Net profit in 2023 increased 28.7% year on year; dividend rate of 40.2% FY23's annual revenue was 8.42 billion yuan (RMB, same below), up 21.0% year on year. Among them, the revenue of the main brand 3619 increased 17.4% year on year, and the growth rate increased 3.7 percentage points. Affected by the increase in gross margin of footwear and children's products, the company's overall gross margin increased 0.6 percentage points to 41.1%. Benefiting from the expansion of gross margin and the impairment of 170 million yuan in accounts receivable accrued in 2022 (45 million refunded in 2023), the company's FY23 achieved net profit of 960 million yuan, an increase of 28.7% over the previous year. Dividend of HK$0.204 per share for the full year of 2023, with a dividend ratio of 40.2%.
The children's category and e-commerce are driving rapid growth
By category, footwear revenue was 3.51 billion yuan, up 23.0% year on year; clothing revenue was 2.69 billion yuan, up 9.8% year on year: the volume and price of footwear and clothing products increased. Children's products performed well in 2023, with revenue reaching 1.96 billion yuan, an increase of 35.7% over the previous year, accounting for 23.2% of revenue. The company continues to expand the layout of offline sales points. Last year, it added a net increase of 254 main brand sales outlets in China to 5,734. The main brand maintains 75.9% of sales outlets in third-tier and third-tier cities. In addition to the vigorous expansion of offline outlets, the company's e-commerce channel performed well last year, with e-commerce sales revenue of 2.33 billion yuan during the period, a strong year-on-year increase of 38.0%. During the “618” and “Double Eleven” shopping festivals, sales of its top products were booming, and it achieved the number one ranking in the domestic racing running shoe sales in the Tmall industry.
Marketing efforts accelerate the enhancement of brand influence
FY23 spent 1.07 billion on marketing, up 35.4% year over year, and its share of revenue rose to 12.7%. After signing basketball superstar Nikola Jokic during the period, the company also had spokespersons such as basketball superstars Alan Gordon, Spencer Dinwiddie, and famous Chinese basketball players Koranbak Macan and Li Yiyang, which helped expand the company's brand influence and basketball product sales.
The company will launch a Jokic co-branded product in 2025.
Double-digit increase in turnover in the first quarter
Management anticipates a 10-15% year-on-year increase in offline sales of major brands in the first quarter of 2024, sales of children's products will increase by more than 20%, and e-commerce sales will also increase by double digits. Management also guided revenue growth of 15%-20% year-on-year in 2024. We continue to be optimistic about the company's positioning as “specialized, youthful, and international”, deeply involved in the fields of running and basketball, and at the same time developing products in other fields such as women's and leisure life. The company's current corresponding valuation is 7.8 times the FY24E price-earnings ratio, and there is still about a 40% discount compared to peers.