CHINA LILANG Ltd (HK: 1234), which produces menswear under the Lilanz label, is trading smack in the middle of its 52-week range, currently at around 10.8 hkd.
NextInsight accompanied 10 Greater China fund managers to Lilang’s Fujian-based facilities last week to attend its winter collection fashion show and better assess the true value of this steadily expanding clothier.
Admittedly, our group of interested participants led by Hong Kong-based Aries Consulting was more accustomed to factory tours and boardroom Q&A sessions than to the rarified setting of an invitation-only fashion show.
But once our group of nearly a dozen fund managers was waved in past security, we put away our cameras (not allowed for IPR reasons), and took out our notebooks, drinking in the anticipation.
And for those hoping for a few chuckles at how far behind the exhibition lagged peer events in Paris, Milan, New York or Tokyo... they were likely left scratching their heads in pleasant surprise.
That is because Lilang’s fashion show -- during which a steady stream of sculpted male models catwalked past in the company’s Lilanz winter collection --- went off without a hitch and exuded professionalism and refinement.
In fact, for most of us, it was our first exposure to this company – and brand – and if first impressions are everything, then we left very impressed indeed.
Regrettably, Lilang security prohibited any photography of the suits and ensembles being slowly strutted up and down the catwalks in order to prevent closely guarded fashion secrets from slipping into competitors’ cutting rooms.
Therefore, you’ll just have to take NextInsight’s word for it ... they were very fetching and the company obviously has a flair – even obsession – for detailed planning.
And this is precisely the face that potential investors want to see on a listed firm that is, after all, all about brand building and quality perception.
From Humble to Haute
Lilang’s story begins humbly.
In 1987 it was established in Jinjiang, Fujian with an initial capital of just 30,000 yuan, three aging sewing machines and a single iron.
After over two decades of development, it soon led the way in business clothing and apparel for men in Mainland China with what it calls “an integration of design, R&D, production and marketing” to become an over 13 bln hkd company today, listed in Hong Kong in 2009.
Its total revenue last year rose 31.6% to 2.1 bln yuan, producing a bottom line jump of 38.2% to 419 mln.
But more importantly, its gross margin rose 2.6 percentage points to 37.9%, a feat which the company attributes to higher Average Selling Prices (ASP) on more effective marketing and bolstered brand recognition.
Part and parcel of the retail fashion game in the PRC, and worldwide, is to hitch one’s label to a rising star.
Chen Daoming (陳道明), sometimes referred to as the “Emperor of Chinese drama,” is one such superstar who has been hired by Lilang to be a spokesperson for the Lilanz brand.
He is perhaps best known to foreign film fans for his role as the Emperor Qin Shi Huang in the Chinese blockbuster Hero.
Meanwhile, American Daniel Wu, who has appeared in over 40 films, is Lilang’s spokesperson for its “L2” brand.
“The two spokespersons possess distinguished characteristics and represent the respective philosophy of the two brands, thus accentuating the brand image,” Lilang company officials said.
Lebensraum
Lilang has great faith in the men’s fashion market in the PRC for its line of clothing, especially with the strong domestic economic growth and a growing awareness of the art of personal consumption.
That means it is not only focusing on designing, manufacturing and marketing new fashions, but also taking care of the brick-and-mortar side of things, with a steady expansion in retail floorspace.
As of the end of 2010, “LILANZ” had a total retail sales outlet area of 299,000 square meters, up 7% year-on-year.
Meanwhile, its recently created brand “L2” is currently at 8,200 square meters across the PRC.
“Retail stores are one of the most important channels for advertising and enhancing brand image, and since 2008, the group has subsidized distributors to renovate the layout and design of retail outlets in phases,” the company said.
“By the end of 2010, all stores had completed their renovations, and there are plans to further upgrade the first batch of renovated stores in 2011 to improve the display spacing and to further enhance store image.”
Lilang added that it places great importance on promotional activities, such as the winter collection fashion show we attended last week in Jinjiang, Fujian.
“We place great emphasis on the long-term development of brands, and actively enhance brand values through various marketing and promotional activities.
"Some of these include placing a large billboard at Shanghai’s Hongqiao Airport and increasing advertising spending on CCTV during the recently-concluded Asian Games in Guangzhou to coincide with the launch of our winter collections.”
In 2010, China’s economy continued to expand and the retail market remained prosperous, with the country’s GDP rising 10.3% to 39.8 trln yuan, the envy of the major economies of the world.
Lilang says that given the booming economy and the increase in per capita income, domestic consumption continues to rise and drive overall retail spending, with total 2010 retail sales of consumer goods in the PRC reaching 15.5 trln yuan, up 18.4% year-on-year.
“The demand for high-end brand name products also intensified, and benefitted the healthy development of the branded apparel industry,” the firm said.
It added that it is capitalizing on the market’s growing demand for fashionable and premium branded apparel by continuing to actively promote and enhance the “LILANZ” brand image and introducing more higher-end products into its product mix.
At the end of the day, a clothing designer, producer and retailer lives and dies with the prestige of its brand.
And if the slick professionalism and seamless precision that characterized its fashion show, as well as the highly efficient flagship store we were invited to tour are any indication, then Lilang is certainly a PRC clothier with tremendous potential in a crowded market where only the stand-out names thrive.
See also:
XTEP 2010 Net Up 25.7%: What Analysts Now Say...
CHINA TAISAN, CHINA GAOXIAN, LI HENG: Riding High On Industry Recovery
Comments
Market cap of Lilang is of course in a league of its own , at 13b HKD