Net Profit Is Close To The Cut In Five Years. Luxury Prada Can't Sell Anymore?

This year, a large part of the textile and garment industry has a poor performance, especially those with low price and weak brand awareness. Generally speaking, there are two kinds of claims in the market. First, external trade disputes are the external ones. The second is the pressure of internal economic growth and the lack of domestic demand.

The above may be influential, but it is by no means the main factor, because the environment is aimed at the whole industry. When there is systemic risk in the industry, the companies that are short of competition and inefficient are often eliminated.

Look at the same industry Prada (01913-HK), the company's products are mainly targeted at high-income groups, the product prices and quality are relatively high. According to the latest report of the company's latest performance in the first half of 2019, the total sales revenue reached 12 billion 274 million yuan (RMB, the same below), an increase of 4.5% over the same period last year, and net profit of 1 billion 211 million yuan, an increase of 49.8% compared with the same period last year. According to the two sets of data, Prada's operating data seemed to be good in the first half of the year.

Next, we will split up the profit data of Prada to see what the real profit level of the company is.

Net profit has "moisture".

First, let's look at revenue data. Prada's revenue grew by 4.5% in the first half of the year, though not fast, but it also maintained a slight rise, at least more than those in the same industry.

From the perspective of splitting up, Prada's income comes from the whole world, and Europe, Asia Pacific, America and Japan account for more than 95% of the total revenue. In the first half of 2019, the company suffered a 4% decline in revenue from the Asia Pacific region. The rest of the other regions with larger revenues accounted for the growth of revenue. For the reasons for the decline in revenue in the Asia Pacific region, the company explained in its semi annual report that it was mainly due to China's social unrest and adverse currency fluctuations that led to the contraction of Hongkong's economy.

In addition, Prada's revenue growth in each region does not exceed two digits, and its growth rate is relatively slow. This is also a side evidence that the company's business has entered a mature stage.

Let's look at net profit and net profit growth of 49.8% under the background of 4.5% growth of company revenue, which means that the profitability of the company has increased significantly. Indeed, Prada's net interest rate has increased from 6.8% to 9.8%.

But if we look at it carefully, Prada's profitability does not seem to be so optimistic, because the company's net interest rate has increased significantly in the first half of the year, and the net profit has increased significantly. How much impact does this one bring to the net profit of the company? Because it has not found the specific data, it can not be determined, but it is estimated that it will not be less.

Finally, we can see that the price earnings ratio of Prada at HKEx is 28 times higher than that of the Hong Kong Stock Exchange (data source: Orient wealth), and the business growth has been very limited. Why?

Profit growth should be reversed?

From the past business data, Prada's total business income from 2018 to 2014 was 24 billion 660 million yuan, 21 billion 390 million yuan, 23 billion 500 million yuan, 25 billion 440 million yuan, 24 billion 750 million yuan, basically unchanged; the net profit from the mother fell from 3 billion 141 million yuan in 2014 to 1 billion 612 million yuan in 2018.

What causes it? First look at gross profit margin, Prada's gross profit margin in 2018 was 72%, in 2014 it was 71.8%, gross margin was very high, and relatively stable, which was not achieved by most garment and textile enterprises. In addition, the gross margin of the company remained unchanged for five years, which means that the pricing power of the company was still very strong. Even if the upstream cost increased, the company could transfer the cost to downstream customers smoothly.

Needless to say, Prada's net profit decline in the past five years is due to an increase in the proportion of the company's inter district expenses. We see that other expenses in the company's expenditure are 12 billion 880 million yuan in 2014 and 15 billion 210 million yuan in 2018, an increase of 2 billion 330 million yuan, which is more than the net profit decline of the company in the past five years.

Even if the revenue of Prada did not grow in the first five years, the net profit cut and the net interest rate also had 6.6%, which has been quite serious, because most of the net interest rates in the ordinary clothing and textile industry are mostly single digits, and the net interest rate is very unstable, which is easy to be affected by the gross margin and cost changes, while the net interest rate of Prada is still high in the long run.

On the whole, Prada's products are not big problems, the pricing power is strong, the gross profit margin is stable, while the net interest rate has slipped, but the market has higher expectations for the net interest rate warmer, plus the company's gross margin is stable, so the valuation is higher. But the company's net profit growth can continue to improve, and the uncertainty is also very strong.