Bags / Shoes & Accessories

Recently, the shoe manufacturer Jiuxing Holdings (01836.HK) issued an announcement:

For the six months ended June 30, 2021, revenue increased by 36% year-on-year to US$695.5 million, mainly due to the rebound in orders and the low base effect that was severely affected by the new crown pneumonia (COVID-19) epidemic last year; net profit rebounded to 3,220 Million US dollars (approximately 208.5 million yuan), which turned into a profit from a net loss of 5.2 million US dollars in the same period last year.

Enhance customer mix and add new customers in the luxury footwear category, resulting in higher product development costs. As one of the long-term profit margin growth and diversification strategies, the group continues to invest in Indonesia. Indonesia will become Jiuxing

One of the main shoemaking bases in the future

The announcement stated that the year-on-year increase in revenue was mainly due to the rebound in orders and the low base effect caused by the severe impact of the COVID-19 epidemic last year.

In the first half of 2021, the company's operating environment has improved significantly.

The gradual lifting of various restrictions on the new crown pneumonia (COVID-19) and the steady progress of the company’s vaccination plan in the company’s main export markets have enabled brand customers to have the confidence to follow up our footwear product orders in an all-round way, in order to restore normal seasonality Performance provides support.

The company has launched a plan to steadily increase production capacity based on demand.

We are about to realize new production capacity in Indonesia, which will become one of the company's main manufacturing bases in the future. The company's new manufacturing facility in Solo will begin production in the third quarter of 2021 as scheduled, and is expected to contribute to overall sales in 2022.

Short-term risks remain

Goldman Sachs backed

In the short term, the new crown pneumonia (COVID-19) epidemic still poses continuing risks. The most worrying is the recent wave of infections in Southeast Asia.

The company will continue to pay close attention to the development of the epidemic in the region. With a diversified production base covering China, Vietnam, Indonesia, Bangladesh and the Philippines, the company promises to do its best to minimize the impact of the epidemic and keep orders in order to deliver products to customers.

Even so, the company expects that shipments and revenue will continue to recover in the second half of 2021, but due to a high base, the pace of recovery may slow down.

Goldman Sachs released a research report stating that it maintains the "Buy" rating of Jiuxing Holdings (01836), raises its target price from HK$11 by 14.5% to HK$12.6, and raises its 2021-23 net profit forecast by 1 to 3%.

The bank said that based on a better product mix, the company's average selling price is expected to remain stable, or an increase of 1 to 2%.

Luxury, fashion and sports-related businesses will become growth drivers. It is estimated that the annual sales will contribute about 11% to 12%, more than 15%, and 35% to 38%. The bank is optimistic about strong demand and rapid expansion of production capacity, but some of them are new This was offset by the increase in customer research and development costs and the increase in tax rates.