The overall performance turning point is paying attention to the TOC model

Peace bird 603877, diagnosis stock

Event: Recently, we conducted on-the-spot investigations on the company and communicated with the company's management layer on the company's operating performance and follow-up strategic issues.

The mid-end fashion brand group, 2018 young and loaded.

Taiping Bird is a retail-oriented multi-brand fashion apparel company founded in 2001 and listed on the Shanghai Stock Exchange in January 2017. The company's strategic goal is to become "the preferred brand of the new generation of Chinese fashion", and is committed to providing consumers with medium-priced high-quality fashion apparel. At present, the company mainly owns PEACEBIRD women's wear, PEACEBIRD men's wear, LEDIN Lecho women's wear, MiniPeace children's wear, MATERIALGIRL women's wear brand, and expands the brand of Machi Home, Underwear, Petitavril Betty Children's Wear, Peace Bird, Nest Home, PAPAFACE Women's Tide brand.

In recent years, the company's performance has shown steady growth. The compound growth rate of revenue in the past five years is 13.27%, and the compound growth rate of net profit is 28.88%. In 2015, the company began to adjust the overall tone of the brand, giving and emphasizing the fashion and young genes of the products, which inevitably caused a certain amount of inventory backlog. In 2016 and 2017, the company accrued 209 million yuan and 175 million yuan respectively. The inventory depreciation reserve has dragged down the overall performance. In 2016, the company's revenue growth rate was 7.06%. Since 2013, it has dropped to single digits for the first time. The net profit growth rate is -20.22%. It was the first time since 2013. After nearly two years of adjustment, the inventory has gradually cleared up, the storage age has been optimized and improved, the product tonality has gradually stabilized, and the products have gradually gained market recognition. The company achieved revenue of 7.142 billion yuan in 2017, an increase of 12.99%, and a net profit of 456 million yuan. With the increase of 6.72%, the growth rate, especially the net profit growth rate, has increased significantly compared with 2016. On the basis of the reduction of inventory pressure, the company first piloted the TOC model in PEACEBIRD menswear, and the sales rate, discount rate and tracking rate were all improved. In addition to the endogenous growth of other brands, the company's 2018Q1 performance was outstanding, achieving revenue of 17.34. 100 million yuan, an increase of 14.49%, a net profit of 133 million yuan, an increase of 131.88%, net profit doubled.

The TOC model was successfully piloted and introduced to all brands of the company in 2018.

In order to break through the bottlenecks of production and sales issues such as production and sales rate and marketability, the company further integrates data analysis, production reversal, warehousing logistics and terminal retailing capabilities through the TOC (Theoryofconstraints-constrained theory management model) system based on sound channels and comprehensive data foundation. In turn, the inventory optimization of the best-selling deep sales and sales is realized. The autumn and winter 2017 PEACEBIRD men's clothing took the lead in the TOC model pilot, the effect is remarkable: in the winter of 2017, the production and sales rate increased by 6pct., the discount rate of garments increased by 3pct. The ratio of replacement orders achieved breakthrough; the gross profit margin increased by 2.79pct. to 61.32%. Take the double-faced coat as an example. In the winter of 2017, a total of 170,000 pieces were sold, contributing 200 million in retail sales, of which 10 million invoices were contributed by TOC's 5 replenishment orders.

The success of the PEACEBIRD men's TOC model pilot has provided reference for other brands. The company will be implemented across the brand in all brands under the group in 2018. Children's clothing fabrics and men's fabrics have relatively simple characteristics. The company has adopted the DuPont fabrics and higher standard surface materials to differentiate the children's clothing accessories. In addition, the MiniPEACE itself is the PEACEBIRD men's clothing hatching differentiation, the operating theory of the TOC model. Reproducible. However, due to the high degree of fabric use and the high degree of complexity, women's wear management, especially fabrics, is difficult, and there are certain difficulties in the application of TOC mode. However, considering that the company is the first to make a rapid response to the supply chain, it is the Lechocho women's wear. The entire women's wear brand has a certain supply chain foundation. In addition, the company's current buying mobile phone system, especially the women's fabrics, has a more prominent buyer's ability. The fabric corresponding to the strong and explosive products accounts for about 70% of the fabrics purchased, that is, the buying rate is about 70%. The higher fabric buying rate provides a solid foundation for women's implementation of TOC.

The brand hatching ability is strong, and the path of future expansion is clear.

As a mid-end fashion brand group, the brand follows the developmental gene of “nurturing”. PEACEBIRD men's wear is separated from PEACEBIRD women's wear, MiniPEACE children's wear is separated from PEACEBIRD men's wear, and the town's home is separated from LEDIN Lecho women's wear, and the underwear product line is separated from the women's wear product line. The rapid growth of PEACEBIRD men's wear and MiniPEACE children's wear, as well as METERIALGIRL women's wear, Petitavril shell sweet children's wear, PAPAFACE tide suit, etc., we can find that the company's brand hatching ability is strong. At present, METERIALGIRL women's clothing is expected to be profitable in 2018, and MiniPEACE children are expected to build certain brand barriers in the middle and high-end children's wear market within 3 years. The home line of Taiping Bird. Nest and Miao Home will have a breakthrough in performance after the style adjustment is confirmed.

The company's future development path is clear, and both long-term and short-term goals are available. In terms of short-term goals, 1) net expansion of 600 stores in 2018. The 600 stores are expected to account for about 30% of the direct sales stores. The channels focus on the core business districts and shopping centers of the first, second and third tier cities. PEACEBIRD men's wear, PEACEBIRD women's wear, MiniPEACE children's wear, LEDIN 乐町 women's wear are expected to have 100 At the same time, the company plans to open about 10 brands of large stores (1000m2 or more, gold location, annual turnover of 30 million). 2) 30% growth in online business in 2018. In 2017, the company's online business income was 1.79 billion yuan, a year-on-year increase of 37.48%, revenue accounted for 25.45%, 2018Q1, the company's online business income was 457 million yuan, an increase of 23.65%, revenue accounted for 26.60%. Based on the high base of the company's online business, the company has set a growth target of 30% in 2018. The inventory clearing, online special contributions and discounts are gradually reduced. The company will further increase the quantity and proportion of new products, plus the TOC model and other The positive factors, we expect the discount rate will increase in 2018, the number of discounts will be reduced, and the profit margin is expected to increase. In terms of long-term goals, online and offline retail sales will exceed 20 billion yuan in the next three years, and online water consumption will exceed 10 billion yuan. In the future, the company will continue to improve the store's fine management and continuously improve the store's efficiency; MiniPEACE and Petitavril betty children's wear form a children's wear brand matrix, benchmarking competition Barabala; corresponding to the current online business of 4 billion yuan of water, 1.8 billion yuan of revenue, In the next three years, the online water consumption of 10 billion yuan will correspond to the scale of revenue of 4.5 billion yuan; the direct line will be complemented by direct sales, and the increase in the proportion of direct stores will drive the growth of offline performance.

For the first time, give a “Recommended” rating.

As a multi-brand operation apparel group, the company has outstanding fashion design capabilities, adheres to the mid-end cost-effective route, and has not significantly increased the product rate. There is still room for exploration in the existing stock market. The incremental market corresponding to emerging brands and cultivating brands also has potential. . We are optimistic about the company based on the following points: 1) Both the company and its management layer regard fashion and design as the source of production and sales. The learning ability, responsiveness and execution ability of fashion are at a high level, and the company dares to enable all kinds of talents. Young talents, a learning atmosphere, a virtuous circle of competition, and high employee loyalty. 2) From the perspective of inventory age, turnover level, operation of TOC mode, expansion of offline stores, promotion of online business, etc., combined with the performance in the first quarter, we judge that the overall turning point of the company's performance will continue. 3) The company's two-year adjustment has improved performance, and a series of marketings such as 2017H2 cross-border cooperation, KOL, and brand big show have been recognized by the market and supported by performance. It is expected that there will be several high-quality IP cooperation in 2018, combined with refinement in suppliers. Management and life-cycle membership management are intensive, and the company's operational capabilities are more prominent. However, we will still pay attention to the improvement of inventory, the operation of the TOC model in the women's brand, and the impact of the quarterly performance caused by the increase in the frequency of the order.

The company's revenue for 2018-2020 is estimated to be 83.64/96.27/11.082 billion yuan, net profit is 6.42/8.36/9.97 billion yuan, and EPS is 1.34/1.74/2.07 yuan respectively. Give the company 25.5-28.5 times PE in 2018, and the stock price range is 34.17-38.19 yuan in the next 6-12 months. For the first time, give a “Recommended” rating.

Risk warning: TOC model failed to advance; consumption was weak; new brand expansion was less than expected.