Incident: The company disclosed an operating summary announcement for the first quarter of 2024.
The revenue growth rate continues to be superior to the industry, and e-commerce & children's clothing continues to grow at a high double digit rate: 1Q24, the company's offline bulk clothing sales increased by 20-25%, and e-commerce sales increased by 20-25%, and remained superior to the overall growth rate of the industry. Looking at the month by month, the company performed better in January and March than in February, partly due to the Spring Festival misalignment.
Discounts have deepened month-on-month, and various operating indicators have maintained a healthy level: 1Q24 company discounts are about 70% off, and seasonal factors are compounded by intensifying industry competition, and discounts have deepened month-on-month; terminal inventory sales ratio is about 4.5-5 times, of which the inventory structure is healthy, products maintain a sell-out rate of more than 80% over 180 days, and various operating indicators such as terminal store efficiency, connection rate, and repurchase rate are in line with expectations.
Continuing to introduce new functional products, and the marketing side continues to invest in amplifying the volume: Q1 introduced a variety of new functional products. In terms of running shoes, the company launched various products such as Feifun 3, Shippeng Family Series, and Biao Speed 3 PRO to continue to expand its product matrix; in terms of basketball, signed with Pop to expand its influence in the basketball field; in terms of soccer, Li Mengwen, signed a contract with the women's soccer team to launch the Dream Chaser series of soccer shoes. In addition, we expect that in '24, the company will continue to invest heavily in marketing, becoming the official sportswear supplier of FINA, amplifying the volume of initiatives such as sponsoring the Qingdao Marathon, and at the same time launching e-commerce marketing activities online in cooperation with hot events, including “No break during the New Year” and “NBA All-Star Weekend”, etc., to stimulate the potential of the generator channel to form a differentiated competitive advantage online.
Maintaining the 15-20% range of the 24-year revenue guide: The company's order meeting orders increased by about 15%/20% +/ 15% + in the first three quarters of 24, respectively, continuing the high growth trend, and revenue growth is highly certain. In January-March '24, the company received some demand for replacement orders. On the day of the Qingming Festival in April, the offline performance was excellent (+30% in terms of turnover). The management maintained the 24-year revenue growth rate in the 15-20% range, and maintained the 24-year goal of opening 100-200 stores each.
Profit forecast and investment advice: The company is expected to benefit from changes in consumer trends and the broad sports market in low-tier cities, and maintain steady growth superior to the industry. We expect the company's net profit to be 1.17 billion yuan or 1.37 billion yuan in 24-25. The current stock price corresponds to the 24-year PE of 7.8x. The valuation is cost-effective compared to the same industry, and maintains a “highly recommended” rating.
Risk warning: Domestic consumption environment continues to weaken; competition in the sports industry in third-tier cities and below intensifies; 361 degree product launch falls short of market expectations; risk of inventory fluctuations