Incident: Taobo announced the operating performance for the third quarter of FY2024. The announcement disclosed the three-month operating situation from September 1, 2023 to November 30, 2023. In Q3 of FY2024, the Group's retail and wholesale business achieved a low 10-20% year-on-year growth in terms of total sales.
Flow is recovering steadily, and the month-on-month H1 growth rate continues to improve. FY2024Q3 achieved a low level of 10-20% growth in pre-tax sales, double-digit growth both online and offline, and the effects of global operations were gradually unleashed. 1) Offline channels: With the recovery of offline consumption since this year, significant terminal sales advantages have returned. Among them, the retail business has achieved a high level of growth of 10-20%. Looking at each brand, Q3's main brands and non-major brands both achieved double-digit growth, and non-major brands recovered faster than major brands. Among them, the average weighted growth rate of brands with a Q3 growth rate higher than the company's overall sales growth rate (that is, a low 10-20% growth rate) is a high double digit, and the average weighted growth rate of brands whose growth rate is lower than the overall growth rate is a medium unit of measure (if the impact of Adidas channel adjustments during the period is excluded from low double-digit growth). 2) Online channels: The recovery trend of online channels converged with offline retail to achieve double-digit year-on-year growth, mainly driven by the company's global operation strategy.
Inventory and discounts continue to improve, and operations are steady. The overall total inventory amount is healthy and manageable. The inventory sales ratio at the end of November was slightly lower than 4 months, a significant improvement over the previous year, and the same level as at the end of August. Q3 Retail discounts continued to improve, improving the number of low units over the previous year, and maintaining a stable discount level compared to the end of August.
The total sales area of stores returned to the expansion trend in Q3. The total sales area of FY2024Q3 Taobo continued to improve month-on-month. At the end of Q3, it achieved +0.5% month-on-month growth, and the -1.7% year-on-year decline gradually narrowed. The company's progress in opening Mao stores has accelerated since Q3, and progress in Maoguan stores has slowed down, so it is expected that net store opening will be achieved within the year.
Profit prediction and valuation: As a sports retail leader, Taobo will continue to enjoy beta-level benefits while strengthening its alpha attributes through a series of actions. We expect that FY2024-2026 Taobo's revenue will reach 29.79 billion yuan/34.0 billion yuan/37.97 billion yuan, +10.0%/+14.1%/+11.7% year-on-year; net profit will be 2.3 billion yuan/2.70 billion yuan/3.07 billion yuan/3.07 billion yuan, respectively, +25.4%/+17.1%/+14.0% over the same period, maintaining the “buy” rating.
Risk warning: sales of major brands have weakened beyond expectations, new business expansion falls short of expectations, slow recovery of industry discount rates, macroeconomic impact, etc.