发, 减少对外部 ODMs 的依赖和降低生产成本商务休闲系列推动复苏受到 L2 品牌经验的教训, 利郎于 2016 年推出利郎 LILANZ 品牌的全新商务休闲系列, 平均售价较主品牌系列低 33%, 目标针对一至二线城市的年轻男性到目前为止, 利郎已在这个系列取得一些成果分销商已意识到这一点, 尤其该产品系列享有利郎 LILANZ 的声誉, 并允许店铺开设在受欢迎的购物中心这也解释了为什么利郎 LILANZ 订货会订单增长加快为减低分销商的存货风险及加快店铺开张速度, 利郎采纳了代销模式, 并计划于 2018 年下半年全面实施 1

2 Summary. Lilang has undergone two years of transformation, and its financials have been relatively stagnant during the period. However, with strong trade fair orders received for 2018 and the introduction of its smart casual collection, the Company has started to resume growth. Its strategy called improving product quality without raising the price seems to be paying off financially in 2018E, and Lilang is also speeding up the pace of store expansion for the year. Despite the recent rally, Lilang is trading at <13x 2018E PER, but the EPS CAGR between 201 to 2019E is expected to be 21%, according to Bloomberg consensus. The Company also has net cash of RMB2bn. It has a long history of paying generous special dividends and is likely to offer a dividend yield of >% for 2018E. CHINA LILANG LIMITED [1234.HK, NOT RATED] (HK$) (HK$ million) The Company. Established in 198, China Lilang is one of the leading menswear brands in mainland China. Lilang designs, manufactures and sells business and casual men s apparel under the LILANZ brand, which targets mainly men from 30 to 40 in Tier 3 & 4 cities. As at 31 Dec 201, the Company had 2,4 stores in China, which were operated by 2 distributors and 898 sub-distributors. Financially, 2016 & 201 Were Relatively Tough Years was a tough year for Lilang, as competition among apparel brands intensified. The core brand LILANZ suffered a sharp decline in trade fair orders starting from the Fall 2016 season. Lilang initiated a younger casualwear brand called L2 shortly after the Company s IPO in 2009, but the performance was worse than expected. Lilang decided to cease operations of L2 in 2016, which lowered profitability in Financially, the 201 results have yet to show signs of recovery. Overall revenue grew by only 1.2% to RMB2,441m, dragged down by discontinued L2 brand. However, the core LILANZ brand recorded.9% revenue growth, as trade fair orders recovered. The growth of LILANZ was due in part to higher advertising and promotional expenses in 201 of RMB23.8m, representing.4% of overall revenue (2016: 8.0%). On the other hand, as L2 was discontinued, administrative costs were lower for 201, resulting in flat overall SG&A. As a result, overall operating profit stayed flat at RMB668.9m and the OPM remained at 2.4% in 201 (2016: 2.%). Net profit, however, increased by 13.2% to RMB611m, as the effective tax rate was lower Expected to Show Good Signs of Recovery. The 201 earnings alone did not indicate that Lilang resumed growth momentum in 2H 201. Lilang entered the trade fair season for 2018 in Aug 201 and had very strong YoY order growth of 21%. The trade fairs for Autumn 2018, organized in Jan 2018, were even more encouraging, with order growth of 31%. Management attributed the turnaround to the Company s successful implementation of a strategy called improving product quality without raising the price, which included the following measures: (1) it hired foreign design directors with work experience with leading apparel brands, such as Armani and Levi s; (2) under the guidance of the new design team, Lilang offered more products using a wider variety of fabrics and materials; and (3) the Company dedicated more resources to its own R&D for materials and products, reducing its reliance on external ODMs and the cost of production. Market Cap: US$1,6m; Free Float: 31.1% RMB FY16 FY1 FY18E FY19E Revenue (m) 2,412 2,441 2,92 3,499 COGS (m) (1,416) (1,42) (1,44) (2,02) Gross profit (m) 996 1,014 1,229 1,448 Gross margin (%) EBIT (m) Net profit (m) Net margin (%) EPS ROE (%) Dividend yield (%) PER (x) PBR (x) Source: Bloomberg Turnover (RHS) As at 31 Dec 201, 68% of the products were designed by Lilang, and 36% of these own-design products adopted proprietary fabrics. This allowed Lilang to offer products with greater differentiation from those of its peers. Smart Casual Collection Aiding the Recovery. Benefiting from lessons learnt from L2, Lilang launched a new smart casual collection under the LILANZ brand in 2016, with an ASP around 33% lower than that of the main collection, targeting younger working males in Tier 1 & 2 cities. So far Lilang has reaped some of the fruits of the success of this collection series. It is well perceived by distributors, as the product line shares the reputation of LILANZ and allows store to open in popular shopping malls. It also explains why the growth of LILANZ trade fair orders accelerated. To avoid inventory risk for distributors and to speed up the pace of store openings, Lilang adopted consignment model, which it plans to fully implement in 2H (continued on next page) Price (LHS) 2

3 Store Openings Targeted to Speed Up. Because of store consolidation and the discontinuation of the L2 line, Lilang reduced the number of stores from 2,98 in FY201 to 2,4 in FY201. However, with demand returning, the Company is planning to accelerate store openings for FY2018E. Specifically, the total number of LILANZ stores (main collection & smart casual combined) is targeted to increase to not less than 200 this year. This will be driven by: (1) ~0 store expansion for the main collection series in untapped markets, such as the Jiaodong Peninsula, Dalian and Sunan, and (2) net addition of ~ stores for the smart casual collection, with the plan to expand into areas like Hefei, Xian, Jiangxi and Fujian. Lilang also aims to deploy its new retail strategy for its smart casual series in 2H 2018, as the products are more standardized and suitable for e-commerce. Financials Likely to Remain Healthy. Because of the lower ASP, its smart casual series is expected to drag down Lilang s GPM slightly. However, this is likely to be offset by lower SG&A. Specifically, management expects advertising and promotion expenses as a percentage of revenue to be slightly lower in 2018, as not as many stores require renovations as in 201. This combination may support earnings growth and a sustainable dividend payout. As at the end 201, Lilang had RMB2,018m in cash and no debt. The Company has a long tradition of paying special dividends since For 201, the Company proposed paying a total DPS of HK$0.44 (special dividends included), equivalent to a total payout ratio of ~0%. Valuation. The share price of Lilang has seen improved performance since Feb 201, as there were signs of improving trade fair orders. There was another notable rally after its 201 earnings announcement in March However, the strong trade fair orders have locked in revenue for most of Lilang is trading at <13x 2018E PER, but the EPS CAGR from 201 to 2019E is expected to be 21%, according to Bloomberg consensus. There may be further upside if the trade fair orders for Winter 2018 (completed in June 2018) continue to record strong growth. The Company also has net cash of RMB2bn. It has a long history of paying generous special dividends and is likely to offer a dividend yield of >.3% for 2018E. Risks: (1) Weaker-than-expected trade fair orders for Winter 2018; (2) lower-than-expected GPM due to new product launches; (3) slower-thanexpected store expansion plan; and (4) higher-than-expected advertising and promotion expenses Figure 1: 201 Results Review RMB'000 FY2016 FY201 YoY Change Revenues 2,411,638 2,441,0 1.2% Cost of Sales (1,41,32) (1,42,240) 0.8% Gross Profit 99,906 1,013,81 1.8% Selling & Distribution Expenses (22,386) (311,149) 23.3% Administrative Expenses (11,28) (89,999) -4.% Other Operating Expenses (6,449) (,82) 21.4% Other (Net) Income 9,69 64,4-34.3% Operating Incom e (Loss) 663,33 668, % Net Finance Income 83,423 2,43-3.0% Earnings before Taxes 46,6 21, % Provision for Income Tax (206,912) (1,40) -46.6% Net Incom e 39, , % EPS (RMB) % DPS (HK$) % GPM 41.3% 41.% 0.2 ppt NPM 22.4% 2.0% 2.6 ppt Sources: Company, CGIS Research 3

Figure 2: Store Locations and Breakdown FY201 FY2016 (Excluding L2) FY201 Northern China 28 238 24 North Eastern China 302 24 221 Eastern China 80 61 639 Central and Southern China 26 69 600

4 Figure 2: Store Locations and Breakdown FY201 FY2016 (Excluding L2) FY201 Northern China North Eastern China Eastern China Central and Southern China South Western China North Western China Total 2,98 2,400 2,4 Sources: Company, CGIS Research Figure 3: Revenue by Region and Breakdown for 201 (Unit: RMB million) Sources: Company, 4

5 Figure 4: Trade Fair Orders Performance Year Season Order Growth -ve Low Single Digit 2014 Fall +ve Mid Single Digit Winter +ve High Single Digit +ve High Single Digit 201 Fall +ve Low Double Digit Winter +ve 1-1% +ve Low Double Digit 2016 Fall -ve 13-18% Winter -ve 13-18% -ve High Single Digit 201 Fall +ve High Single Digit Winter +ve Low Double Digit ve 21% Fall +ve 31% Sources: Company, CGIS Research 40% 20% 0% -20% Figure : Forward PER (Based on Bloomberg Consensus) /4/ /4/ /4/201 26/4/ /4/201 BEst P/E Ratio (1234 HK Equity)(Curr Ann) Year Average (9.6x) Sources: Bloomberg, CGIS Research

6 Figure 6: Peer Comparison Company Ticker Trading Price Mkt Cap PER(x) PBR(x) ROE(%) Div YIeld(%) Currency US$m FY0 FY1 FY2 FY0 FY1 FY2 FY0 FY1 FY2 FY0 FY1 FY2 Mensw ear Peers China Lilang Ltd 1234 HK HKD.20 1, Heilan Home Co Ltd -A CH RMB , Youngor Group Co-A 6001 CH RMB 8.9 4, Joeone Co Ltd -A CH RMB , Fujian Septw olves Industry-A CH RMB 8.2 1, Baoxiniao Holding Co Ltd-A CH RMB Simple Average Apparel Peers Listed in Hong Kong Bosideng Intl Hldgs Ltd 3998 HK HKD , Shanghai La Chapelle 6116 HK HKD , Jnby Design Ltd 3306 HK HKD Giordano International Ltd 09 HK HKD I.T Ltd 999 HK HKD Esprit Holdings Ltd 330 HK HKD Koradior Holdings Ltd 309 HK HKD Trinity Ltd 891 HK HKD Bauhaus Intl Holdings Ltd 483 HK HKD Simple Average Apparel Peers Listed in A-share Zhejiang Semir Garment Co-A CH RMB.01 4, Ningbo Peacebird Fashion C-A6038 CH RMB , Lancy Co Ltd-A CH RMB Shenzhen Huijie Group Co L-A00263 CH RMB Simple Average Sources: Bloomberg, CGIS Research 6

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