China Merchants Securities Will Reiterate Its Buying Rating For China'S Le

According to the world clothing and shoe net, recently, China Merchants Securities issued a research report, pointing out that its qualitative and quantitative channel research shows that

The plate has improved from the end of 2016 to the beginning of 2017, and has resumed steady growth.

China's sports apparel sector has improved since the end of 2014, and has been recovering healthier since 2015.

Research shows that the garment sector has improved

The development of the garment industry is lagging behind because of the significant dispersion of industries and clothing.

The management level of the plate is slow to adjust and adapt to the international management mode.

In addition, the abnormal warm winter in 2015 brought impact on the industry, resulting in inventory pressure.

However, according to the same store sales growth data of domestic leading apparel retailers and sports retailers in the quantitative channel research, we can see that the clothing sector began to improve from the fourth quarter of 16 years, and the same store sales growth showed a positive trend. So far, the stable number of units in the same store has been re established in 2017 (Figure 1).

In addition, as the same store sales grew steadily, dealers were replenishing inventory (Figure 2).

Clothing and sportswear orders will be compared with the future show that the revenue of the apparel sector will reach a high level of double-digit health growth in the second half of 17 and 18.

Apparel retail will remain strong in the next 6 months

China Merchants Securities expects retail sales of clothing will remain strong in the next 6 months:

1) as the Mid Autumn Festival coincided with the National Day holiday, the golden week holiday extended in October.

2) it is estimated that retail sales in the first quarter of 18 will achieve strong year-on-year growth on the basis of seasonal effects caused by seasonal effects in the first quarter of 17. This is because Chinese people have the traditional custom of buying new clothes before the Spring Festival, while the Spring Festival holidays in the first quarter of 17 years (at the end of January) are reduced in the previous year, leading to a reduction in the peak season, but the 18 year Spring Festival will be in the middle of February.

China Merchants Securities maintains a recommended rating on the clothing sector and reiterates its remark on China.

(01234) buy rating.

China's Li (01234): the value of the company will be unlocked.

China Merchants Securities pointed out that particularly optimistic about the company, mainly in the following logic: first, good operation, achieved a stable single digit shop sales growth and healthy channel inventory, sales ran out of 70%-80%.

Two, the order will remain positive. It is expected that profits will improve in the second half of 2017.

The three is valuation attraction.

In view of this, China Merchants Securities maintained a buy rating, which is equivalent to a 18 year forecast earnings ratio of 10 times and a dividend yield of 7%.

Since China Merchants Securities was different from the buying consensus of the market consensus, but since the expected profit improvement and the positive order data since March have unlocked the hidden value as a catalyst, the price of the company has risen by 28%.

At present, the retail business is keeping healthy, the number of units in the same store sales is increasing, the channel inventory is healthy, the sales volume of 2017 spring and summer products is 70%, and the products sold in autumn and winter in 2016 are up to 80%.

The average retail discount is also healthy, about 20 percent off.

Expected sustained and steady growth

After a conservative deployment in 2016 (based on the extension effect of winter and warm rainfall in the first half of 15 seasons to the first half of 16 years), more orders were added to the dealers. The number of orders for spring and summer series in 2018 continued to show growth momentum, up 21% over the same period last year.

Based on the high cardinal effect, the series of autumn and winter 2018 will increase by 10% and 5% respectively.

Overall, as the expected number of orders is better than expected, the company's revenue will rise in 2018, and the 18/19 profit growth forecast will be increased by 2%, from an increase of 8% over the same period to 10% over the same period.

Our earnings per share forecast in 17-19 is 6% higher than the market consensus.

Return on investment still attracts

Despite the general growth prospects, the company still provides excellent return on investment, because its valuation is 18 times forecast earnings, 10 times the average level of clothing and sports apparel industry, 11-12 times.

In addition, the returns of Li Lang are still attractive, with a dividend yield of 17-19 in the year of 6-7% (4% and 5% respectively in clothing and sportswear industry) and 19%, compared with 10% and 14% in the clothing and sports apparel industry respectively.

The new target price is HK $7.23.

China Merchants Securities maintains a buying rating different from the market consensus. The new target price is HK $7.23, reflecting the higher 18/19 earnings per share forecast and the 18 year target price earnings ratio increased from 10.5 times to 11.5 times. The valuation method based on our apparel industry average level remains unchanged, which is also consistent with the average level of sports service industry.

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