Introduction to this report:
2024Q1's net profit to its mother fell 2% year on year, and its performance was lower than expected, mainly due to factors such as delays in the payment of government subsidies; the company's many brands continued to gain strength, and the pace of store expansion is expected to be low and high, and the annual results are expected to grow steadily.
Key points of investment:
The investment proposal took into account that Q1 performance was lower than expected, and the 2024-2026 EPS forecast was lowered to 0.55/0.63/0.70 yuan (0.57/0.67/0.77 yuan before adjustment). Considering the company's stable position as a leader in menswear, the investment proposal gave 2024 PE 14 times higher than the industry average, maintained a target price of 7.98 yuan, and maintained a “gain” rating.
Incident: 2024Q1 revenue/net profit attributable to mothers/net profit deducted from non-return to mother were $13.5/2.5/230 million, respectively, +4.8%/-2.1%/+6.9% year-on-year. The performance fell short of expectations.
Q1 Revenue growth slowed, and performance fluctuated in the short term. Consumption of 2024Q1 terminals was relatively weak. Combined with the effects of low temperatures in early March, the company's revenue growth rate slowed down, up 4.8% year on year.
The company's gross margin was +1.7 pct to 67.8% year-on-year, a record high in recent years. We judge that this is mainly due to good sales of new products in winter. As of the end of 2024Q1, the company's inventory balance was 1.07 billion yuan, a further decrease of 7% from the beginning of the year, and the inventory remained healthy. The Q1 sales/management/R&D/finance expense ratio was +1.4/+0.1/-0.1/-0.7 pct year on year, and the cost rate was +0.7 pct year over year. In addition, the 2024Q1 company received 200 million yuan in government subsidies, a significant decrease from 50 million yuan in 2023Q1. We judge that it is mainly related to the pace of government subsidy disbursement. Affected by the above factors, the company's net interest rate was -1.1 pct year on year, and net profit to mother was -2.1% year over year.
The pace of store expansion is expected to accelerate in the second half of the year, and full-year results are expected to grow steadily. The company's business quality is excellent, and many brands continue to gain strength. Among them, Goodbye expands categories such as sportswear, and the consumption scenario continues to expand. Haggis continues to optimize channel layout. The pace of store expansion is expected to accelerate in the second half of the year. Sub-brands such as Treasure Bird Group Buying and Lefeiye are expected to grow rapidly, and the company's annual performance is expected to grow steadily.
Risk warning: The improvement in store efficiency falls short of expectations, and the progress of store expansion falls short of expectations