The Most Profitable Industry Is Shenzhou International, Which Is Far Ahead Of The Fashion Rich List.

Blue chip new - China knitting giant Shenzhou International Group Holdings Limited (2313.HK), after announces worse than expected market performance, dropped more than 7% on Monday afternoon, down 6.23% from the day, guarding 100 Hong Kong dollar pass, at HK $100.8, corresponding to the market value of HK $151 billion 525 million.

In 2018, Ningbo garment giant's net profit increased by 20.7% from 3 billion 762 million 700 thousand yuan to 4 billion 540 million 500 thousand yuan, and earnings per share increased from 2.53 yuan to 3.02 yuan.

Despite earning more than 20%, the company's strong growth momentum gives investors high expectations, and the average profit forecast for the company last year is as high as 4 billion 710 million yuan.

Profits rose, the Ningbo garment giant continued to become the most profitable company in China's apparel industry, and Anta sports (2020.HK), which announced its annual net profit of 4 billion 102 million 900 thousand yuan, is the most profitable company for branding.

Ma Jianrong, chairman of Shenzhou International, is still ranked the richest in the clothing industry with the fortune of 7 billion 800 million dollars. It is more than two times the 3 billion 700 million dollar of the Zhou Chengjian family of the second Hai Lan family.

Morgan Stanley said Monday that Ningbo's net profit increased by 20% to 2 billion 400 million yuan in the second half of the year, which was 8% lower than expected. The sales increased by 20% over the year, which was higher than the expected 1%. The cost was higher and the operating rate 10.4% was 150 basis points lower than that of the bank, resulting in a lower operating profit than the expected 12% of the bank.

To this end, Dassault lowered the international target price of Shenzhou from HK $112 to HK $110, while maintaining the "overweight" rating. The bank said that Ningbo still had many structural advantages such as integrated supply chain and vertical mode, which promoted long-term value.

The Group intends to send a final dividend of HK $0.90, together with an interim dividend of HK $0.85, with a total dividend yield of HK $1.75 for the whole year, up 20.7% from HK $1.45 in 2017.

In fiscal year 2018, Shenzhou International, which owns Nike Nike, Uniqlo UNIQLO and Adidas Adidas, achieved 20 billion 950 million 200 thousand yuan sales, up 15.8% from 18 billion 85 million 200 thousand yuan a year ago.

During the period, the first largest customer contributed 6 billion 258 million 800 thousand yuan, up 19.1% from 5 billion 256 million 100 thousand yuan in 2017, 16 billion 237 million 400 thousand yuan from the top four customers, accounting for 77.5%, an increase of 13.7% compared with 14 billion 284 million 900 thousand yuan in 2017, while the rapid growth of the mainland market has become the group's largest market, with income 6 billion 312 million 400 thousand yuan last year, 30.3% yuan higher than the 4 billion 844 million 600 thousand yuan in 2017.

The sports category is still the Shenyang needle of Shenzhou International high speed growth. Last year, its income increased by 14 billion 275 million 600 thousand yuan, up 18.5% from the same period last year, accounting for a further increase of 150 basis points to 68.1%. The strong performance mainly benefited from the excitement of mainland China market movement, and the US market also had great demand.

During the reporting period, Shenzhou International gross margin increased by 31.6% on average by 20 basis points, with a gross margin of 6 billion 614 million yuan, representing an increase of 16.6% over the 5 billion 671 million 300 thousand yuan in 2017.

Ningbo group said that the scale of production capacity of overseas production bases increased in 2018, which further reduced the cost of unit product apportionment, and the continuous improvement of the company's production efficiency all had a positive impact on gross margin. However, the increase in labor costs and raw material prices weakened gross profit margins during the year.

Shenzhou International said that in order to cope with the pressure of recruitment difficulties and rising labor costs, the group attached importance to replacing manual operations with automation equipment.

During the year, although staff salaries continued to rise rapidly, the cost of staff costs declined.

In order to adapt to automated production scheduling, it not only improves production efficiency and shortens delivery cycle, but also helps stabilize product quality.

Nomura reported on Tuesday that Shenzhou International last year's gross margin was worse than market expectations, mainly due to the provision of retail business and the impairment of overseas stocks. The one-time factor was cut off and the gross profit margin was 32.1%. And the non operating factors are not likely to continue this year. It is expected that the EBIT profit margin of Ningbo company in 2019 will be increased by 100 basis points to 25.6% annually. Therefore, the Shenzhou International target price will be increased from HK $118.5 to HK $123.4, maintaining the "buy" rating, with the reduction of 8% and 7% respectively in the 2019 and 2020 fiscal year.

UBS on Tuesday also raised Shenzhou International target price from HK $107 to HK $117, maintaining a "buy" rating.

The bank points out that Shenzhou International will not suffer from the negative impact of Sino US trade friction, because China has become the largest market of the company.

CLSA also increased the target price of Ningbo company to HK $129.

In addition, Nomura said Shenzhou International capacity growth in 2019 is expected to slow down by 10%, but it will accelerate to 16% and 18% in the next two years.

Shenzhou International pumped up more than 4% on Tuesday morning.

Looking forward to the future, although the economic slowdown and trade friction have brought greater uncertainty to the company, and at the same time bear the dual pressure of market and cost, as well as the unfavorable factors of strengthening environmental regulation and increasing factor prices, the company actively deploys the Vietnamese market, continues to expand its overseas capacity, and continuously improves its competitiveness through product innovation and quality service, in order to win more market share, and at the same time, it will automatically resolve the rising cost.