Core Viewpoint - The report from CMB International maintains a "Buy" rating for Jiangnan Buyi (03306) and raises the target price to HKD 23.30 based on a 12x P/E ratio for the fiscal year 2026, up from a previous 10x for fiscal year 2025 [1] Group 1: Sales and Profitability Outlook - The company has slightly lowered its net profit forecasts for fiscal years 2026 and 2027 by 7% and 8% respectively, reflecting faster sales growth driven by new brand contributions, lower-than-expected gross margins, and operational leverage not meeting expectations [1] - Management has provided guidance for fiscal year 2026 indicating "aggressive sales growth but conservative profit margins," with a target of high single-digit sales growth [2] - The company aims for long-term sales targets of RMB 10 billion in retail sales and RMB 6 billion in listed company sales, with a long-term gross margin target of over 65% and a net margin target of over 15% [2] Group 2: Recent Performance and Trends - For fiscal year 2025, the company reported revenue growth of 5% to RMB 5.55 billion and net profit growth of 6% to RMB 898 million, aligning with expectations [3] - The gross margin decreased by 0.3 percentage points to 65.6%, slightly below expectations, but the effective tax rate was better than anticipated at 26.3% [3] - E-commerce sales grew robustly by 18%, benefiting from the acquisition of the online-focused children's brand onmygame, while self-operated store sales declined by 6% [3] Group 3: Future Growth Drivers - The company expects multiple drivers for sales growth in fiscal year 2026, including a low base effect from last year's warm winter, enhanced membership services, and the anticipated strong performance of new brands onmygame and B1OCK, which saw approximately 70% growth in fiscal year 2025 [2] - The company maintains flexibility to slightly increase retail discounts to boost sales and accelerate inventory turnover, especially as net profit margins are above long-term targets [2] - The company reported a 24% year-on-year increase in inventory levels, which requires attention as it may impact future profitability [3]
招银国际：维持江南布衣(03306)“买入”评级 目标价升至23.30港元