Introduction to this report:
The turnover of FY2024Q3 company is in line with expectations and has achieved high-quality growth. It is expected that the pace of opening stores will gradually return to normalization, and it is optimistic that turnover will continue to grow in high quality.
Summary:
The investment recommendation company's FY2024Q3 turnover performance is in line with expectations, and the quality of operations has improved markedly.
We estimate that the company's net profit for FY2024-2026 will be 23.9/27.8/3.15 billion yuan, respectively, and the latest closing price corresponding to PE will be 17/14/12 times, respectively, giving it an “increase in holdings” rating.
The FY2024Q3 flow is in line with expectations, and the quality of operations has improved markedly. The total turnover of FY2024Q3's wholesale and retail channels increased by 10-20% year-on-year, outperforming FY2024H1, mainly due to same-store growth driven by increased sales of new products. At the same time, the operating quality of the FY2024Q3 company improved markedly, and the number of units with discounts improved year over year. By the end of November, the inventory value had dropped by double digits year on year, which was basically the same compared to the end of August, and the inventory to sales ratio was slightly less than 4 months. The year-on-year improvement was significant, and it was basically flat compared to the end of August.
The two major brands of FY2024Q3 operate steadily. By brand, the FY2024Q3 turnover growth rate is higher than the company's overall brand-weighted flow growth rate by double digits, and the flow growth rate is lower than the number of units in the company's overall brand-weighted flow growth. The flow performance of both types of brands has improved markedly compared to FY2024H1 (FY2024H1 is double digits in growth/number of declining units, respectively), so it can be seen that the company's main brands are operating steadily. Looking at each channel, the growth rate of the company's retail channel is superior to that of the wholesale channel, mainly because retail channel operations are more flexible, and the online growth rate is basically the same as offline, mainly due to the normal good operation and membership system of private domains.
It is expected that the pace of opening stores will gradually return to normalization, and it is optimistic that turnover will continue to grow steadily. The gross sales area of FY2024Q3's directly-managed stores increased by 0.5% month-on-month and decreased by 1.7% year-on-year. The number of gross stores opened increased month-on-month, and the number of Maoguan stores slowed down year-on-year. We expect the company's pace of opening stores to gradually return to normal. Considering that domestic brands plan to sink the market in 2024, and the competition or marginalization faced by international brands, compounded by the company's own healthy inventory and discount levels, we are optimistic that the company will continue its steady and high-quality flow performance in the short to medium term. In the long run, the company actively explores cooperation with high-potential sports brands and fully enjoys the growth dividends of the sports industry. At the same time, digital transformation is expected to drive continuous improvement in retail efficiency.
Risk warning: Terminal consumption recovery falls short of expectations, and sales of major brands fall short of expectations