Semir(SZ:002563) HTSC·2024-10-31 07:55Investment Rating - The report maintains a "Buy" rating with a target price of RMB 7.50 for Semir Apparel [7][15]. Core Views - The company reported a steady revenue growth of 5.62% year-on-year to RMB 9.399 billion in the first three quarters of 2024, although net profit decreased by 9.25% to RMB 755 million [1]. - The third quarter saw a revenue increase of 3.15% year-on-year to RMB 3.444 billion, but net profit dropped significantly by 35.97% to RMB 203 million, primarily due to increased channel and R&D expenses [1][3]. - The outlook for the fourth quarter is optimistic, with expectations of improved terminal performance and continued channel optimization and marketing investments [1][2]. Revenue and Profit Forecast - The forecast for 2024-2026 indicates a net profit of RMB 10.9 billion, RMB 12.9 billion, and RMB 14.8 billion, with corresponding EPS of RMB 0.41, RMB 0.48, and RMB 0.55 [5][14]. - Revenue is projected to grow to RMB 14.51 billion in 2024, reflecting a year-on-year increase of 6.2%, with further growth expected in subsequent years [10][14]. Channel Performance - Online sales are expected to outperform offline sales, driven by the company's comprehensive retail strategy and multiple platform efforts [2][12]. - The children's clothing segment, particularly the "Balabala" brand, is anticipated to show higher growth rates compared to the main Semir brand [2][11]. Cost and Margin Analysis - The gross margin for the third quarter decreased by 0.84 percentage points to 42.44%, attributed to rising procurement costs and promotional activities [3][14]. - The sales expense ratio increased by 0.69 percentage points to 23.11%, while R&D expense ratio rose by 0.48 percentage points to 2.70% [3][14]. Inventory and Cash Flow - As of the third quarter, inventory increased by 14.10% year-on-year to RMB 4.168 billion, with inventory turnover days improving by 23.84 days to 179.83 days [4]. - Operating cash flow turned negative, with a net cash flow of RMB -360 million, primarily due to new inventory purchases and loan repayments [4]. Valuation and Comparable Analysis - The report suggests a valuation premium for Semir Apparel, considering its leading position in the children's clothing market and ongoing channel optimization [15]. - The target price is based on a 2025 PE of 15.7x, compared to the industry average of 10.3x for comparable companies [15][16].