Seven wolves: slightly higher valuation but still stable investment

Continuously promote the flattening of channels. The company focuses on the optimization of distributor management and the steady expansion of direct-operated stores to promote the integration of company sales channels. The company began to promote the flattening of channels in 2008. The company has established six marketing management centers in East China, South China, North China, Central China, Southwest, and Northwest, and the flattening of distributors will effectively enhance the company’s control over channels. Ability and increased control over dealers. At the same time, the company also expanded its direct operating system, increased three sales subsidiaries in Wuhan, Xi'an, and Shenzhen, added Shangying Direct Company in Xiamen, and gradually established a direct single-account model.

On December 31, 2009, the company had a total of 3,249 terminal outlets, a net increase of 480 over 2008, an increase of 17.33%. The expansion of channels continued to be steady, and the total control effect was significant. Among them, 220 directly-operated and affiliated terminals, a net increase of 122 over 2008, with a growth rate of 124.49%. The construction of direct channels has become the focus of the company; there are 3,029 agent terminals, a net increase of 358 over 2008, with a growth rate of 13.40. %, the growth rate has slowed down significantly. The company is committed to increasing the construction of large stores such as living halls and flagship stores. In 2009, the number of living halls and flagship stores was 34 and 311, respectively, an increase of 54.55% and 32.91% year-on-year, respectively, to increase image promotion and expand market influence. So as to stimulate overall sales.

We believe that in 2010, the company will continue to promote the upgrading and integration of distribution system channels, accelerate the construction of direct-operated systems, and continue to increase the investment in life museums and flagship stores.

The brand is further subdivided. To further stabilize and expand the six product lines of Red Label, Green Label, Blue Label (SWJEANS), Children's Clothing (SWKIDS), Women's Clothing (SWLADIES) and SEPEWOLVES (SEPEWOLVES). In 2009, the ratio of red and green was 87.24%, and that of blue was 6.54%. The blue label series developed rapidly in 2009. As the product's fullness continues to expand, Blue Label gradually expanded its individual sales channels. During the reporting period, there were 115 blue label stores. In the future, Blue Label will contribute the company’s major sales revenue together with the Red Label Green Label.

The company broke through the long-term silence of the brand's endorsement strategy, the use of Sun Honglei, Hu Jun, Zhang Han Yu, Zhang Zhen and other four popular players to join the heavy attack, the joint interpretation of seven wolves, "chasing men in life more than one side," the brand values. At the same time, innovatively put forward the concept of “Celebrity Hall”, clearly defined the identity of the spokesperson and the concept of group, and precipitated the brand spokesperson’s assets; extensively incorporated all social names into the “Celebrity Hall”, and gathered Sun Honglei, Hu Jun, Zhang Hanyu, Zhang Zhen, Lu Chuan, Duan Xiaohong. , Haiyan, Dazuo, Dong Hebing, and a large number of international and domestic celebrities.

Earnings forecasts and investment advice. We believe that as the number of channels of the company exceeds 3,000 and the scale effect continues to show, the three future cost ratios may gradually decline, further increasing the profitability; the continuous optimization of channels gradually recommends flat management, and will also increase the overall management level. What brings is the improvement of net profit rate. We continue to be optimistic about the development trend of the seven wolves. We increase our 2010-2011 earnings per share to 0.94-1.24 yuan (previous forecast is 0.88 and 1.16 yuan respectively). In 2010, PE was 30.26 times, which is relatively reasonable, but considering the company's steady operation and good development trend, we Seven wolves are considered to be a stable investment category and maintain a “buy” rating.