Key points of investment
The projected performance for the 24/3/31 fiscal year exceeded expectations:
The first half of the fiscal year has been handed over a bright questionnaire: FY24's revenue and profit both exceeded expectations during the 23/4/1-23/9/30 period, with revenue of 7.47 billion yuan (+20.9% YoY), exceeding expectations due to a high increase in the down jacket business. Among them, the Bosideng brand's revenue was 4.42 billion yuan (+25.5% year over year), and the Xuezhongfei brand's revenue was 265 million (+52.2% year over year); the Group's operating profit for the first half of the fiscal year was 1.23 billion (+30.2% year over year), due to a high increase in the down jacket business and loss reduction in women's clothing. 100 million (year-over-year + 25.1%); At the same time as performance increased, inventory turnover efficiency continued to improve. 9/30, the Group's inventory was 3.883 billion yuan (+12.8% year over year), and the inventory turnover period was 160 days (year-on-year - 21 days), from an efficient supply chain system with flexible pull-out and quick reversal of small orders.
The outstanding performance of down jackets is expected throughout the second half of the fiscal year: since entering the peak season in October 23, 3-in-1 jackets, down jacket products represented by extreme cold, and high-end outdoor activities continued to be favored by consumers under the cold winter+snow travel boom. In line with the continuous increase in channel optimization and centralized marketing and marketing campaigns, the company's sales performance continued to break through. In 2023, Double Eleven surpassed Uniqlo to become the number one brand in Tmall apparel sales. The national cooling since December also effectively promoted sales. New Year's Eve is 1/21, The upcoming Spring Festival holiday is also beneficial to winter clothing sales in January-January (generally, most consumers prefer to buy spring clothes rather than winter clothes after the Spring Festival), so we expect the bright performance of down jackets throughout the second half of the fiscal year.
The sunscreen business is becoming more professional and more diverse, helping to break through summer performance in the new fiscal year:
In March, the company launched a new generation of professional sunscreen, with outstanding professional performance (UPF100+, 66% cooler than the national standard, 35% more breathable), and launched a co-branded product with Christelle Kocher (art director of Chanel's advanced workshop), collaborated with Fashion Bazaar to create SHOWROOM, and the Beijing Film Festival to help raise the topic. In addition to the existing Hot Sun series, the urban light outdoor series was added to expand coverage of life scenes in the new fiscal year. Continued high growth lays a solid foundation.
Strong incentives to share growth dividends with core employees:
The company announced two incentives on the evening of 11/28, including 1) awarding reward shares: for 9 directors, executives and core employees, the number of 78.4 million shares, accounting for 0.7% of the issued shares, the exercise price: 1.62 HKD/shares. The licensing conditions must meet the financial performance & personal performance targets of the Group and/or each division, and can be used for 30%/30%/40% after 8 months/20 months/32 months, respectively. 2) Grant of share options: The target is 170 directors, executives, and core employees, with a maximum of 511 million shares, accounting for 4.69% of the issued shares. The exercise price: 3.24 HKD/share. The exercise conditions must meet the financial performance & individual work performance goals of the Group and/or each division, including the Group's 24, 25, and 26 fiscal year results, which also need to meet the standards. After 8 months/20 months/32 months, respectively, from now on, 30%/30%/40% of the rights can be used. On the one hand, strong incentives reflect confidence and determination for subsequent business development, and on the other hand, share growth dividends with core employees.
Profit forecast and valuation: Considering the strong performance of the mid-report and peak season and sufficient new product reserves, we have raised our profit forecast once again. We expect the company's revenue for the fiscal year 24/3/31, 25/3/31, and 26/3/31, +30%/14% YoY, +30%/14% YoY, net profit to mother 29.0/33.3/3.77 billion yuan, +35%/+15%/+13%, corresponding to PE14.0/12.2/10.7X. Currently, the valuation is still clearly cost-effective. The dividend rate for the past two consecutive fiscal years has exceeded 80 %. The high dividend attribute of undervaluation is highlighted, and the “buy” rating is maintained.
Risk Factors:
The frequency of cooling was lower than expected, and consumer spending power was lower than expected