Shanshan Brand Management Co Ltd (1749.HK) QQ3 2024 Earnings Analysis: China Apparel sector resilience with margin compression and solid balance sheet
Executive Summary
Shanshan Brand Management delivered a third-quarter 2024 (QQ3 2024) result that shows a modest YoY revenue decline but improved QoQ momentum, underpinned by a stable gross margin and a continued investment in branding and omnichannel capabilities. Revenue for QQ3 2024 stood at 265.48 million CNY, down 5.3% year-over-year but up 11.6% quarter-over-quarter, reflecting a seasonal rebound as distribution and online channels respond to demand recovery. Gross profit was 91.20 million CNY with a gross margin of 34.35%, a compression of about 6.6 percentage points YoY, suggesting cost pressures or product mix shifts within the period. Operating income reached 15.58 million CNY (operating margin 5.87%), up 3.15% YoY and 36.34% QoQ, signaling some operating leverage despite a tougher revenue backdrop. Net income was 9.98 million CNY, with a net margin of 3.76%; this marks a slight YoY decrease of 1.69% but a solid QoQ improvement of 51.13% as operating performance benefited from cost control and non-operating items normalization where applicable. Earnings per share (basic and diluted) were 0.0748 CNY.
The company maintains a healthy balance sheet and liquidity profile, with total assets of 819.6 million CNY and total liabilities of 543.3 million CNY. Cash and cash equivalents plus short-term investments stood at 107.1 million CNY, while net debt was modest at approximately 56.2 million CNY. The current ratio sits at 1.25x and the quick ratio at 0.72x, indicating reasonable near-term liquidity but continuing reliance on operating cash generation and working capital efficiency. The inventory level is elevated (278.22 million CNY), contributing to a lengthy operating cycle (cash conversion cycle approximately 113 days) and suggesting working capital optimization opportunities. The stockholdersโ equity totaled roughly 276.28 million CNY, with a debt-to-equity ratio of about 0.59 and a total debt load of 162.68 million CNY. Valuation remains modest by several metrics (P/B ~0.34x, P/S ~0.35x, P/E ~2.32x), implying potential upside if operating leverage improves and growth re-accelerates. Investors should monitor demand dynamics in the Chinese apparel market, brand strength across FIRS and SHANSHAN lines, supply chain costs, and the pace of deleveraging or balance sheet optimization.
Overall, the QQ3 2024 results reflect a company navigating a competitive domestic apparel market with a tempered top-line trajectory but improving operating discipline and a balance sheet that supports strategic investments and potential deleveraging over the near term.
Key Performance Indicators
Revenue
265.48M
QoQ: 11.62% | YoY:-5.29%
Gross Profit
91.20M
34.35% margin
QoQ: -7.05% | YoY:-6.59%
Operating Income
15.58M
QoQ: 36.34% | YoY:3.15%
Net Income
9.98M
QoQ: 51.13% | YoY:-1.69%
EPS
0.07
QoQ: 51.11% | YoY:-1.71%
Revenue Trend
Margin Analysis
Key Insights
Revenue: 265,475,502 CNY for QQ3 2024 (YoY: -5.29%; QoQ: +11.62%)
Efficiency and leverage
- Cost of revenue: 174,277,095 CNY; cost of revenue ratio mirrors gross margin trend
- SG&A and OpEx: total selling, general and administrative expenses 75,618,895 CNY; depreciation & amortization 5,135,256 CNY
- EBITDA: 20,262,480 CNY; EBITDA margin 7.63%
- Net debt: ~56.23 million CNY; cash and short-term investments: ~107.10 million CNY
- Total debt: ~162.68 million CNY; debt-to-equity ~0.59; current ratio 1.25x; quick ratio 0.72x; cash ratio 0.20x
Balance sheet and liquidity
- Total assets: 819.55 million CNY; total liabilities: 543.27 million CNY; total equity: 276.28 million CNY
- Receivables: 239.83 million CNY; inventory: 278.22 million CNY
- DSO: 81.3 days; DIO: 143.68 days; DPO: 111.59 days; CCC: ~224.98 days baseline, suggesting working capital intensity remains a factor
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
265.48M
-5.29%
11.62%
Gross Profit
91.20M
-6.59%
-7.05%
Operating Income
15.58M
3.15%
36.34%
Net Income
9.98M
-1.69%
51.13%
EPS
0.07
-1.71%
51.11%
Key Financial Ratios
currentRatio
1.25
grossProfitMargin
34.4%
operatingProfitMargin
5.87%
netProfitMargin
3.76%
returnOnAssets
1.22%
returnOnEquity
3.61%
debtEquityRatio
0.59
priceToBookRatio
0.34
priceEarningsRatio
2.32
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Notes: The earnings transcript for QQ3 2024 is not provided in the data set. Consequently, direct management quotes from the QQ3 2024 call are unavailable in this report. Themes typically discussed in apparel-focused calls would likely cover demand resilience in tier-2/3 Chinese cities, brand mix optimization between FIRS and SHANSHAN, cost containment initiatives, and online channel growth; however, no verbatim quotes can be cited from the transcript here. If a transcript is supplied, a thematically organized section with quotes by role (CEO, CFO, Chief Merchandiser) will be included, grouped by strategy, operations, and market conditions.
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Forward Guidance
There is no formal forward guidance disclosed in the provided data. Given the QQ3 2024 results, the companyโs ability to restore revenue growth will hinge on: (1) domestic consumer demand stabilization in China and brand preference for SHANSHAN and FIRS, (2) continued expansion and optimization of omnichannel sales including e-commerce partnerships, and (3) cost discipline to manage gross margin compression amid potential raw material and logistics cost fluctuations. Management commentary (if available) would be expected to emphasize brand investments, channel mix optimization, and inventory management as levers for margin stabilization. Key factors investors should monitor: demand recovery in core menswear segments, tempo of store rationalization versus expansion, input cost trends, and any capex cadence tied to branding and digital platforms.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
1749.HK Focus
34.35%
5.87%
3.61%
2.32%
1532.HK
25.50%
-4.11%
-2.71%
-3.40%
1682.HK
1.15%
-17.10%
-0.85%
-15.13%
1719.HK
19.40%
2.92%
0.93%
47.43%
1739.HK
35.20%
-6.66%
-3.90%
-2.60%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Macroeconomic tailwinds and brand-led growth could support a modest earnings re-rate if revenue re-accelerates and gross margins stabilize. The stock trades at a subdued multiple (P/E ~2.32x; P/B ~0.34x; EV/EBITDA ~7.35x), suggesting potential upside if the company can accelerate top-line growth, improve working capital efficiency, and realize operating leverage. However, the lack of visible free cash flow data and the current higher working capital burden warrant a cautious stance until there is clearer evidence of sustained margin improvement and positive cash generation. Key monitors: demand trajectory in core markets, progress on omnichannel initiatives, inventory optimization, and any strategic capital deployment that enhances brand value without compromising balance sheet strength.
Key Investment Factors
Growth Potential
Moderate growth opportunity from brand portfolio expansion (FIRS and SHANSHAN), expansion in ecommerce channels, and stronger positioning in formal and casual menswear within China. Valuation metrics imply appreciation potential if top-line growth re-accelerates and operating leverage improves (P/E 2.32x, P/S 0.35x, P/B 0.34x).
Profitability Risk
Key risks include ongoing macro demand volatility in China, margin pressure from product mix and input costs, working capital intensity (DIO/days inventory), and relatively modest liquidity buffers given the current ratio and cash conversion cycle. Competitive intensity in apparel manufacturing and potential FX exposure if international sourcing is involved could weigh on profitability.
Financial Position
Strong balance sheet support with considerable cash (~107.1m CNY) and modest net debt (~56.2m CNY). Leverage remains limited (debt/equity ~0.59) but working capital needs are material (inventory high at 278.2m CNY; CCC ~225 days). Liquidity headroom exists to fund strategic initiatives and potential deleveraging over the next 1-2 years.
SWOT Analysis
Strengths
Established brand portfolio with FIRS and SHANSHAN across formal and casual menswear, backed by a long domestic retail and distribution footprint.
Moderate balance sheet leverage with substantial cash reserves and a controlled debt level (net debt ~56.2m CNY; total debt ~162.7m CNY).
Diversified sales channels including potential sublicensing, ecommerce distribution, and store network which can support margin resilience.
Weaknesses
Revenue declined YoY in QQ3 2024 (-5.29%), indicating sensitivity to domestic demand fluctuations.
Gross margin compression YoY (~34.35% vs prior periods) suggests cost pressures from inputs or channel mix that require ongoing management.
Working capital intensity indicated by high inventory and DIO, contributing to a longer cash conversion cycle (~225 days).
Opportunities
Deepening online and omnichannel presence to offset slower brick-and-mortar growth and extract higher-margin digital sales.
Brandๆทฑๅ in tier-2/3 Chinese cities where apparel penetration remains favorable and underserved.
Product mix optimization and potential cost containment initiatives to restore margin resilience.
Threats
Competitive intensity in the Chinese apparel market and potential price competition.
Macro headwinds in consumer spending and potential raw material/logistics cost volatility.
Prolonged working capital cycles could stress liquidity if revenue growth slows or channel mix shifts unfavorably.