Winner Fashion (03709.HK) achieved total revenue of RMB 6.91 billion in 2023, and gross margin rose slightly to 75.3%, driving the Group's net profit to grow 1.2x year-on-year. The Group also announced a dividend of HK$0.7 per share, which is equivalent to ~ 52% dividend ratio.
The information disclosure is more detailed: We are positive about Winner Fashion (03709.HK)'s approach of providing more detailed operating information. The breakdown of gross margin by channel plan and disclosure of information to promote investment is beneficial to help investors understand the Group's sales strategies in different channels and future brand strategies. Furthermore, the Group intends to announce quarterly revenue from the first quarter of 2024, and we believe more detailed disclosure reflects the company's confidence in its operations.
The outlook for 2024 is stable, and 2025 is potentially surprising: Winner Fashion (03709.HK) brands all achieved double-digit growth last year. Benefiting from the rebound in retail sales in China in the fourth quarter of 2023, the contributions from direct stores and distributors were as exciting as expected, and sales growth on the Tmall platform, which sells more regular-priced products at the same time, remained flat. However, due to the increase in sales of Douyin, Xiaohongshu and Vipshop, and the decline in gross margin on online platforms, the Group is still maintaining a certain level of effort in inventory removal. Without much change in strategy, we expect the Group to achieve steady growth in 2024. However, due to the influence of macro factors, we are still cautious. In particular, we believe the Group was challenged to a certain extent by the impact of the growth and suspension of retail sales in China at the beginning of the year. Looking ahead to 2025, the Group's brand promotion strategy and potential diversification strategy may bring surprise to investors. The former will help the Group strengthen its light and luxury position, while the latter will help the Group develop new markets through acquisitions/partnerships.
Brand strategy has become an important business direction: Since last year, Winner Fashion (03709.HK) has invested more energy in i) including fashion week brand activities, ii) selecting ambassadors, and (iii) adopting new interior designs to enhance brand identity in stores, while brand strategy and light luxury positioning continue to be important business directions this year, and the Group Plan invests around 3% of revenue in brand promotion.
The next year has developed steadily, with a new catalyst: we maintain our view on Winner Fashion (03709.HK), believing that it will continue to grow steadily and maintain an attractive dividend ratio. At the same time, cash inflows remain strong after making one-time adjustments to accounts receivable and payable. Plans to replace smaller stores with larger stores are still in progress. From 2023, 200-square-meter stores will account for 24% of self-operated stores, and larger capital expenditure estimates will invest in diversification strategies in 2025. We reaffirm our assessment of the group's “buy” and maintain the target price at HK$16.78 per share.