JOEONE(601566)：FOCUS ON MEN‘S PANTS;DISTRIBUTION CHANNEL REFORM BRAND RENEWAL UNDERWAY

　　Investment positives
　　We initiate coverage of Joeone Co. Ltd. with an OUTPERFORM rating and a target price of Rmb14.85, implying 22x 2022e P/E.
　　Why an OUTPERFORM rating?
Large potential market for menswear industry, offering room for growth for industry participants. We estimate the market for
　　menswear in China at about Rmb578bn in 2021. The market concentration ratio of the menswear industry in China is rising slowly with upside potential compared with developed countries, in our opinion.
Refocusing on men’s pants. As Joeone continues to advance its strategic reform ─ branding itself as a “men's pants expert” ─ we believe the company will develop competitive products and optimize its product mix, backed by years of experience in men’s pants. The company has launched some key products popular among consumers. Young people account for a growing share of the firm’s client base, and we expect its products to be increasingly attractive to young consumers.
Improving brand strength. With the help of sports and events marketing, Joeone uses mainstream social networking service platforms （e.g. Weibo, WeChat and Douyin） to comprehensively and frequently market its brands. We believe such efforts will help Joeone build a young and fashionable brand image.
　　Distribution channel structure optimized. We believe Joeone’s efforts to upgrade stores will attract a large number of young customers. The optimization of its store structure, combined with the company’s reform of inefficient distribution channels, should pave the way for brand rejuvenation, in our opinion.
　　How do we differ from the market? The market is worried the company's distribution channel reforms will affect its financial performance. We believe strategic reforms may bring short-term pain but the company will enter a new stage of growth in the long run thanks to optimization of distribution channels and rebuilding of brand image.
　　Potential catalysts: The company’s strategic reforms have produced stronger-than-expected results: 4Q21 earnings beat expectations.
　　Valuation and recommendation
　　We expect the company’s EPS to be Rmb0.5 in 2021 and Rmb0.68 in 2022, implying a CAGR of 3%. The stock is trading at 26x 2021e and 19x 2022e P/E. As a long-established menswear company, Joeone is focused on advancing strategic reforms and has optimized its products, brands, marketing, and distribution channels. We expect the company to reshape its brands and gain new growth momentum. We initiate coverage with an OUTPERFORM rating and a target price of Rmb14.85 （22x 2022e P/E）， offering 14% upside.
　　Risks
　　Resurgence of COVID-19; disappointing adjustments of distribution channels; brand marketing and growth miss our expectations.
【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。