[Depth Analysis] What Does This Designer Brand Jiangnan Cloth Rely On To Support Billions Of Market Capitalization?

Jiangnan Buyi is the leading designer brand in China. fashion Group, designer brand is mainly targeted at high and middle income consumers who pursue high quality clothing products and personal feelings. Clothing usually has strong design sense and characteristics, and the logo brand personality is easy to identify.

The leader of the Chinese designer clothing market is growing rapidly. According to 2017 retail sales statistics, Jiangnan Buyi group ranked first in the Chinese designer fashion industry (accounting for about 9%). There are 7 brands under the group, which respectively locate women's wear, men's wear, children's wear and home. Over the past 3 years, the further expansion of channels and the gradual stabilization of new brands led to a rapid increase in income and net profit, and the compound growth rate of 3 years was 19% and 30% respectively.

Designer brand segmentation industry has great potential in the overall clothing market. With the increasing demand for personalization and fashion products, consumers are increasingly looking for clothes that can represent their individuality. With strong innovation ability and brand personality, designer brand can provide highly differentiated products with unique characteristics. According to the CIC consulting report, it is estimated that the market capacity will increase from 5 billion 680 million yuan to 13 billion 460 million yuan from 2018 to 2022, and the compound annual growth rate will be 24.5%.

Quality and stability of designer team, multi brand strategy and fans economic operation to build core competitiveness. 1) the group's designer team is stable and high quality. In the future, the designer hatch platform will help multi brand strategy. At present, there are 60 designers in the group. Among them, Li Lin, the founder and chief creative officer of the group, is the principal designer. Each of them has worked in the group for more than 16 years. Under the guidance of these old designers, the group has constantly absorbed excellent designers to create stable designer echelons to match the constantly added brands. 2) in the layout of multi brand strategy, we must break through the market segments and build the ecological circle of the south of the Yangtze River. From the comparison of designer brands, Jiangnan cloth covers the most comprehensive and cost-effective market segments. 3) the full channel operation mode based on fans economy is the escort of sales. The group is currently the most successful fan business operator in the domestic designer's brand.

In 2017, more than 140 thousand of the members consumed more than 5000 yuan per year, resulting in over 16.7 consumption of $100 billion. The group has absorbed powder through rational offline store expansion, making full use of social media such as WeChat and micro-blog to enhance interaction with fans, making use of online and offline activities to further enhance fans' understanding and cognition of brand spanmission life philosophy, enhance brand loyalty and enhance repeat purchase rate, strengthen the layout of electronic business platform, and further improve sales efficiency by using inventory sharing system, thus realizing the full channel operation mode with fans economy as the core, providing the most comprehensive guarantee for group sales.

Valuation and rating: we expect the company's 18/19/20 EPS to be RMB 0.83/1.02/1.22 yuan, corresponding to the dynamic P / E ratio of 19/16/13 times. We believe that the company is the leading brand clothing designer company. We gave the company 23 times PE valuation in 2018, corresponding to the target price of HK $22.9, for the first time covering the "overweight" rating.

Risk warning: the risk that brand style is no longer popular.

The following is the original text of the study:

1 the leader of China's fashion market, the revenue and net profit have increased rapidly.

Jiangnan Buyi group is China's leading designer brand fashion group. According to the retail sales volume of 2017 years, the group ranks first in the Chinese designer fashion industry (accounting for about 9%). Group products are mainly aimed at middle and high level revenue customers, to meet the needs of customers to highlight their individuality through clothing, to design, promote and sell fashionable clothes for ladies, men, children and teenagers. The brand portfolio includes JNBY, CROQUIS (sketch), JNBY by JNBY, less, Pomme de Terre (Peng MA), JNBYHOME and SAMO, and seven brands, which are oriented to specific customer segments and share the unique design concept of the group's unified brand concept. The group has actively deployed overseas markets. Currently, there are 39 distributors and 5 direct outlets outside mainland China, covering 17 countries and regions in the world.

From 2014 to 2017 fiscal year, group business revenue increased from 1 billion 380 million yuan to 2 billion 330 million yuan. In the past 3 years, the compound annual growth rate was 19%, and the operating income growth rate increased year by year, mainly due to the accelerated growth of non JNBY brands. The net profit from mother yuan increased from 150 million yuan to 330 million yuan, and the compound annual growth rate of 3 years in the past year was 30%.

Channel expansion and new brand contribution revenue growth

By the 2018 half of the fiscal year, the number of stores under the group line was 1768, and the number of stores in the past 3 years was 16.6%. Among them, JNBY by JNBY, sketching and less have achieved rapid channel expansion. With the expansion of stores, non JNBY brand revenue has been growing rapidly, and has played a leading role in the sustained growth of business revenue. Judging from comparable data from the same store, the group has shown a continuous upward trend in the past few years, and the market demand has continued to improve.

2, the potential of subdivision industry is huge.

2.1 designer brand segmentation industry has great potential in the overall clothing market.

Clothing consumption as an important part of national consumption largely depends on the income of residents. From 2013 to 2017, China's sustained economic growth has laid a good foundation for the development of the garment industry. It is estimated that the compound annual growth rate of urban household disposable income in China from 2018 to 2022 will be 7.1%. The strong rise of China's economy has brought considerable pressure on the United States of the world's largest economy in many ways. However, the total consumption per capita consumption of clothing and shoes in China is 250.8 US dollars, which is still at a low level compared with the average level of 902.5 in developed countries. In addition, according to the 2018 year old consumer market environment and trend report released in March 30, 2018 this year, consumption is still an important driving force for China's economic growth. The state will continue to promote domestic demand, strengthen the fundamental role of consumption in economic growth, and the consumer goods market is expected to grow by 10.1%, which will provide impetus for the growth of clothing and footwear consumption.

According to brand types, the clothing industry mainly includes designer brand, luxury brand, fast fashion brand and commercial brand. Jiangnan Buyi is the leading designer brand fashion group in China. The designer brand is mainly targeted at high and middle income consumers who pursue high quality clothing products and personal feelings. clothing Usually, it has strong sense of design and characteristics, and the brand personality of logo is easy to identify.

With the increasing demand for personalization and fashion products, consumers are increasingly looking for clothes that can represent their individuality. With strong innovation ability and brand personality, designer brand can provide highly differentiated products with distinctive characteristics. Therefore, it has maintained rapid growth in the past few years and predictable years ahead. According to the CIC consulting report, from 2013 to 2017, the designer's brand subdivision market capacity increased from 1 billion 800 million yuan to 4 billion 490 million yuan, and the compound annual growth rate was 25.7%. The market capacity of 2018 from 2018 to 2022 years is expected to grow from 13 billion 460 million yuan to 13 billion 460 million yuan, and the compound annual growth rate is 24.5%, far exceeding the overall growth level of the clothing industry.

2.2 quality and stability designer team, multi brand strategy and fans' economic operation to build core competitiveness.

2.2.1 quality stable designers echelon, the future design incubator platform to help multi brand strategy

The group adopts the design led retail mode, giving the talented and experienced team of designers the freedom to create fully, focusing on originality in the design process, allowing designers to pursue aesthetic sense of beauty with unique aesthetic vision, rather than always following or cater to the latest trend, so as to ensure the high degree of identification of the group's products. Listing provides opportunities for the group to grow in the international market. The important step of the future international expansion plan is to attract new design talents and set up the incubator platform. The mature business model of the group can provide designers with the opportunity to display their talents. The spanformation of designer's results is the source of lasting attraction for the group products, and also provides the talent base for the multi brand strategy of the group.

Designer team is stable and brand recognition is high.

The core of designer brand fashion group is strong design ability. A stable and high quality designer echelon can ensure that the brand design concept is rooted in one continuous line on the basis of innovation, and extend the brand concept to the field beyond the clothing branch, and reach a wider customer base. With this capability, the group can continue to provide innovative products, earn higher product premiums, and gain a higher profit margin in the long run. From the group's founder and chief creative officer, Ms. Li Lin to the chief designer, each of them has worked in the group for more than 16 years. Under the guidance of a group of old designers, the group has constantly absorbed excellent designers to create stable designer echelons to match the continuously added brands. At present, there are more than 60 designers. In the 2017 fiscal year, more than 4000 styles have been launched. On the basis of innovation, they have always maintained the consistency of the soul of the South China cloth design system and ensured the high recognition of the brand. According to the CIC report, consumers believe that the JNBY brand has the characteristics of very distinctive designer, simple fashion design, comfortable fabric and high brand awareness.

Pay attention to the combination of art and provide inspiration for designers.

In 2008, the group set up the laboratory of imaginative mechanics. It is a non-profit art center. It is a specialized agency to explore and support new art forms. It focuses on finding and promoting innovative things, and building an exchange and development platform for artists. At the same time, the group can cultivate a new generation of designer talents through art cooperation projects, and cooperate with artists with novel concepts to provide inspiration for designers.

Continue to focus on fabric design and development, help design products landing.

The group focuses on the design and development of high quality fabrics, and has a team specializing in fabric development, and has successfully developed 10 kinds of fabrics. Adhering to the passion for pure handwork's unique texture and its insistence on manual creation, the group also set up the Jiangnan cloth fabric laboratory, which provides a unique original forging design for the brand's independent fabric series. Every season orders will set up a special design team to specialize in innovative design, and enhance the competitiveness of clothing in a two pronged way, striving to make products distinctive and provide products with higher quality and better embodiment of designer's concept as far as possible.

2.2.2 constantly breaks through the market segments in the layout of multi brand strategy, and builds the ecological circle of cloth in the south of the Yangtze River.

Multi brand strategy is the only way for brand clothing enterprises to break through single brand scale ceilings. The 7 major brands of the group are almost all consumers of all ages. Each brand has different design styles and brand positioning. It can disperse risks to a certain extent and ease the single brand sales slump caused by the rapid change of fashion. In addition, there is synergy between brands. The loyal customers of the main brand JNBY are easy to produce the demand for other brands of the group, and the brands in different life cycle interact with each other, so as to achieve the overall sustainable growth. As of June 2016, more than 23 thousand (7.1%) members have become members of JNBY and CROQUIS, and over 15 thousand (14.3%) members have become members of JNBY and less at the same time. Over 24 thousand (13.9%) members have become members of JNBY and JNBY by JNBY.

From the comparison of designer brands, Jiangnan cloth covers the most comprehensive market segments, including men's wear, women's wear and children's clothing. Compared with the high-end brand positioning of various designer groups, the brand of Jiangnan Buyi brand is more cost-effective. For example, compared with the same main environmental protection brand, the price of the group's brand is lower under the condition of the same fabric quality.

Further subdivision of group business according to audience types can be found that from 2014 to 2017 fiscal year, the proportion of women's clothing in business receipts decreased from 79.8% to 66%, and the growth rate was lower than the overall level. The contribution of other types of market segments to business income has increased year by year. The contribution of men's clothing sales to business income has not changed significantly, and the growth rate is slightly higher than the overall level. The income of young people and children's products in this subdivision market has increased rapidly, and the contribution rate to total business income has risen from 3% in fiscal year 2014 to 14.2% in fiscal 2017, mainly due to the fact that the opening up of the second child policy has led to the overall upward trend of children's clothing industry and the upgrading of consumption and so on, so that the sales volume of JNBY by JNBY has increased considerably.

Overall, Men's wear The growth of sales and sales of youth and children's products played a stimulating role in the growth of total business revenue. Although the two growth rate was higher than that of female clothing, the absolute amount was still significantly lower than that of women's clothing. Women's clothing is slower because of its larger body size, but it has a very stable growth. It can be used as group cash cow to support the cultivation and development of the new brand of the group.

2.2.3 is a full channel operation mode with fans economy as its core to escort sales.

The group is currently the most successful fan business operator in the domestic designer's brand. As of the first half of fiscal year 2018, premium fans contributed 67.4% of the sales revenue to the group. In addition, the group's fans continued to improve. From 2015 to 2017, the number of active members increased from 115 thousand to 260 thousand, the compound annual growth rate was about 50%, and the number of active members in 2017 was more than 290 thousand, an increase of 26% over the previous year. At the same time, the number of members with higher consumption has also increased year by year. In 2017, over 140 thousand of the members consumed more than 5000 yuan per year, resulting in over 1 billion 670 million consumption.

From the 5 core steps of fans' economic operation, such as absorbing powder, improving the quality of fans, buying and buying, continuing to repeat the purchase rate, and buying multiple channels, the group can absorb powder through rational offline store expansion; make full use of the interaction between WeChat and micro-blog social media, and make use of online and offline activities to further enhance fans' understanding and cognition of brand spanmission life philosophy, enhance brand loyalty, strengthen the layout of electronic business platform, and further improve sales efficiency by using inventory sharing system, thus realizing a full channel operation mode with fans economy as core, providing the most comprehensive guarantee for group sales.

Rational store expansion speed to achieve suction powder

In the 2018 fiscal year, the group planned to open 200-350 stores. By the end of December 2017, 177 stores had been added. From the past few years, the group has maintained a steadily increasing level of store expansion. With the steady expansion of group stores, the number of group members has also increased steadily. We believe that the group's excellent quality and unique products with the expansion of channels have produced an amazing ability to absorb powder. By the end of 2017, the number of members exceeded 2 million 400 thousand, representing an increase of about 20% compared with June 30, 2017. Among them, the proportion of online members increased gradually, and by the end of 2017, online membership accounted for more than 79%. In the same period, micro-blog fans increased by 3 times, a net increase of about 600 thousand, Tmall shops concerned about the number of fans increased by about 500 thousand, and the ability to absorb powder was the leading industry.

The whole channel interactive platform strengthens the stickiness of the fans, and realizes the stock sharing system.

The group has set up a full channel interactive platform, aiming at cultivating "fans economy" (buying group products by pursuing the lifestyle advocated by the group), improving fans' understanding and cognition of the brand's life philosophy, enhancing brand loyalty and increasing the repeat purchase rate. Taking into account the information acquisition channel and purchase mode of consumers, the platform includes three parts (1) offline retail outlets (2) online platform (3) WeChat interactive marketing platform.

(1) offline retail outlets: designer brands emphasize experiential consumption. Offline stores offer not only a clothing experience, but also a unified guide to the appearance of self owned stores and distribution shops, and also the brand's pursuit of natural and comfortable lifestyles. The group will organize offline activities on a regular basis, such as organizing children to travel to Africa before. In the concept store of Liang Ma Qiao's official residence in Beijing, from decoration to display and layout, a new theme will be brought every few months, and the art form will be displayed in the commercial space of the concept store by way of exhibition. The exhibition of "no candy to disturb" was held by the contemporary artists. The exhibition not only showed many exhibits designed by artists and children, but also held a creative fashion show, and 30 children from the South China clothing consumer family displayed the latest products of the children's clothing brand JNBY by JNBY in the installation works of the artists, so that children and parents could enjoy "crazy and warm" time. Through increasing the sense of experience and interaction of consumers in the physical stores and offline activities, the group passes the designer's unique spirit and quality, and spanforms more consumers into fans of the brand.

(2) online platform: to satisfy customers' demand for shopping anywhere and anytime, adopt the strategy of "simultaneous sale of new products, the same price and the line of interests under the line" to resolve the channel conflict, that is, if customers place orders online, the products ordered will be delivered through retail stores or logistics centers (from customers' closest location) and through the revenue sharing system to distribute profits from various channels.

　 (3) WeChat platform: linking brands with consumers and conveying art. fashion Information, synchronization of the latest product information, shelf extension - online shopping, interactive value-added services. Different from traditional clothing Enterprises and groups, such as WeChat and micro-blog, are not only used to enhance consumer stickiness, but also provide a platform for online experience and shopping. Since the media channel is not only a consumer, but also a fan that spanforms consumers into brand names, it will further enhance the stickiness of fans to brands by passing on the idea of "better design and better life". In order to let fans online, Jiangnan cloth clothing in WeChat content creation, in addition to new theme and collocation information, also provide art and fashion information and other fans interested in content. In addition, through the interaction with fans on new products from the media, it can also predict sales volume to a certain extent, and make up the "exploding money" at any time, reducing the possibility of unsalable products under traditional mode, and effectively improving the efficiency of product design, production and sales during the season. By comparing with the online sales channels of the same type designer's brand clothing, we find that the group's online sales channels are the most comprehensive and integrate the information acquisition and purchase channels thoroughly, thus maximizing the spanformation from information spanmission to purchasing power.

The full channel interactive platform enables consumers to express their shopping requests in various ways at any time and anywhere. An effective inventory management system enables the group to meet the needs of consumers in the shortest time. The combination of the two allows customers to buy it if they want to buy it. The group is one of the few companies that have a stock sharing and distribution system. The system is developed by the group itself for its retail network. It enables customers to buy on demand even when a certain item is out of stock, improving customer shopping experience and promoting sales. In addition, the system can shorten the time to market, improve inventory management and improve the competitiveness of the industry.