Cathay Pacific Haitong Securities: Maintaining Jiangnan Cloth (03306)'s “Gain” Rating Multi-brand Ecosystem-Driven Value Compound

The Zhitong Finance App learned that Cathay Pacific Haitong Securities released a research report saying that the net profit of Jiangnan Puyi (03306) FY2027-2029 is expected to be 10.8/11.7/1.26 billion yuan respectively, and FY2027 12X PE will be given a target price of HK$28.3 based on the exchange rate of HKD 1 = 0.86 yuan to maintain the “increase” rating; the bank believes that the women's clothing industry is shifting from total expansion to share competition, and the concentration of the middle and high-end racetracks will increase relatively quickly, and Jiangnan Puyi is expected to take the lead in benefiting from strong brand recognition.

Cathay Pacific Haitong Securities's main views are as follows:

The women's clothing industry is shifting from total expansion to share competition, and the concentration of middle and high-end racetracks is increasing relatively fast

With strong brand recognition, Jiangnan cloth is expected to be the first to benefit. The growth rate of the Chinese women's clothing market is stabilizing, but the concentration (CR10 is 8%) is still significantly lower than that of the mature markets of Japan and South Korea (CR10 is 42%/24%, respectively). Among them, the concentration on the middle and high-end segments is increasing relatively fast. Market experience in Japan and South Korea shows that after consumer aesthetics mature, brands with stable styles and strong commercial operation capabilities are expected to continue to increase their share; Gangnam cloth has both local design recognition, diversified channels, and refined member operation capabilities, and is more likely to benefit from increased market segmentation concentration. FY2026 achieved net profit of 1 billion yuan (+12% year over year), ranking first in the domestic industry in terms of net profit scale.

JNBY's main brand supports stable cash flow, and multi-brand relays form a new growth curve

Thus, a unified and deep ecological accumulation is formed. 1) JNBY's main brand supports stable cash flow: the ten years after JNBY brand revenue first surpassed 1 billion yuan (FY2014-2024), achieving double-digit compound growth, leading the growth rate; FY2026 revenue reached 3.24 billion yuan. While building a basic cash flow market, the bank determined that the 3 billion yuan range was still not a large-scale ceiling; 2) LESS, children's clothing and emerging brands: the company built LESS, sketch, and jnby mainly through internal incubation By JNBY children's clothing and multiple emerging brands, covering different ages, genders and consumption scenarios. The revenue CAGR for each FY2019-2026 brand was 14.3%, 1.4%, 9.3%, and 31.2%, respectively. Among them, LESS, children's clothing and emerging brands grew faster, further enhancing the group's growth flexibility, and building a unified and deep designer brand ecosystem through shared design management, member access, and inventory collaboration.

Design, supply chain and members work together to build barriers, and high management quality lays a solid foundation for shareholder returns

The company relies on high R&D investment and a stable team of designers to build brand barriers, improve product operation efficiency and stabilize profit resilience through an intelligent fast reverse supply chain system. Currently, members contribute more than 80%, and strong service capabilities form members' competitiveness with high stickiness and high repurchase competitiveness. FY17-26 high-value members have increased from 118,000 to 360,000. In terms of profit quality, FY26's net interest rate of 16.5%, ROE of 38.3%, and inventory turnover days of about 166 days are superior to peers. FY26 includes a special dividend payout rate of about 110%, taking into account the quality of growth and cash return.

Risk Alerts

Demand for terminal consumers falls short of expectations, development of emerging brands falls short of expectations, etc.