Chinese listed apparel companies really recover in the first three quarters of 2023?

Chinese apparel companies have made a good start this year, amid calls for economic restart and industry recovery, moving from "relatively pessimistic" to "relatively optimistic." Has the apparel industry recovered in the first three quarters, and are corporate profits good? This article selects 12 major listed apparel companies as samples to get a glimpse.

HLA had the highest operating income in Jan-Sep 2023 of about 15.57 billion yuan, a year-on-year increase of 13.85%. Semir and Youngor ranked second and third, with operating incomes of 8.9 billion yuan and 7.46 billion yuan respectively, a year-on-year decrease of 0.5% and 41.85%. GRN and Meters/bonwe ranked last, with approximately 1.07 billion yuan and 837 million yuan respectively, a year-on-year increase of 8.6% and a decrease of 13.5%.

The total operating income of the 12 companies was 54.56 billion yuan in Jan-Sep, a year-on-year decline of 4.81%, widening 0.94% compared to the first half of this year. In terms of revenue growth rate, 7 companies experienced year-on-year growth, while 5 companies, including Younor, Semir, Peacebird, Hodo, and Meters/bonwe, experienced a year-on-year decrease. Youngor saw a deep decrease, while LANCY saw a big increase.

Youngor had the highest net profit of 2.69 billion yuan, a year-on-year decrease of about 35.8%. HLA and Semir ranked second and third, with net profits of 2.45 billion yuan and 832 million yuan respectively, a year-on-year increase of 40.2% and about 207%. Hodo and GRN ranked last, with 39.2 million yuan and -55.24 million yuan respectively. Among them, GRN had a negative net profit, while the remaining 11 companies were all positive.

The non-recurring net profit (net profit excluding non-recurring gains and losses), Youngor had the highest value of 2.54 billion yuan, a year-on-year decrease of about 37%. HLA and Semir ranked second and third of 2.22 billion yuan and 776 million yuan respectively, a year-on-year increase of 26% and 356.5%. GRN and Meters/bonwe ranked last of -61.37 million yuan and -96.11 million yuan respectively.

The net profit of the 12 companies totaled 7.4 billion yuan in Jan-Sep, a year-on-year growth of 20.9%, which was 4.35% lower compared to the first half of this year. Among the 12 companies, GRN had a net loss, while the other 11 companies all achieved profitability. In terms of non-deductible net profit, the total number was 6.59 billion yuan, a year-on-year increase of 14.5%, which was 12.3% lower compared to the first half of the year. GRN and Meters/bonwe were in deficit, while the other 10 companies all achieved profit.

In terms of inventory turnover days, Youngor ranked first with 1,397 days, followed by Meters/bonwe and Joeone with 346 days and 308 days respectively. Hodo had the lowest turnover days of 64 days. The average number of the 12 companies was 328 days, a year-on-year increase of around 14%. Generally, a lower turnover days means a lower inventory occupancy rate and stronger product liquidity.

In terms of the asset-liability ratio (total liabilities/total assets*100%), Meters/bonwe had the highest ratio of 90.09%, followed by Youngor and LANCY at second and third place with 53.25% and 50.22% respectively. Ellassay had the lowest debt ratio of 32.76%. The average level of the 12 companies was 45.61%, a year-on-year decline of 1.3%. Generally, a lower asset-liability ratio indicates stronger debt-paying ability, but it is not always better to have a lower ratio. A high or low debt ratio may not be optimal for a company, with 40% to 60% being the standard range most favorable for business development.

In conclusion, based on the main operating indicators, most of the 12 listed companies had good operational development in the first three quarters of 2023. Except for the high asset-liability ratio of Meters/bonwe, the remaining 11 companies were within 32-53%, and the inventory turnover day was mainly 130-300 days. GRN and Meters/bonwe had a deficit in non-deductible net profit, while the other 10 companies achieved profitability. However, the decline of operating income of the 12 companies in Jan-Sep was slightly higher than the first half of the year, and the average growth of net profit and non-deductible net profit was generally lower than the first half of the year, indicating that the tempo of the recovery is weaker than expected.