Guosen: Maintains "outperform the market" rating on JNBY (03306) as net profit in the first half of fiscal year 2026 increased by double digits.

Guosen released a research report stating that it maintains a "outperform" rating on JNBY (03306), with a target price of HK$21.8-25.8, corresponding to 11-13x PE for FY2026. The company's performance is stable, seizing the opportunity to invest in undervalued high dividend stocks. The company's performance has steadily grown, its profitability continues to improve, cash flow is abundant, a strong membership system and brand power have built a solid moat, and it maintains a relatively high dividend payout ratio. Based on the company's performance in the first half of the fiscal year exceeding expectations, the bank has raised its profit forecast, with projected net profits for FY2026-2028 of 960 million/1.02 billion/1.07 billion respectively, year-on-year growth of + 7.3%/6.5%/4.7%. Guosen's main points are as follows: Net profit in the first half of FY2026 increased by 12%, profitability continues to improve In the first half of FY2026, JNBY achieved revenue of 3.376 billion yuan, a year-on-year increase of 7.0%, demonstrating competitiveness and growth resilience in the face of overall pressure in the apparel retail industry. Gross margin increased by 1.4 percentage points to 66.5%, mainly benefiting from changes in channel structure, product pricing strategies, and discount management. Net profit increased by 11.9% year-on-year to 676 million yuan, with a net profit margin increasing from 19.1% to 20.0%. On the expense side, the sales expense ratio and management expense ratio slightly increased to 32.4% and 9.2% respectively. Operating cash flow netted 996 million yuan, an increase of 21.1% year-on-year, with a net cash ratio of 1.47. Healthy operating cash flow performance is a strong guarantee for the company's continued high dividend payout, with the company announcing a mid-year dividend of HK$0.52 per share, planning to maintain a dividend payout level of 75% for the full fiscal year of 2026. Online growth leads and gross margin significantly improves, main brand performance steady 1) In terms of channels, online revenue increased by 25.1% year-on-year to 750 million yuan, accounting for 22.3%, with a gross margin increased by 1.6 percentage points to 65.8%, mainly benefiting from robust product pricing strategies and increased efforts in discount management; offline revenue increased by 2.7%, with steady growth in self-operated channels (5.7%) and basic stability in distribution channels (0.3%). However, overall comparable store sales fell by 2.2%, mainly affected by the warm winter and timing of the Spring Festival. 2) In terms of brands, JNBY accounted for 55.1% of revenue, with a steady growth of 5.7% and a gross margin increase of 1.8 percentage points to 69.4%, maintaining a core position; the revenue of the growth brand accounted for 37.9%, slightly declining by 0.2%, with LESS showing outstanding performance, revenue increasing by 16.3% year-on-year, and a gross margin increase of 1.7 percentage points to 70.5%; the revenue of the emerging brand accounted for 7.0%, with revenue growth of 22.4%, showing good development potential, but with slight pressure on the gross margin, decreasing by 3.6 percentage points to 48.8%. Risk warning Sharp downturn in the macroeconomy; intensified market competition; brand image damage; systemic risks.