Introduction to this report:
Q1 The company's turnover is in line with expectations. The subsequent turnover growth rate is expected to gradually improve, maintaining the expected increase in turnover and revenue orders for the full year of 2024.
Summary:
The investment proposal company is a leader in the Guochao movement. Big products are expected to develop steadily as a basic market. China's Li Ning/Li Ning took advantage of the momentum in 1990, and the incubation of women/outdoors/youth can be expected. We expect the company's net profit to be 33.8/37.5/4.14 billion yuan in 2024-2026, respectively. The PE corresponding to the current stock price is 12/11/10X, respectively, giving it an “increase in wealth” rating.
Q1 The turnover was in line with expectations, and the discounted inventory remained healthy. Q1 The company's omni-channel traffic grew at a low rate, in line with expectations; among them, low offline orders declined (retail orders increased, wholesale orders declined), which was weaker than the company's expectations; online traffic grew at a low level of 20-30%, better than the company's expectations. In 2024Q1, the company's inventory sales ratio was 4-4.5 months, wholesale was better than direct management, and the warehouse age structure was healthy (new products within 6 months accounted for nearly 90%); online and offline discounts all improved by a single digit year on year.
Q1 The Ole channel performed well, and the sales performance was superior to that of the same store. 1) Direct sales are superior to wholesale: Mainly due to the excellent performance of direct sales channels, the growth rate of direct-run regular price stores is basically the same as wholesale after excluding Olay. 2) Same-store performance is weaker than turnover: Q1 company's omni-channel same-store orders declined. Among them, low retail orders declined, wholesale fell by 10-20% in the middle, and online grew at a low 20-30% rate. The decline in offline same-store sales is mainly due to a double-digit decline in customer flow and no improvement in transaction rates; although the number of stores has declined (Li Ning has decreased 26 stores for adults and 23 fewer children since the beginning of the year), thanks to the optimization of the store structure, the turnover growth rate is superior to that of the same store.
It is expected to rise from low to high around 2024, with a gradual upward trend throughout the year. Considering the base, pace of opening stores (the wholesale channel is expected to open 100 stores throughout the year, mainly on H2), new products (Wade 11 is expected to officially launch in May; mass products targeting emerging and sinking markets will be launched one after another in Q2, etc.), and marketing activities (Olympic-themed activities will be launched one after another starting in May), H2's turnover and same store growth rate are expected to be superior to H1. For the full year of 2024, we maintain a double-digit forecast of the company's year-on-year revenue growth in terms of the number of units and low net interest rates. In terms of volume price, we expect the company's ASP to remain relatively stable in 2024, with growth mainly driven by volume growth.
Risk warning: industry competition intensifies; terminal consumption recovery falls short of expectations, etc.