The company released its 2024 quarterly report, and the results exceeded expectations. 24Q1 achieved revenue of 4.76 billion yuan, up 30.2% year on year, net profit to mother of 790 million yuan, up 63.7% year on year, net profit after deducting non-return to mother of 780 million yuan, up 64.3% year on year. Considering that the average exchange rate of the US dollar to RMB appreciated by about 4% year on year in 24Q1, it is estimated that the company's 24Q1 revenue and profit growth rate was slightly lower than the RMB caliber, which accelerated month-on-month growth compared to 23Q4, and superior to the performance of Fengtai Enterprise and Yuyuan Shoe Division's revenue growth units and a slight decline over the same period, respectively, showing its own growth.
23Q4 volume growth accelerated, average prices reached the next level, orders recovered rapidly, and the trend of high value was obvious. According to the company's announcement, split volume price: 1) Sales volume: 24Q1 sales volume was 46 million pairs, up 18.4% year on year 23Q1, reaching about 89% of 22Q1 sales. As the inventory level of downstream sports brands became normal, 24Q1 orders improved faster month-on-month (23Q4 sales volume increased about 5% year over year), reflecting the company's high flexibility in the order recovery process. 2) Average price: According to revenue and sales estimates, the 24Q1 RMB ASP is about 104 yuan, up 10.0% year on year. The US dollar ASP is expected to grow in the middle of a year on year. It is still continuing the strong growth trend of ASP in 2023, mainly due to changes in customer structure, an increase in the share of customers with high unit prices, and the unit price of new customer orders is generally high, driving the company's ASP order trend to rapidly increase.
Operational improvements and plant efficiency have driven significant year-on-year increases in gross profit margin and net margin. 24Q1 gross margin increased by 5.0 pct to 28.4% year over year, higher than the high gross margin in a single quarter in 23 (gross margin reached 26.5% in 23Q3), which is a high level for the same period in a single quarter. The sharp increase in gross margin is due to the company's continuous strengthening of operational improvements, and the efficiency of the old factory is gradually improving. The 24Q1 sales/management/R&D expense ratio was flat/increased by 1.8 pct year over year, and the increase in management expense ratio was mainly due to an increase in performance compensation costs due to sales growth; the 24Q1 exchange loss was expected to decrease year over year; the income tax rate increased 3.7 pct year over year mainly due to increased profits and increased income tax from overseas subsidiaries to the parent company; the final net interest rate was 16.5%, an increase of 3.4 pct year on year, a record high in a single quarter.
The company has huge production capacity reserves in Southeast Asia to ensure continued growth in production and sales in the future. Two new finished shoe factories have been put into operation as scheduled, and production expansion is expected to accelerate this year. According to the company's announcement, 24H1 plans to gradually put into operation two new factories in Vietnam (a finished shoe and shoe material factory, respectively) and a new finished shoe factory in Indonesia. According to the order plan, the company continued to promote production capacity construction. By the end of April, the newly built finished shoe factories in Junhong, Vietnam and Sechuan, Indonesia (Phase I) had begun operations. Among them, Indonesia, as the company's new production base, is expected to have a total production capacity of 50 to 60 million pairs/year in the next two phases, which is not only an important increase in production capacity in the future, but also an important complement to meet the diversification demands of downstream customers.
The company is the world's leading professional manufacturer of sports shoes. 24Q1 performance growth accelerated, growth was shown, business quality was improved again, medium- to long-term growth can be expected, and the “buy” rating is maintained. Based on the excellent performance of 24Q1, the 24-26 gross margin was raised to 26.6%/26.7%/26.8% (previously 25.9%/26.0%/26.1%), and the 24-26 profit forecast was raised. The net profit for 24-26 is estimated to be 39.1/45.2/5.26 billion yuan (originally 37.4/43.7/5.08 billion yuan), corresponding to PE 19/17/14 times, maintaining the “buy” rating.
Risk warning: Downstream core customer order demand has shrunk; the progress of new production capacity falls short of expectations; competitors have greatly expanded production, etc.