Virginia Underwear Income Movement, The Profit Is Overwhelming, Vietnam Buys The Land Again.

Revenue from us customers reached HK $3 billion 163 million 500 thousand, an annual increase of 12.4%, accounting for 53.9% of the group's total revenue, down from 60% in the previous year.

The annual results released by Virginia International (Holdings) Limited (2199.HK) today show that the underwear manufacturer has achieved 25.5% annual revenue growth for the whole year, thanks to the trend of sports related orders.

In recent years, the Vietnam production line, which has been actively laid out, has begun to create profits for the group, easing the pressure on the continuous increase of the cost of the factory buildings in the mainland, not only promoting profit margins significantly improved, but also increasing net profit by 146%.

Virgin has released a positive profit warning early last week, sending a good news ahead of schedule.

Since its launch in October 2015, the group has launched a profit warning before its six half yearly or full year performance. Four of the six surplus policemen have been positive, and two of the 2018 fiscal year ended March 31, 2018.

The annual revenue rose from HK $4 billion 676 million 900 thousand in fiscal 2017 to HK $5 billion 868 million, and gross margin increased by 170 basis points to 21.3%.

Chest circumference and personal care

It is still the largest source of revenue, with an annual growth of 26.8% to HK $4 billion 728 million 600 thousand, which accounts for 80.6% of the group's total.

Management revealed that sales of sports bust increased by more than 20%. The popularity of no steel ring style has increased the number of major cooperative brands with emphasis on comfort and function of sports underwear orders. The group has established a cooperative relationship with many new international casual wear and sports brands by seamless underwear, and has enriched the customer portfolio.

Virginia has issued two surplus police in fiscal year 2017 in the year of fiscal year two because of the sluggish sale of its main customer L Brands Inc. (NYSE:LB), Victoria, s Secret, and Vitoria.

In order to reduce reliance on single brand, the Group actively soliciting new customers, the five main factors.

Customer revenue has shown strong growth.

Revenue from us customers reached HK $3 billion 163 million 500 thousand, an annual increase of 12.4%, accounting for 53.9% of the group's total revenue, down from 60% in the previous year.

Customer contributions in China and Europe increased by 30.7% and 31.6% to HK $612 million 700 thousand and HK $530 million 900 thousand respectively, while Japanese customers increased by 183.6%.

The founder, chairman and chief executive of Virginia Hung Hung Yi revealed that the secret of Victoria 's Secret Vitoria still accounted for more than 30% of the group's revenue.

The revenue of the chest and other moulded products increased by 2.3% to HK $524 million 700 thousand, while the revenue of sports functional products surged 41.5% to HK $614 million 800 thousand. In one go, we exceeded the chest and other moulded products to become the second largest business of Virginia.

Management pointed out that the number of sportswear orders doubled during the year. The group is developing more products with sports brand partners. With the completion of the third factories in Vietnam, the group will have more capacity to cope with garment orders, so the growth potential of the business is huge. In terms of sports shoes, the main sports brand partners' order is stable, and the group has added a new brand of American shoe brand which is comfortable and environmentally friendly.

Virginia's Vietnam workshop is located at VSIP, Vietnam's Industrial Park, Haiphong.

The main production line of chest and underwear, the annual output of 46 million pieces of the first workshop is close to full production, production efficiency has reached more than 85% of the skilled workers in Shenzhen factory.

Second the output of the chest is mainly enough to support domestic production.

The third plant will be put into operation in April this year. It is expected that 8000 employees will be recruited before the third quarter, and finally the total annual production capacity of the bra, underwear and functional sportswear will reach 30 million.

The fourth plant is expected to start operation in the first quarter of 2019, which is the same as the third plant.

During the year, the group purchased another land in VSIP, to build fifth plants. After completion, all footwear capacity in Shenzhen (2 million pairs per year) will be relocated to Vietnam. The group points out that the latter has many advantages, such as cost, labor supply, environmental protection, advanced production facilities, tax rate and politics.

As of March 31st, Virginia's Shenzhen plant had about 15 thousand employees, while Vietnam's three factories had a total workforce of 21 thousand and 500.

The group has HK $1 billion 8 million 100 thousand in non mainland assets in mainland China, though it has an increase of 7.6%, but its share has decreased from 31.6% in fiscal 2017 to 26.7%. On the contrary, Vietnam has increased 66.6% to 71.9% and non current assets increased 37.5% to 2 billion 715 million Hong Kong dollars.

In the earnings report, Virginia pointed out that under the shadow of the Sino US trade war, many US cooperation brands accelerated the shift of orders to Vietnam, which was beneficial to the group that vigorously expanded Vietnam's capacity, which became one of their most important competitive advantages.

In the 2018 fiscal year, the group achieved a net profit of HK $240 million 200 thousand, compared with HK $97 million 635 thousand in the previous year.

The board recommended that the final dividend of HK $3.8 per share be increased by 52% compared to the 2.5 Hong Kong cents in the same period of the previous year. The annual dividend is HK $6.3, 2.52 times the 2.5 Hong Kong cents in the previous year.

On Thursday, 2199.HK received HK $6.10, down 0.97% from the whole world, and expanded the cumulative decline in 2018 to 20.8% so far.

Nomura said the net profit of the group's close to 1.5 fold growth is still 21% and 22% lower than that of the bank and its market expectations, mainly due to the gross margin difference.

In addition, Vietnam's continuous expansion has increased capital expenditure from HK $910 million in fiscal year 2017 to HK $1 billion 140 million in fiscal year 18, while the fifth plant plan will make significant investment in the current 19 fiscal year. It is expected that the asset liability ratio will further increase from 59.3% in 17 fiscal year to 59.3% in 18 fiscal year, and the financial cost will increase accordingly.

The bank therefore lowered the target price of 2199.HK from HK $6.65 to HK $5.81, maintaining a "neutral" rating.