The company recently announced that starting from 2010, each franchisee will be charged an annual channel support management fee of 30,000 yuan. Based on the current number of stores, the total fees collected in 2010 are estimated to reach approximately 17 million yuan. From our perspective, while the company collects these fees from franchisees, it is also expected to provide additional price concessions and promotional support to them. As a result, the actual impact on franchisees is likely to be minimal. On the company’s side, this adjustment is estimated to increase profits by about 1.7 million yuan in 2010, primarily due to tax considerations. This policy is expected to continue in the coming years.
According to the company’s follow-up reports, winter sales have been strong, with growth exceeding 20% compared to the previous year. In 2009, the company saw year-over-year comparable growth of over 5%. Recent data from the National Bureau of Statistics and the China Business Information Statistics Center show that retail sales of consumer goods increased by 25.8% and 31.48%, respectively, in November compared to the same period last year. After accounting for festival factors, the chain growth still rose by 3.1 and 5.75 percentage points, indicating robust domestic consumption. High-end fashion brands are showing signs of significant growth. We expect the growth of domestic apparel consumption to range between 15% and 20% in 2010.
After inventory clearance and internal restructuring in 2009, branded apparel companies are expected to outperform industry growth again. We maintain our previous view from the issuance tracking report, believing that with the availability of additional capital and a solid brand foundation, the company will accelerate its channel expansion in a moderate manner. Revenue and profit growth in the future will mainly come from rapid channel expansion, optimization of the channel structure, rising product prices, profit release after the sub-brand San Jeronado reaches scale, and the stronger and expanding Shanghai Bao-Yuan service business.
The company's current "multi-brand, diversified business" strategy is becoming increasingly clear and stable. In the future, the gradual growth of various brands and the complementary nature of different businesses will help the company evolve from a small, niche brand into a larger, more influential apparel retail enterprise. We maintain our earnings forecast for the company, expecting earnings per share to be 0.66 yuan in 2009, 0.88 yuan in 2010, and 1.14 yuan in 2011, with growth rates of 56%, 34%, and 29%, respectively. We continue to maintain an "overweight" rating.
We believe that the recent stock price decline due to broader market corrections presents a good opportunity to invest in quality companies like this one. Potential catalysts include the possibility of the company being next in line for a major delivery. However, risks remain, including macroeconomic fluctuations and challenges in launching new brands.
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ZHOUSHAN FOISON IMPORT AND EXPORT CO.,LTD. , https://www.foison-fashion.com