Seven Wolves: Net Profit In The Next Two Years Can Still Maintain Nearly 20% Growth.

The seven wolves released a performance bulletin. In the past 08 years, their operating income reached 1 billion 653 million yuan, up 88.6% from the same period last year, which is in line with the expectation. Net profit reached 141 million yuan, up 60% over the same period last year, lower than the 164 million yuan we predicted and the 165 million yuan expected by the market.

Among them, the fourth quarter income increased by 45.4%, net profit fell 18.9%.

Therefore, in the short term, it may lead to a general profit forecast reduction and a pressure on stock prices.

In the medium to long term: (1) the company's revenue grew rapidly, and its gross profit was stable. The profit was not up to standard, mainly due to the increase in the cost of opening shop, advertising and information management system, but it was conducive to the development and growth of the company.

2) in view of the fact that the company has achieved a good growth in 2008 and has a leading position in the leisure wear market in China, we maintain the "recommended" rating. If the short-term performance fails to meet the market expectations, the stock price will fall and the valuation is lower than the market average level. At present, the A share market is averaging 18 times the 09 year price earnings ratio, while the brand clothing company should have a certain premium in the larger market, which is a good time for the new intervention.

It has benefited from sales network expansion and upgrading projects, and sales scale has expanded further.

In recent 08 years, about 800 new stores have been opened (in 2007, the issuance of new projects has basically been completed), and the business area has increased by more than 70%.

Gross profit was basically flat, but the operating profit margin decreased by 2.1 percentage points from last year, mainly due to a substantial increase in sales and management costs: the company launched a large-scale store expansion project in 08, with higher capital investment.

We estimate that the sales cost will increase by about 1 percentage points.

The cost of advertising is higher than in previous years.

During the Olympic Games, the company invested some advertising expenses to enhance its brand image and influence.

The company is committed to sorting out the management framework and starting the Oracle IT system construction. Starting from 08 years, it will invest about 10 million yuan every year in the next 3 years.

Therefore, the management fee rate has increased by about 0.5~1 percentage points.

In the fourth quarter of 08, sales revenue increased by 45.4% compared with the same period last year, and net profit dropped by 18.9% compared with the same period last year.

09 years' Outlook: revenue grew by 10% in the first half of the year, and 16% in the second half of the year. Part of the one-time cost in the fourth quarter of 2008 is not expected to happen again.

We believe that the net profit rate decline in 09 years is unlikely.

We expect that the company will continue to expand its high-quality stores in 09 years, but the expansion will slow down to around 10%.

The high base effect in 08 years may form a certain pressure on the growth of the first half of 09 years, and inventory digestion.

We expect seven wolves to grow at about 10% in the first half of 09 and grow at around 16% in the second half.

The profit margin is lower than originally expected, but it will improve over the next 08 years.

Mainly due to the 08 year shop construction argument, site selection and other one-time costs no longer occur, advertising costs are expected to significantly reduce.

We expect the net profit margin of 09 years to be around 9.1%, which is basically the same as the 08 quarter of the 1-3 quarter.

09 net profit is expected to grow by about 20%.

The first half grew 10% year-on-year, up 35% over the second half of last year.

Excluding the additional cost of about ten million yuan in the 4 quarter of 08 years, the increase of 15% will achieve our expectation.

We will fine tune the -1.2%/-3.3% of 09-10 revenue forecasts to reflect the downward pressure on sales growth.

The net profit margin of 09/10 has been reduced to 9.1%/9.3% to reflect the scale effect of some one-time costs no longer occurring and income growth.

After adjustment, the company's net profit in 09-10 can still maintain close to 20% growth rate.

Investment advice: at present, the stock price corresponds to a 20.9 times 09 year price earnings ratio, which is lower than the valuation level of 25 times the US state dress.

Although the company's 08 year cost increase has led to a decline in profit margins, the cost is mainly used for store expansion, brand image enhancement and management capability improvement, which will lay a good foundation for the company's long-term development.

The seven wolves, as China's leading men's wear brand, have excellent brand image and store network advantages.

We are optimistic about its leading position in the industry and its long-term development potential to maintain the "recommended" investment rating.

Investors should pay attention to the downside of the industry valuation center and the potential risks brought by the slow growth of the 09 year report.

Brand clothing companies should have a premium in larger cities.

If short-term performance fails to meet market expectations, the stock price will fall and the valuation is lower than the market average (currently 18 times 09 years PE), which is a good time for new intervention.

Wang Xiaonan: editor in charge