Red Dragonfly Obstacle: Inventory high margin Low PE avoid account receivable

Inventory is undoubtedly the biggest disease of China's clothing and footwear enterprises at present. Recently, Zhejiang red Dragonfly Shoes Co., Ltd. (hereinafter referred to as "Red Dragonfly") disclosed the prospectus to be landed on the Shanghai Stock Exchange, which is the following Saturday (002291. SZ) and O ' Connell International (603001.SH), the A-share market may usher in the third footwear manufacturing companies, but the high inventory and far less than the same industry's gross margin so that its landing in the capital market is fraught with worry. Inventory and Accounts Receivable "inventory is a chronic disease." "One of the PE institutions in Shanghai, said in an interview with the first financial daily," our company never cast apparel footwear manufacturing enterprises, is worried about inventory problems. At the same time, many companies are the goods sold to dealers after the recognition of income, resulting in a large number of accounts receivable problem is also very troublesome. "For red dragonflies, the problem of inventories and accounts receivable seems to be troubling in recent years," he said. The development of Red Dragonfly in the last three years is ideal. The prospectus showed a net profit of 257 million yuan in the overall recession in 2013, down 12.44% from 2012 's 293 million Yuan. In the same period, O ' Connell International net profit fell by 50.41% Year-on-year, Saturday net profit also fell 39.91%. In this respect, red Dragonfly explained that the 2013 operating activities generated net cash flow increase of 308.76% because the company's sales revenue increased by 179 million yuan, resulting in a sharp increase in cash inflows, while the cash outflow of goods to purchase significantly reduced. However, access to data found that the high growth of operating income accompanied by the surge in accounts receivable. The 2012 end of the red Dragonfly accounts receivable is 293 million yuan, and by the end of last year the figure has increased to 411 million yuan, according to the calculation of the increase of 40.27%. In contrast, its operating income grew by only 5%. Inventories are also growing sharply. The book value of the company's inventories at the end of 2011, the end of 2012 and the end of 2013 was 497 million yuan, 606 million yuan and 623 million yuan respectively, according to the prospectus. Inventory value accounted for 41.27% of current assets at the end of 2013, accounting for 23.53% of the total. The carrying balance of inventory goods is 615 million yuan, the proportion of total inventory is 92.44%, the main composition of the final inventory. In the same period, the industry average inventory book value and current assets ratio is only 33.94%, red Dragonfly 42.9% of the level is obviously much higher, and the last three years of data. According to the company, although the inventory management has been strengthened to control inventory size, so that the inventory maintained in the normal production of reasonable levels, but if in the future due to changes in the market environment or increased competition resulting in inventory backlog or impairment, will adversely affect the operation. Gross margin is far lower than the peer-a-share market popular culture plate high gross margin, today's manufacturing gross profit margin has fallen sharply. But for the Red Dragonfly, its gross margin compared with the same industry listed companies are also a lot lower. The prospectus shows that 2011--2013, the company ownerBusiness gross profit margin of 34.43%, 35.61% and 35.43%, the same time the company's comprehensive gross profit margin of 34.05%, 35.49% and 35.13% respectively. And 2013 1--6 Month, industry average gross profit level is 53.01%, and red Dragonfly's gross profit margin only has 36.11%, 2011--2012 industry average gross profit margin is 53.73% and 52.59%. It is not difficult to see that nearly 20% of the gross margin gap makes red Dragonfly's profit level is significantly lower than peers. In this respect, it is explained that the company's comprehensive gross profit margin level lower than other listed companies are due to the company's channel structure and other companies caused by different. However, access to data found that even with the red dragonfly with the same direct channels for the main channel O ' Connell International, the past gross margin data performance is higher than the red Dragonfly, the first half of 2013 O ' Connell International comprehensive gross profit margin of 41.22%, high out of the red Dragonfly shoes 5%. It is worth mentioning that the level of Mao's interest rate is lower than peers, the ratio of assets and liabilities is far higher than peers. Data show that in 2011, 2012 and the first half of 2013, the ratio of the assets and liabilities of the Red Dragonfly footwear was as high as 58.31%, 52.98% and 46.02% respectively, while the industry average asset-liability ratio was only 30.14%, 28.81% and 27.08% in the same period.