A Lot Of Money Fled In The South Of The Yangtze River.

Jiangnan Buyi (03306), which has announced a double increase in revenue and net profit, seems to have suffered a lot of capital flight recently.

Zhitong finance and economics APP understands that Jiangnan Buyi released its annual performance report in August 27th. The company achieved revenue of 3 billion 358 million yuan (the same below) for the entire fiscal year ended June 30, 2019, an increase of 17.3% over the same period last year, a gross profit of 2 billion 56 million yuan, an increase of 12.6% over the same period last year, a net profit of 485 million yuan for shareholders, an increase of 18.1% over the same period last year, a basic profit of 0.95 yuan per share, and a final dividend of 0.43 yuan per share.

On the day of the announcement, the share price of Jiangnan cloth fell to -2.31%, and the volume of the 1 million 50 thousand shares was nearly 3 times larger than that of the previous day. In August 28th, the company's share price dropped by 10.24%, and the volume expanded further to 3 million 470 thousand shares, involving HK $40 million 210 thousand. On the 29 day, the decline of Jiangnan cloth clothing remained unchanged, and the decline of -6.49% was also accompanied by a large number of transactions of 2 million 140 thousand shares. In just 3 trading days, the company's total stock price fell nearly 20%, and over 76 million yuan fled.

The market panic may be behind the growth of good performance, there are many signs of growth slowdown.

Revenue growth declined for the first time in five years

Behind the overall growth of maturity, growth and emerging brand revenue, it is the lowest year-on-year growth in four years. Zhitong finance and economics APP learned that in the financial year of June 2019, the revenue of the mature brand JNBY reached 1 billion 879 million yuan, up 15.9% from the same period last year, and the share of revenue decreased from 56.6% in the same period last year to 56%. Growth brand CROQUIS, JNBY by JNBY, less revenue grew by 14.1%, 20.8%, 20.6% to 645 million yuan, 476 million yuan and 287 million yuan respectively, the growth brand overall revenue increased 17.6% to 1 billion 408 million yuan, accounting for a slight increase from 41.9% in the same period last year to 41.9%. The 71 million 420 thousand yuan of new brands has the smallest volume of revenue contribution, but the growth of 57.8% is the brightest year on year, and its revenue share has increased by 0.5 percentage points to 2.1%.

The growth of the whole brand has helped to increase the revenue of the 17.3% of the south of the garment industry, but the company's year-on-year revenue in the past five years was 16.60%, 17.95%, 22.58%, 22.80% and 17.25% respectively. In the 2019 fiscal year, the growth rate was the first time since the growth rate in 2015.

At the same time, the company's gross margin level also appeared to make the market worried.

The gross margin of the brand is poor.

The first time the revenue growth has dropped, the gross profit margin of Jiangnan Buyi is still at its lowest level in five years. Zhitong finance and economics APP learned that the company's mature brand JBNY contributed 1 billion 164 million yuan in gross profit, an increase of 12.9% over the same period last year, and the gross profit margin dropped 1.7 percentage points to 61.9% over the same period. The growth rate of CROQUIS, JNBY by JNBY and less gross profit increased by 9.6%, 13.2%, 15.3% to 414 million yuan, 259 million yuan and 190 million yuan respectively, and the gross profit rates dropped by 2.7, 2.7, and 190 million percentage points respectively. The overall decline in gross margin level led to gross profit of 2 billion 56 million yuan, 12.6% year-on-year growth rate was significantly lower than revenue growth, gross margin level fell 2.5 percentage points to 61.2% over the same period.

In the past five fiscal years, the gross profit margin of Jiangnan Buyi was 61.41%, 62.57%, 63.23%, 63.75% and 61.23% respectively, and the gross margin level of 61.23% in fiscal year 2019 was the lowest in five years.

The company said the cause of the decline in gross margin was mainly due to changes in the structure of the channel, that is, the proportion of self operated channels under the relatively high gross margin. Data show that although the 1 billion 489 million yuan revenue of self run stores is still the heaviest in the south of the Yangtze River, the growth rate of 6.3% is much lower than that of the distribution outlets under the same line. The 47.9% growth of the online channel is 47.9%, and the profit margin of the high margin self operated store has dropped to 44.3% from 48.9%, which has caused the gross margin level of the company to be dragged down.

Against this background, the profitability of the main business of the company has slowed down substantially.

Net profit growth also needs to be removed.

After eliminating the non main business, the profit growth rate of Jiangnan cloth clothing will also be discounted. Zhitong finance and economics APP learned that, on the basis of 12.6% growth in gross profit, the sales and marketing expenses increased by 12.8% to 1 billion 170 million yuan compared with the same period last year. The administrative expenditure increased by 20.3% to 302 million yuan over the same period, which was higher than the gross profit growth rate. Therefore, the 645 million year profit growth of 15.99% was higher than that of the gross profit growth rate.

Statistics show that the largest contribution to other revenue growth is the increase of government subsidies from 122.7% to 44 million 70 thousand yuan over the same period, plus the provision of idle land to allocate and sell idle land, which increased by 6 million 920 thousand yuan and 6 million 410 thousand yuan respectively compared with the same period last year. This means that the slowdown in profitability of the company's main business is actually more serious than the surface data.

Over the past five years, the net profit of shareholders of the company has increased by 31.69%, 21.60%, 38.54%, 23.76%, and 18.14% respectively. Even though there are many non main business support, the net profit growth in 2019 fiscal year has slipped to the lowest level in five years, and it has dropped to below 20% for the first time in five years.

In addition, Jiangnan cloth will move to the new headquarters in 2020 - located in the "Tianmu Li" west of Hangzhou. But what happens at the same time is that Jiangnan Buyi is going to depreciate the new headquarters and logistics center. The management of the company also openly indicated that the growth will be dragged down and the growth rate will fall to "low double-digit" when looking forward to the performance of fiscal year 2020. Coupled with the impact of IFRS's new accounting standards, the company's future performance will be greatly affected, so HSBC, Citigroup and other major banks have also lowered the target price of Jiangnan cloth.

To sum up, there are many signs of slowing growth in the south of the Yangtze River. There are still many factors that will drag down profits in the future. Therefore, it is easy to understand the rapid drop in performance and a large amount of capital flight after the announcement.