CICC: Maintaining Gangnam Clothing (03306) outperforming the industry rating target price of HK$24.97

The Zhitong Finance App learned that CICC released a research report saying that it basically maintained the Jiangnan Buyi (03306) FY27 profit forecast of 1,069 million yuan and introduced the FY28 profit forecast of 1,131 billion yuan. The current stock price corresponds to 8.8/8.7 times the FY27/28 price-earnings ratio, maintaining an outperforming industry rating. Considering the steady performance of the company, maintaining the target price of HK$24.97 is equivalent to 10.4/10.3 times FY27/28P/E, with 19% upside compared to the current period.

CICC's main views are as follows:

FY26 results are in line with this forecast

The company announced FY26 (July 2025 to June 2026) results: revenue of 6.05 billion yuan, +9.0% year on year; net profit to mother of 1.0 billion yuan, +11.7% year over year. The results are in line with this forecast. The company declared a final dividend of HK$1.06 per share and a special dividend of HK$0.75 per share, along with an interim dividend of HK$0.52 per share, with an annual dividend of approximately 110%.

The number of high-value members continues to expand, and online channels are growing strongly

On the member side, FY26 increased the number of member accounts with a total purchase of more than RMB 5,000 by about 30,000 to over 360,000. By channel, FY26 direct marketing/distribution/e-commerce channel revenue was +11%/+1%/+21% year-on-year, respectively, to 23.0/23.0/ 1.45 billion yuan, and online channels contributed nearly half of the annual revenue increase. The net increase of FY26 direct-run stores was 9 to 501, and the net number of distribution stores decreased by 8 to 1,617. The company continued to optimize locations and close inefficient stores. By brand, FY26 JNBY/JNBY by JNBY/LESS/sketch revenue was +7.6%/+6.5%/+17.4%/-1.1% year-on-year to 32.4/8.8/7.3/710 million yuan, and revenue of emerging brands was +32.2% to 480 million yuan, and revenue accounted for +1.4ppt to 7.9% year-on-year.

Profitability increased and inventories declined

FY26 gross margin was +1.0ppt to 66.6% year over year, mainly due to online/distribution channel gross margin +2.4pp/ +1.5ppt year over year. FY26's sales expense ratio was +0.4ppt to 36.0% year on year, mainly due to the increase in direct management and online channel revenue; the management expense ratio was +1.1 ppt to 10.7% year over year, mainly due to increased investment in design and R&D and increased personnel remuneration. Overall, FY26's net profit margin was +0.4ppt to 16.5% year-on-year. In terms of operation, the number of inventory turnover days at the end of FY26 was +5 days to 166 days year-on-year, and net inventory was -2.9% year-on-year to 910 million yuan.

Development trends

The bank is optimistic that the company's strong member stickiness and multi-brand cultivation capabilities are expected to lead to steady growth in performance. Furthermore, the Shuangpu Logistics Park under construction by the company is expected to take 3-4 years, and it is expected that the breadth of product supply and operational efficiency will improve after completion.

Risk warning: Competition has intensified, retail sales have fallen short of expectations, and the speed and spending power of membership has fallen short of expectations.