The Zhitong Finance App learned that Orient Securities released a research report stating that it maintains the Taobo (06110) “gain” rating and basically maintains the profit forecast for the next three years based on the latest operating data. It predicts FY24-26 earnings per share of 0.38, 0.44, and 0.51 yuan, respectively, maintaining FY24's 18-fold PE valuation, with a target price of HK$7.49. The company's FY24Q3 retail and wholesale business sales volume increased by 10%-20% year-on-year. In addition, it is expected that the second half of the fiscal year will increase its efforts to open stores to match market demand.

The report's main points are as follows:

The company's FY24Q3 (September-November 2023) retail and wholesale business sales increased by 10%-20% year-on-year.

As of November 30, the gross sales area of direct-run stores increased 0.5% month-on-month and decreased 1.7% year-on-year. By brand, brands with a faster overall revenue growth rate in 23Q3 (10%-20% lower segment) have a weighted average growth rate of two digits. Compared with the overall growth rate of 23Q3, the weighted average growth rate is a medium unit number (if short-term factors are excluded, low double-digit growth is achieved), which is a month-on-month increase compared to the FY24H1 situation.

Indicators such as inventory sales ratio and retail discount improved year over year.

By the end of November, the company's inventory sales ratio was slightly less than 4 times, a significant improvement over the previous year. The bank believes that the increase in the sell-out rate of new products is the main reason. At the same time, partner brands are gradually restarting marketing activities, such as the Nike High School Basketball League and the warm-up for the Sanlitun basketball tournament, etc., which are also expected to contribute positively to overall sales. Furthermore, with the increase in the share of new product revenue, the discount rate of FY24Q3 continued to improve year on year, and the trend and magnitude are basically the same as FY24H1.

The opening of stores is expected to accelerate in the second half of the year.

FY24Q3, the company's closing situation has slowed both year-on-year and month-on-month latitude. It is expected that the second half of the fiscal year will increase its efforts to open stores to match market demand. Benefiting from the restart of partner brand marketing activities and the acceleration of net store opening in the second half of the year, the bank expects the company's revenue growth rate to continue to exceed the industry average. On the other hand, considering the company's healthy inventory level+continuously improving new product sell-out rate, it is expected that profitability will continue to recover in the second half of the year. In terms of dividend rates, according to wind data, FY2021-2023 was 9.4%, 8.1%, and 5.8%, respectively. The FY24H1 mid-term payout rate increased to 74.2% year on year, up from 70.4% in the same period last year. The bank believes that behind this, it reflects the company's strong ability to generate cash income and a healthy and steady state of operation, which is also an important factor in increasing the company's investment value in the current market environment.

Risk warning: Fluctuating Adidas and Nike business growth, sportswear clearance progress, etc.