Securities Times Network July 25th
event:
Last week, we visited Jiangsu Guotai and discussed in detail the success of the company's executives on the integration of supply chain operations. The core ideas are shared as follows:
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Huasheng Industrial is the largest subsidiary of Jiangsu Guotai in the apparel supply chain business, with a 60% shareholding ratio. In 2016, its revenue was approximately RMB 5 billion, accounting for 16.83% of Jiangsu Guotai’s revenue; net profit was RMB 170 million, accounting for Jiangsu Guotai 17% of total net profit. We take Huasheng Industry as an example to explore the success of Jiangsu Guotai in the apparel supply chain business.
1. Huasheng Industrial's garment business has developed rapidly in the past 3 years, and its profitability has been steadily improved.
The net profit scale increased significantly: Huasheng Industrial achieved revenues of RMB 4.6 billion, RMB 5.4 billion and RMB 5 billion in 2014-2016, respectively; net profit was RMB 100 million, RMB 67.21 million and RMB 180 million, respectively. It was 2.22%, 1.23%, and 3.54% (the reason for the low net profit margin in 2015 was due to Ningbo's long-term provision for bad debts of RMB 140 million). The actual net profit in 2016 was 46% higher than the performance commitment of 120 million yuan. The export value of garments accounts for about 75% of all exports: the income of Huasheng's export business accounted for about 70% in the past three years, of which clothing exports accounted for 77% of all export business, and the rest was yarn exports. The overall gross profit margin of the export business increased year by year, from 11.36% in 2014 to 13.89% in 2016. Huasheng's garment business has started to grow rapidly in the past three years. The proportion of garments in exports will be higher in the future, which will drive the overall gross profit margin and the growth of profit scale. We expect Huasheng Industrial's net profit margin to reach 4% this year. .
2. The customer concentration is high, the proportion of brand customers is increasing, and the order growth rate is faster than the growth rate of customer business income.
1) The scale of the apparel business has increased, the scale advantage has been achieved, the proportion of brand customers has increased, and the proportion of channel customers has decreased. The strategy of using large teams to connect with large customers, although the docking of large customers in the price of a slight profit, but the large customer scale effect and order continuity is better than the small customers.
2) High customer concentration: Huasheng Industrial's core brand customers are PRIMARK, GIII (operating companies such as CK, DKNY, GUESS, TOMMY HILFIGER, LEVI'S, etc.). In 2016, the annual sales of the two core customers totaled approximately USD 300 million. It accounts for 40% of Huasheng's total income, accounting for 57% of total export revenue.
3) Market share has an increasing trend, order growth is faster than customer revenue growth A, GIII: It is one of the largest garment garment manufacturers and importers in the United States. Founded in 1956, the category covers skirts, swimwear, outerwear, footwear. , sportswear, bags and accessories, operating more than 40 brands, with CK\DKNY\GUESS\TOMMY\ColE HAAN\LEVI'S and other brands of production and distribution rights. At the end of 2015, the number of stores reached 367, and the revenue growth rate dropped from 33% in 2011 to 10% in 2015. Huasheng Industrial is the largest supplier of CK, with an annual order volume of approximately US$180 million. Since the beginning of this year, the total growth rate of the three brands of CK\Tommy\DKNY of GIII is expected to reach 30%, and the purchase cost can be reduced by 5%-8%. The growth rate of the order amount exceeded the overall revenue growth rate of GIII, indicating that the company's strong supply chain service level has been recognized by customers.
4) The status is gradually strong, and the right to speak is improved: the company has gradually connected to the regional branch of the brand through the middle of the intermediary and the brand, and has been able to directly connect with the overseas headquarters of the brand, and gradually improve the voice. In the process, the company's cost management and control capabilities will be further strengthened. At present, the new customers' development methods are based on mutual recommendation among customers, which shortens the customer evaluation and running-in period.
3, supply chain service integration services Huasheng team and customer team in-depth cooperation, covering design, proofing, production, storage and transportation, customs clearance, insurance, distribution, financial services and other entire industry chain. Take American customers as an example. The brand design link has just been involved. The development department has docked with the US for 2 or 3 months. The design process is mutually beneficial. Huasheng will recommend fabrics to customers and undertake follow-up printing, production and transportation. Huasheng's outsourcing factories are mainly distributed in Jiangsu Province, Shandong Province, Anhui Province, Henan Province and Jiangxi Province. It has 3 self-operated factories located in Zhangjiagang, Nanjing and Jiangyin. There are more than 100 core manufacturers in Huasheng, and the company accounts for more than 50% of its total production. Therefore, the company has strong words in terms of delivery time and quality control for these core manufacturers. Right, there are special merchandisers to track at the factory. The management level of the manufacturer is high, the manufacturer's output, order quality, delivery date and other data are quickly updated in the ERP system, the followers in the factory conduct real-time feedback on the information, and the customer obtains information on the product quality evaluation. . This information will be used as an indicator for the manufacturer's assessment, and manufacturers that do not meet the standard will be replaced.
4. The company's industrial barriers in the apparel supply chain and the company's core competitive advantages
1) Talent advantage
Supply chain service competition is fierce. The company's supply chain service is first-class in China, and the supply chain has a long chain. The company starts from raw materials to garment export, involving many processes and processes. From taking orders, designing proofs, and accounting, The company does. The production process is carried out by other subsidiaries of the group or outsourcing factories, and the proportion of self-production is only 10%. In addition to relying on the ERP information system, the huge supply chain system relies more on the company's top-down talent system. It relies on subsidiaries, branches, divisions, departments, and team managers to manage these factories. The company will be different. The customer, the different types of products, to have a dedicated team to connect with the customer, the general work for 4-5 years, the salesman is mature, will give some brands to dock, the salesman has promotion and incentive mechanism, the mature salesman flows Very small. In contrast, small enterprises lack the accumulation of talents and experience, and it is difficult to make the supply chain links all the way.
2) High customer stickiness
The company is engaged in the supply chain integration service business, which not only includes control over the supply chain, but also services to customers. Exported goods are not purely cost-plus, but also include services. When the cooperation enters a stable stage, the suppliers will not be replaced at will.
3) High efficiency, the delivery period of the clothing business is more than 30 days, the speed is leading
4) The company adopts the method of first picking up and then paying for the upstream manufacturers, which is in a strong position and takes up less capital.
5) Compared with Li & Fung, Li & Fung is biased towards the front end. The company is biased towards the back end. The company may infiltrate the front end properly in the future, avoiding the decline in performance caused by Lifeng's poor production at the front end.
5. Drivers of future profitability improvement The increase in profit margin comes from the scale effect brought by the increase in order size and the cost is reduced. As well as the optimization of customer structure, the elimination of low-end customers, and the increase in the overall order price brought by the proportion of brand customers.
1) Judgment on gross profit margin: As the number of brand customers connected to the company increases, the amount of single customer orders increases, the bargaining power increases, and the transmission capacity of raw material price fluctuations will increase. And as the size of the order increases, the company can reduce the procurement cost of raw materials through scale advantages. Therefore, we judge that the gross profit margin of Huasheng Industrial will show a gradual growth trend in the future, but there is no possibility of huge profits in the foreign trade business. The industry's general gross profit margin is between 10% and 15%.
2) Judging the expense ratio: The three expense ratios will show a downward trend in the long run: the marketing expense ratio will decline with the expansion of business scale and the increase of popularity; the management expense ratio will remain unchanged for the time being; The rate will also be strong with the company's position in the industrial chain. For example, for the manufacturer, the delivery will be paid first; for the brand, the payment will be provided first, and the advantage of this capital will gradually appear.
3) The net profit margin will show a slight increase trend, and this year is expected to reach a 4% net profit margin.
(Securities Times News Center)
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