Maintain BUY but trim TP to HK$ 15.52, based on 13x FY6/20E P/E (from 14x as we foresee slower growth ahead). With declining industry growth and prudent guidance, we foresee certain share price weakness in near future. However, given current valuation of 11x FY20E P/E and 7% yield, it should provide certain cushion and limit the downside risk.
- FY6/19 net profit inline but sales slight missed. JNBY’s sales/ net profit rose by 17%/ 18% YoY to RMB 3,358mn/ 485mn, which were 3% below/ same as CMBI’s est. respectively.
- Slowdown of sales growth in 2H19 was offset by more government grants. Sales growth of younger brands (CROQUIS, jnby by JNBY and less) was relatively slow, decelerated to only 8% in 2H19, vs 27% in 1H19, while that of e-commerce remained robust, at 38% in 2H19 vs 57% in 1H19. However, aided by strong government grants (~1.8% of sales in 2H19 vs 1.2% in 2H18), net profit margin managed to stay flattish, at 14.4% in FY19.
- Guiding an only low-teens sales growth in FY6/20E. While economic downtrend and worsening offline traffic continued to weigh on the apparel industry, we are not surprised to see JNBY giving out more conservative guidance, hence low-teens sales growth for FY20E (CMBI est. of online/ offline self-owned/ offline distributors growth are 30%/ 14%/ 9%), a slowdown from high-teens growth back in FY19. We also trimmed new store openings to just 187/ 195/ 193 or 9.3%/ 8.8%/ 8.0% growth for FY19E/ 20E/ 21E.
- …and a ~10% net profit growth in FY6/20E. Moreover, to factor in: 1) rising D&A and greater rental expenses for new office, 2) initial losses for new logistic centre and 3) depreciation and finance cost adjustments under, IFRS 16, the new accounting standard, we are expecting an additional expenses of ~RMB 36mn, thus pushing down NP growth to ~10% in FY20E.
- Maintain BUY but trimmed TP to HK$ 15.52. We maintain BUY but cut TP to HK$ 15.52, based on 13x FY20E P/E (from 14x P/E due to slower growth ahead), implying a 1.1x 3 years PEG. The counter is undemanding, at 11x FY19E P/E and 7% yield. We revised down our FY20E/21E EPS estimates by 2.9%/5.1%, to factor in the 1) slower offline sales growth, 2) greater discounted sales contribution, thus lower GP margin, 3) slightly slower store expansion and 4) widened losses for the emerging brands.
