China Securities Co.,Ltd.: Maintains "Buy" rating on JNBY (03306); FY26 multi-brand steady growth

China Securities Co.,Ltd. issued a research report maintaining a "Buy" rating on JNBY (03306), and expects the company's FY2027-FY2029 revenue to be RMB 6.44 billion, RMB 6.83 billion, and RMB 7.21 billion, respectively, with net profit attributable to shareholders of RMB 1.068 billion, RMB 1.141 billion, and RMB 1.218 billion. The company released its FY2026 annual results announcement (corresponding to July 1, 2025-June 30, 2026): FY2026 company revenue was RMB 6.046 billion/+9.0%, operating profit and net profit attributable to shareholders were RMB 1.334 billion/+11.4% and RMB 997 million/+11.7%, respectively; FY2026 net cash flow from operating activities was RMB 1.433 billion/+26.5%. The company declared a final dividend of HKD 1.06 per share and a special dividend of HKD 0.75 per share. Together with the interim dividend of HKD 0.52, the full-year dividend per share was HKD 2.33, corresponding to a payout ratio of approximately 110%. China Securities Co.,Ltd.'s main views are as follows: FY26H2 revenue growth accelerated, with online channels + offline same-store sales driving revenue growth; JNBY grew steadily, while LESS growth accelerated FY2026 company revenue was RMB 6.046 billion/+9.0%, achieving steady growth despite pressure in the apparel industry. Corresponding FY26H1 and FY26H2 revenue was RMB 3.376 billion/+7% and RMB 2.67 billion/+11.6%, of which: 1) By channel: FY2026 online, self-operated, and franchise store revenue was RMB 1.448 billion/+20.5%, RMB 2.299 billion/+10.7%, and RMB 2.299 billion/+1.3%, respectively. Corresponding FY2026H2 online, self-operated, and franchise store revenue was RMB 695 million/+16%, RMB 1.118 billion/+16.4%, and RMB 857 million/+3%, respectively. According to company disclosure, FY2026 comparable same-store sales at physical stores increased by 2.4% year on year, rising against the trend amid pressure on store traffic. As of the end of June 2026, the company had a total of 2,118 standalone physical retail stores globally/net increase of 1 versus the end of June 2025, including 501 self-operated stores (net increase of 9 versus 492 last year) and 1,617 franchise stores (decrease of 8 versus 1,625 last year). The company maintained a rational pace of store expansion, focused on improving channel quality and efficiency, continued to optimize store locations, and closed inefficient stores. 2) By brand: The company is a leading domestic designer apparel brand, accurately capturing the middle class's demand for artistic apparel aesthetics, deeply implementing the three major strategies of design-driven, brand-driven, and fan loyalty-driven, and building a multi-brand matrix of mature + growth + emerging brands. Mature brand (JNBY) is a designer brand, focusing on original design with artistic aesthetics to empower the brand. Product design is unique and highly recognizable, and is an important support for high fan loyalty. FY2026 mature brand revenue was RMB 3.241 billion/+7.6%, accounting for 53.6% of revenue, maintaining steady growth resilience despite a high base, with FY26H2 revenue of RMB 1.381 billion/+10.2%; Growth brand matrix (including: CROQUIS, jnby by JNBY, and LESS brands): FY2026 revenue was RMB 2.328 billion/+7.1%, accounting for 38.5% of revenue, and is an important growth driver. Among them, FY26 CROQUIS, jnby by JNBY, and LESS brand revenue was RMB 712 million, RMB 885 million, and RMB 731 million, respectively, down 1.1%, up 6.5%, and up 18.6% year on year. FY26H2 CROQUIS, jnby by JNBY, and LESS brand revenue was RMB 322 million, RMB 389 million, and RMB 338 million, respectively, down 2.9%, up 9.7%, and up 17.4% year on year. Except for CROQUIS, all other brands clearly accelerated. CROQUIS growth slowed quarter on quarter to a decline due to intense competition in its segment. FY2026 emerging brands revenue was RMB 478 million/+32.2%, accounting for 7.9% of revenue, becoming a new growth driver. On the store side, as of the end of June 2026, the number of stores for JNBY, CROQUIS, jnby by JNBY, LESS, and emerging brands was 982, 283, 505, 271, and 55, respectively, up 21, down 25, down 8, up 10, and up 3 versus the end of June 2025. On the profit side, FY2026 net profit grew by double digits, benefiting from changes in channel mix + continuous improvement in profitability under discount management FY2026 operating profit and net profit attributable to shareholders were RMB 1.334 billion/+11.4% and RMB 997 million/+11.7%, respectively, of which: 1) Gross margin: FY2026 gross margin was 66.6%/+1.0pct, of which JNBY, CROQUIS, jnby by JNBY, LESS, and emerging brands gross margin was 69.9%, 67.6%, 60.8%, 70.2%, and 48.8%, respectively, up 1.3, up 1.4, up 2.9, up 1.2, and down 2.7pct year on year; direct-operated, franchise, and online channel gross margin was 73.2%, 60.3%, and 66.4%, respectively, down 0.7, up 1.5, and up 2.4pct, respectively. The gross margin improvement was mainly due to core product competitiveness under design-driven strategy and the company's retail discount management strategy under a healthy merchandise management system. 2) Expense ratios: FY2026 selling and administrative expense ratios were 36.0% and 10.7%, respectively, up 0.4 and 1.1pct year on year. The increase in the selling expense ratio was mainly affected by changes in channel revenue mix, while the increase in the administrative expense ratio was mainly due to increased expenses in product design and R&D departments. 3) Profit margin: FY2026 company operating margin and net margin attributable to shareholders were 22.1%/+0.5pct and 16.5%/+0.4pct. Active members and high-value users further expanded, and inventory control was good As of June 30, 2026, the company's annual active member accounts exceeded 610,000/+9%; among them, members with annual purchase amount exceeding RMB 5,000 exceeded 360,000 (330,000 in the previous fiscal year), with consumer retail sales reaching RMB 5.20 billion/+7.0%, contributing more than 60% of offline channel retail sales and becoming the core support for offline retail; retail sales contributed by members accounted for more than 80% of total retail sales. The company continued to strengthen the connection between brands and consumers through data-driven and refined operations, achieving continuous deepening of user loyalty. The company's FY2026 net inventory was RMB 910 million/-2.9%, and inventory turnover days were 166.3 days, an increase of 5.4 days from 160.9 days in the same period last year, within a healthy range. Risk warnings 1) Risk that product strength falls short of expectations; 2) Risk of intensifying industry competition; 3) Risk that new brand growth falls short of expectations.