New 2024Q1 products and e-commerce drive sales, and business indicators continue to improve. Maintaining the “buy” rating of 2024Q1, the main brand turnover achieved high order growth under a high base (2023Q1 turnover growth of 20% +), mainly driven by e-commerce and functional products. On a monthly basis, there was an increase in flow orders in January-January and early March; in mid-late March, the new 360X and 260 products drove an acceleration in downstream water. The first two weeks of April saw double-digit growth in turnover, which is expected to achieve double-digit growth throughout the year. On the revenue side of the statement, new products are expected to catalyze demand for Q2 replacement orders, laying the foundation for double-digit revenue growth throughout the year. We maintain our profit forecast. We expect net profit to be 11.5/13.4/1.55 billion yuan for 2024-2026, corresponding EPS of 0.4/0.5/0.6 yuan, and current stock price corresponding to PE of 9.3/8.0/6.9 times, maintaining a “buy” rating.
Main brand: Online growth is impressive and the trend continues. Children's clothing is slightly better than adults. The business indicators continue to improve the company's product strategy and increase cost-effective products. On March 20, the “321 Running Festival and Champion Edition Running Shoe Family New Product Launch Conference was held with the China Athletic Association to launch 360X national carbon running shoes and their three champion technologies. It is expected that in 2024Q1 ASP will remain stable and sales increase under the product portfolio. (1) By channel, 2024Q1 e-commerce sales increased by 25% +, and offline sales were low, and the e-commerce growth trend is expected to continue in April; (2) By category, children's clothing sales increased by about 10%, and the main factor base is higher. 2023Q1 children's clothing sales increased by 30% +, and online children's clothing is better than offline. (3) Business indicators have gradually improved: 2024Q1 discounts are 7-75, which is basically the same as the previous year. Driven by new products, the April discount is better than Q1. It is expected that Q2 will improve to about 75, channel inventory turnover will decrease by 4-4.5 months, and new products account for about 70% in inventory. Q2 is expected to improve to close to April.
New brands: 2024Q1's domestic sales increased by 50% +, and Sauconi's turnover and profit were better than expected in 2024Q1. The domestic market turnover of all four new brands increased by 50% +. Professional sports: 2024Q1 Sauconi's sales and profit performance were better than expected. The launch of the new ENDORPHIN PRO Xipeng 4 is expected to drive sales performance in April. Sauconi is clearly positioned, focusing on runners and social elites. It is expected that the proportion of Chinese products will increase after adding commuting and classic series in 2024. S&M expects to net 30-50 businesses in 2024 (of which 10+ are franchisees), with revenue growth of 30-40%. Fashion sports: 2024Q1 K&P has performed well domestically. It plans to expand 30-40 offline stores in 2024, and the domestic market is expected to continue to grow rapidly.
Risk warning: Market competition is intensifying, and acceptance of new products falls short of expectations.