报告名称：China Lilang(01234.HK)Pressure from warm winter but outlook still positive
报告类型：港股研究
报告日期：2016-01-07
研究机构：招商证券香港
股票名称：中国利郎
股票代码：01234
页数：7
简介：Warm winter currently experienced in Southern China to negatively impact Lilang's current SSSG and sell-through ratio which will lead to weaker Winter 2016 trade fair orders
Despite lowered earnings forecast, valuation (currently at 8x FY16E P/E vs peer average of 10x and its historical mean forward 9x P/E) and dividend yield (FY15E/16E at 8%) remain attractive
A warm surprise
The warm weather since Nov 2015 in Southern China (+20℃) has been detrimental to winter collection sales of apparel retailers. For Lilang, 40% of its annual sales are from winter season alone and out of which about 50% is from Southern China. As we expect the warmer than usual weather to continue for the rest of the season, we also expect Lilang's SSSG to post negative single digit SSSG vs positive high single digit SSSG in July-October 2015. The group has already taken measures to limit the impact as much as possible by already starting their end-of-season clearance sale for its current winter collection (average retail discount at 20% off). Although the warm winter will not impact Lilang's FY15E earnings, we expect the lower than expected sell-through ratio to negatively impact FY16E revenue from lower demand on its Winter 2016 collection from higher unsold inventory from its Winter 2015 collection.
We lower ourFY15E-17E earnings by 3%/6%/5%
Main adjustments include: i) lower FY16E-17E revenue by 2% as we trim our FY16E revenue growth from 10% to 8% YoY based on our new assumption that Spring/Summer, Autumn and Winter trade fairs account for 30%/30%/40% of annual revenue and that the respective 2016 trade fair value growth is expected to be 12%/8%/-8% YoY, ii) lift FY15E-17E A&P expense from 8% of revenue to 9%, iii) cut FY16E/17E other revenue from RMB30m and RMB20mn respectively to RMB15mn annually on more conservative estimates.
Fundamentals still strongwith valuation attractive
We consider the warm winter to be one-off while Lilang's outlook remains positive. As such, we maintain BUY rating on Lilang with our target valuation unchanged at 12x FY16E P/E (1SD above mean forward P/E) and set a new TP of HK$8.04 on lower FY16E EPS. Our FY15E-17E EPS are -2%/-5%/-3% vs consensus estimates.

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