The sales performance of down jackets during the Spring Festival exceeded expectations, and the performance guidelines were revised again during the year. The company achieved high-quality sales growth in the FY23-24 fiscal year. Thanks to the combined effects of Bosideng's main brand lightweight down jackets, the joint efforts of the four major winter down jackets, and Snow Fly's focus on the cost-effective market, terminal sales were strong. In January '24, we raised the company's performance from 24% to 27%. According to the company's public conference call, down jackets sold smoothly during the Spring Festival in February, and terminal performance exceeded expectations. We once again raised our performance guidelines and raised the revenue growth rate from 21% to 30%. The net profit growth rate is expected to be faster than revenue, from 27% to 35%. The overall business quality of the company has steadily improved, and it is expected that the net profit growth rate will exceed the revenue growth rate for 9 consecutive years.

Improved channel efficiency, rich product categories, and enhanced brand strength are the core drivers of growth. 1) Implement single-store operations to improve quality and efficiency. According to the company's public conference call, the company opened 102 new direct-run top stores in FY24, with average store sales exceeding 9 million yuan. The number of 10-million-level stores reached 185 nationwide, and the overall operating quality of top stores improved. At the same time, upgrade the franchise business model to further tap the potential of franchisees in the sinking market. 2) Create a richer product category. According to the company's public call, in FY24, the company continued to develop a diversified product portfolio to create increased performance. Sales of the newly upgraded lightweight down jackets increased by more than 45%, and the launch of the 3-in-1 jacket down jacket series became an important growth point for the innovative category. Through pre-planning to accurately position the top products, 17% of the top models in the winter down product line contributed 70% of market sales. Meanwhile, revenue from the off-season laundry category increased by more than 300%. 3) Continuously enhance the leading role of the brand. According to the company's public conference call, the Bosideng brand was worth 88.569 billion yuan in 2023, making it the first in the world's top 500 brands.

The new fiscal year begins, and sunscreen products are being promoted during the off-season. According to the company's public conference call, the sales volume of sunscreen clothing in '23 was about 500 million yuan, revenue increased by more than 300% year on year, and the layout was increased in '24, with a target turnover of 1 billion yuan. The number of stores with sunscreen clothing will increase from 1,000 in FY24 to 1,500, and will be promoted from direct management channels to franchise channels. In terms of products, from the previous promotion of the Hot Sun series to the expansion of the urban commuting product line, categories have been broadened and marketing efforts have been strengthened. Since 2024, sales of sunscreen clothing have increased by more than 85% compared to the same period last year.

The highlights of sunscreen products are outstanding, and the channel strategy layout is clear. According to the company's public conference call, the core advantages of Bosideng sunscreen stand out: 1) Strong technical functionality, leading sunscreen index (UPF reaches 80-100+, and most competitors are around 50); 2) The product has outstanding sunscreen performance while taking into account breathability, and cooling technology reduces the perceived temperature; 3) In 24, a new light outdoor product line was launched, covering business and commuting scenarios. The product texture was significantly enhanced, highlighting the high quality and cost ratio. Currently, the Hot Sun series and light outdoor products all account for about 50%. In terms of channel layout, it will actively use the layout of high-quality shopping malls that already exist offline, use offline stores as key channels for sunscreen, promote it to middle and high-end people, and build Bosideng into the number one successful brand of functional sunscreen clothing.

Implement an equity incentive plan and bind the core management team. The company issued an announcement in November 23, awarding 9 group directors, executives and core employees 78.4 million bonus shares, accounting for 0.72% of the total share capital on the announcement date. The grant price was HK$1.62 per share. Of these, 20 million shares were awarded to senior vice president and general manager of Bosideng Division Rui Jinsong. At the same time, a total of 170 directors, executives and core employees were granted 5115 million share options, accounting for 4.69% of the total share capital on the announcement date, with a subscription price of HK$3.24 per share. Of these, 30 million/5 million/3.9 million shares were awarded to directors Rui Jinsong/Huang Qiaolian/core employee Gao Jianting, respectively. The company will determine the number of attributions based on the group's performance and the grantee's work performance. The equity incentives covered a wide range and were strong, which is conducive to fully stimulating team enthusiasm and demonstrating confidence in development.

The company has been deeply involved in the down jacket industry for more than 40 years. With its deep industry accumulation and efficient organizational transformation capabilities, the company has broadened the moat in all aspects of products, marketing, channels, and operations. The company's main business is stable, and a strong consumer awareness has been established in the field of down jackets. Multiple business lines go hand in hand, and outdoor ice and snow tracks are expected to contribute to growth in the medium to long term. Considering that the company's peak season terminal sales exceeded expectations and that products, channels, etc. are making multi-dimensional efforts, we raised the company's profit forecast. We expect FY24-26 net profit to be 28.9/33.2 billion yuan (originally 27.2/31.8/3.62 billion yuan), respectively, and the corresponding PE is 14/12/11 times, respectively, maintaining the “buy” rating.

Risk warning: Consumption recovery falls short of expectations; market competition increases risk; new product performance falls short of expectations risk.