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Seven Riddles Of Biyinlefen: Light Assets Become Heavy Assets, Building Houses Is More Important Than Opening Stores

2019/7/20 12:59:00 43

Biyinlefen

In recent years, the company's net profit growth has greatly exceeded the revenue growth, the inventory has increased greatly, but the accrual ratio is too low. Moreover, in the past two years when the inventory turnover has slowed down, the gross profit rate has increased.

Biyinlefen (002832. SZ) products are positioned in the market segment combining golf with fashion and leisure life. After years of development, biyinlefen brand has a certain brand influence and popularity in the golf apparel market.

In 2017, the operating revenue increased by 25.23%, the net profit increased by 35.92%, the operating income increased by 39.96% and the net profit increased by 58.49% in 2018, and the operating income increased by 27.37% and the net profit increased by 52.91% in the first quarter of 2019. The gap between the growth of operating income and that of net profit is growing. In recent years, it is not uncommon for clothing industry to close stores on a large scale. Why is biyinlefen able to grow against the industry and achieve extraordinary growth?

It is worth noting that 161.84 million shares of restricted shares issued by the original shareholders are expected to be listed and circulated on December 23, 2019, and a wealth feast may be staged.

The projects invested by raised funds have been changed again and again

In December 2016, biyinlefen successfully raised 698 million yuan in IPO. Prior to that, the growth was also good. The compound growth rates of main business income, operating profit and net profit from 2013 to 2015 were 15.26%, 14.06% and 13.35%, respectively.

Marketing network is the main source of funds raised by biyinlefen, and the planned investment amount of "marketing network construction project" is 521 million yuan.

According to the information disclosure at that time, the "marketing network construction project" planned to build 248 direct sales outlets nationwide, including 7 flagship stores, 17 standard stores, 206 shopping malls, airport joint stores and 18 ball club stores. As of the end of 2015, the company has 601 terminal stores covering the country, including 280 Direct stores and 321 franchise stores, covering the core business areas of major cities in China.

The construction period of the above project is 3 years, and the design production scale is reached in the fourth year. After the implementation of the project, the main economic benefit indicators of normal operation year are respectively 539 million yuan of sales revenue and 129 million yuan of after tax profit.

According to the application draft of the prospectus in March 2016, the flagship stores and standard stores of this project are obtained through purchase, while the stores associated with stores and clubs are obtained through joint operation. At present, flagship stores and some standard stores have signed the purchase intention agreement.

On the eve of listing, the situation of the raised investment project is as follows: the project has completed the investigation and demonstration in the early stage of the project, the preparation of the project feasibility study report, etc., and has obtained the "Guangdong Province enterprise investment project record certificate" (filing Project No. 2015-440100-52-03-000709) issued by the development and Reform Bureau of Panyu District, Guangzhou city.

However, the project is progressing rapidly. According to the announcement on using the raised funds to replace the self raised funds in advance invested projects, about 100 million yuan has been invested as of February 28, 2017.

According to the semi annual report of 2017, as of June 30 of that year, the accumulated investment of the raised funds was 99.2238 million yuan, exactly the same as the amount on February 28 mentioned above. Didn't a cent of the raised funds be invested from March to June?

In July 2017, biyinlefen issued a notice to change the specific implementation location of some of the raised funds investment projects, making corresponding adjustments to the specific implementation locations of the company's previously determined "marketing network construction project".

Half a year later, in January 2018, biyinlefen issued the announcement on changing the use of part of the raised funds, indicating that it plans to cancel the fund-raising investment in the flagship stores and standard stores operated by purchase in the "marketing network construction project", and will use the part of the raised funds originally planned for the project to invest in the new "biyinlefen intelligent warehousing center" project The total amount of funds raised was 224 million yuan, accounting for 35.9% of the company's net raised funds. As of the end of 2017, the "marketing network construction project" has built 200 direct marketing outlets, accounting for 80.65% of the original planned number of new direct marketing outlets, including 185 shopping malls, airport joint stores and 15 club stores. By the end of 2017, the total amount of funds invested in the new direct sales outlets of the project was 131 million yuan, accounting for 25.21% of the total amount of funds raised in the original plan.

In a word, flagship stores and standard stores have been cancelled. So, what happened to the "signed purchase intention agreement" before? Why was it not implemented? Was there any agreement signed? Did biyinlefen breach the contract? If it broke the contract, would it be liable for breach of contract?

In addition, there is a big difference between the "store decoration" and the "long-term decoration cost".

According to the company's accounting policy, the decoration expenses of Direct stores are included in long-term deferred expenses and are amortised over three years. From October 1, 2016 to December 31, 2017, "long term prepaid expenses store decoration expenses" increased by 34.3374 million yuan. Why did biyinlefen use the raised fund of 54.3789 million yuan? The difference between the two is 20 million yuan.

By the end of 2018, only 289 million yuan had been invested. The amount of money raised between RMB 20 million and RMB 15 million can be used to guarantee the interest income of RMB 15 million. This project is much more reliable than the actual investment.

Sales outlets of wulihua

According to the prospectus, byrnerfen had 601 stores nationwide by the end of 2015. Among them, there are 364 high-end shopping malls, 48 airport stores (including high-speed railway stations), 159 independent stores and 30 ball club stores. From the number of stores, channel type, market coverage and other aspects, the company is in the leading position in the industry.

By September 30, 2016, the company still has 601 stores covering the whole country, and the number of various types of stores remains unchanged. Since the prospectus claims that the industry has such a bright future, why hasn't biyinlefen added new stores in nine months?

Until the annual report of 2016 showed that by the end of that year, biyinlefen brand had 602 terminal stores covering the whole country. That is to say, in one year, biyinlefen added one store.

According to the announcement on changing the use of some raised funds, as of June 30, 2017, biyinlefen has 602 stores covering the whole country. In the first half of 2017, stores did not increase.

As of February 28, 2017, nearly 100 million yuan has been invested in the raised capital. Has it not been possible to add a store?

In addition, the 2017 semi annual report shows that there are 603 stores. 602 or 603?

More interestingly, according to the announcement on changing the use of part of the raised funds, the "marketing network construction project" originally planned to build 248 direct sales outlets nationwide. By the end of 2017, the project had built 200 direct marketing outlets.

From the end of 2015 to June 30, 2017, biyinlefen has only added one store in a year and a half. This period of time, the store decoration cost also spent tens of millions of yuan. By the end of 2017, biyinlefen suddenly built 200 direct marketing outlets. But is it really the case?

According to the announcement on the reply to the inquiry letter on the annual report of Shenzhen Stock Exchange in 2017, the company had 652 terminal sales stores by the end of 2017, with the number of stores increasing by 50 compared with that at the end of 2016.

According to the annual report of 2018, by the end of 2018, the company had 764 terminal sales stores, with a year-on-year increase of 112, including 365 Direct stores and 399 franchise stores.

According to the company's network disclosure in recent years, why did it add 200 stores on the basis of 601 sales outlets before listing (November 2016), and only 652 stores (December 2017)? 149 stores were closed? 144 stores were closed from 2013 to 2015.

It is not known how many new direct stores will be added in 2018, but there are 280 before the listing. By the end of 2017, there have been 200 more. If the closure of stores is not considered, there should be 480 Direct stores by the end of 2017. In addition, there should be more than 500 Direct stores opened in 2018. Why are there only 365 Direct stores by the end of 2018? Have nearly 200 direct stores been closed? Only 68 stores have been closed between 2013 and 2015.

Where has the cost of sales increased

Biyinlefen's sales expenses in 2015 were RMB 229 million, RMB 262 million in 2016, RMB 344 million in 2017 and RMB 438 million in 2018. Sales expenses have increased significantly, but the growth of sales outlets is not so ideal.

Compared with the historical data, the sales expenses in 2014 increased by 30.3412 million yuan year-on-year, with 39 sales outlets at the end of the year; in 2015, the sales expenses increased by 31.503 million yuan and 42 sales outlets increased.

In 2016, the sales expenses increased by 32.8527 million yuan on a year-on-year basis, and the number of sales outlets increased by 1. This year, the decoration cost reached 51.8214 million yuan, an increase of nearly 10 million yuan. According to the 2016 annual report, the increase in sales expenses is mainly due to the corresponding increase in marketing expenses such as employee compensation, decoration expenses, packaging and transportation expenses, along with the expansion of the company's direct sales network. With such a large investment, why only one sales outlet was added in that year?

In 2017, the sales expenses increased by 81.7261 million yuan, the reason for the increase was the same as that in 2016, the sales outlets increased by 50; in 2018, the sales expenses increased by 94.314 million yuan, and the sales outlets increased by 112.

Is intelligent warehouse center really necessary?

Biyinlefen changed part of its fund-raising investment in its sales outlets to invest in intelligent warehousing centers, with an estimated total investment of 250 million yuan.

"Improve the company's market response ability, improve the efficiency of warehousing and distribution, improve the turnover rate of inventory, speed up the loading speed, optimize the inventory, and control the distribution cost." All of the reasons listed by the company seem to be sound, but careful analysis shows that it is not the same thing.

From 2015 to 2018, the operating costs of biyinlefen were 281 million yuan, 318 million yuan, 365 million yuan and 542 million yuan respectively. Need to invest 250 million yuan to build an intelligent storage center? This money is put in the bank, a year's interest income is also a lot. Moreover, after the completion of the intelligent storage center, annual depreciation plus operating costs are also quite a lot. Therefore, the reason of "controlling distribution cost" is not enough.

Biyinlefen may have taken these factors into account and is very cautious in terms of investment. By the end of 2018, the accumulated investment was only 5.242 million yuan.

However, the company is still very active in building office buildings. The company owns a 8000 square meter state-owned land use right located in Nancun Town, Panyu District, Guangzhou city. The land use is for industry. In November 2011, upon application, the above-mentioned state-owned land of the company was changed into commercial and financial land. By the end of 2018, 96.1838 million yuan has been invested in the commercial office building, accounting for 49.33% of the budget; the original budget of the commercial office building was 110 million yuan, which increased to 195 million yuan in 2018.

In 2018, a supply chain Park project with a budget of 150 million yuan was added, with a total investment of 218400 yuan in that year.

Abnormal inventory management

Before listing, the increase of inventory at the end of each year is generally lower than that of operating income. After listing, the increase of inventory greatly exceeds that of operating income. From 2012 to 2015, the growth rate of operating revenue was 49.93%, 24.44%, 14.53% and 16.00%, while the increase of inventory at the end of each year was 12.02%, 30.75%, 5.34% and 15.15%, respectively. Except for 2013, the growth of inventory in other years was lower than that of operating income. After listing, the situation reversed. From 2016 to 2018, the growth rates of operating revenue were 11.73%, 25.23% and 39.96% respectively, and the growth rates of inventory at the end of each year were 27.83%, 41.10% and 78.41%, respectively. The increase of inventory is much higher than that of operating income.

From 2013 to 2018, the ratios of operating costs to goods in stock were 147.02%, 149.60%, 150.62%, 133.61%, 113.01% and 92.63%, respectively. The ratio is less than 1, which means that the goods in stock can be sold for more than a year. Even considering the growth, the amount of goods in stock of biyinlefen is not normal.

According to the introduction of the company's two operation cycles, spring and winter, the company has formed two operation cycles. However, it is hard to imagine that biyinlefen will accumulate one year's inventory at a certain time point, unless its inventory backlog is serious and the cost of carrying forward is low. After all, good financial report is very important from the end of 2019 to the understanding of the prohibition period. Net profit increased by 62.17% in 2018, the highest since 2013.

From the perspective of the industry, there are not a few listed companies in the clothing industry that suffer huge losses due to high inventory.

What's more, at the end of 2018, the falling price reserve of biyinlefen's inventory goods was 11.8812 million yuan, accounting for 2.03% of the total inventory. Compared with the same industry, this proportion is really unreasonable.

According to the prospectus, as of the end of 2014, the proportion of inventory falling price reserves in the inventory balance was 2.82% in canudi Road (002656. SZ), 3.86% in Kaiser shares (002425. SZ) and 1.61% in biyinlefen.

In 2014, the operating revenue of kanudi road was 700 million yuan, 50 million yuan more than that of biyinlefen, and the inventory was much higher than that of biyinlefen. At the end of that year, the inventory balance of kanudi road was 467 million yuan, and the inventory falling price reserve was 13.1777 million yuan. The inventory balance of biyinlefen was 168 million yuan, and the inventory falling price reserve was 2.7522 million yuan.

As of the end of 2018, the inventory balance of kanudi Road (later renamed as modern Avenue) was 489 million yuan (431 million yuan of goods in stock), and the provision for inventory falling price was 41.3448 million yuan (all of which were inventory falling price reserves), accounting for 8.46% of the inventory and 9.59% of the inventory goods. At that time, the operating revenue of kanudi road was 1.562 billion yuan, exceeding that of biyinlefen, but the inventory was less than that of biyinlefen.

According to the prospectus, in 2014, the inventory turnover of biyinlefen was compared with that of comparable listed companies in the same industry: 0.59 times for carnaudi Road, 0.84 times for Kaiser shares and 1.49 times for biyinlefen. Biyinlefen said the company's inventory turnover rate is at a high level in the industry, indicating a strong level of inventory management.

By 2018, the inventory turnover of biyinlefen was 1.12 times, and that of canudi road was 2.20 times. Why is biyinlefen's inventory management getting worse and worse?

The inventory turnover of biyinlefen is not as good as that of canudilu, but the provision for inventory falling price is much less. If 9.59% of carnuti road is calculated, the net profit of biyinlefen in 2018 will be about 40 million yuan.

The gross profit margin of biyinlefen is very stable. It was 56.24% in 2011 and 60% in 2012, and has been above this level ever since. In 2017, the gross profit rate was the highest, 65.40%; in 2018, it was 63.28%. However, the number of inventory turnover days in 2017 was 294.14 days, which was equivalent to that in 2011. In 2018, it was as long as 322.58 days. The slower the inventory turnover is, the higher the gross profit rate will be in 2017 and 2018.

Buy back has means

Buyback price of RMB 4.2 billion is not lower than RMB 1.2 million in the report of buyback of RMB 1.2 billion.

As of March 31, 2019, the company has repurchased 1.41 million shares, with a total transaction amount of 47.24 million yuan.

On April 18, the company adjusted the repurchase price from no more than 42 yuan / share to no more than 70 yuan / share.

As of June 12, the company has repurchased 2.37 million shares with a total transaction amount of 90.98 million yuan.

It is not until March 19, 2019 that leffin's share price broke through RMB 42. If the increase is stronger, it will not be completed by March 19. On April 3, the stock price rose 50.99 yuan, then adjusted, fell to 45.5 yuan on April 16, and rose to 50 yuan on the 17th. The price of buyback of no more than RMB 42 / month will be adjusted to no more than RMB 42 on April. However, the capital market did not appreciate it. It began to fall all the way on the 18th, and the stock price rose hopelessly.

Close to the lifting of the ban period, how to stimulate the stock price? More than yinlefen estimates to think of more ways.

Light assets to heavy assets

For the asset light model, biyinlefen is quite proud.

According to its prospectus, the company's brand operation mode is similar to some strong clothing brands in Europe and the United States. It has a strong asset light model and is at the high end of the value chain and can obtain profits higher than the average market profit.

After listing, biyinlefen gradually embarked on the road of heavy assets, planning to invest nearly 600 million yuan to build a house, and part of the funds came from the funds to stop opening stores.

Light assets to heavy assets, building houses is more important than opening stores!

Can biyinlefen walk out of a bright future on the road of heavy assets? Time will give the answer.


 

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