The company announced the 2023 annual report and 2024 quarterly report: 1) 2023: revenue of 3,536 billion yuan/yoy +22.58%, net profit of 911 million yuan/yoy +25.17%, revenue maintained leading industry growth rate, and net profit margin was rising steadily; single Q4 revenue was 740 million yuan/yoy +12.14%, net profit due to mother net profit of 153 million yuan/yoy -0.88%. The main reason for the decline in Q4 revenue growth was related to franchisees' digestion of terminal inventory). Investment in promotion of new brands has been increased, and sales expenses have increased markedly. The company plans to distribute a discovery dividend of 1.0 yuan/share (tax included), with a dividend payment rate of about 62.7% (+39 pct year over year). 2) 2024Q1: Revenue of 1,268 million yuan/yoy +17.55%, net profit to mother of 362 million yuan/yoy +20.43%. Under the weak overall domestic consumption environment, revenue maintained relatively rapid growth, continued to lead peers, and continued to increase steadily.
Direct revenue rebounded rapidly in '23, franchises declined slightly, and online double-digit growth. Direct marketing/franchise/online channel revenue in 2023 was +34.55%/-2.07%/+16.08%, respectively, accounting for 67%/26%/5.5% of revenue, respectively. 1) Direct management: The impact base of the epidemic was low in 2022, and there was a rapid rebound in 23. As of the end of 23, there were 607 direct-run stores, a net increase of 28 home/yoy +4.8% compared to the end of the year, corresponding to the year-on-year revenue of single stores. We think it mainly benefited from the recovery in customer traffic; the gross margin of direct sales channels in '23 was +1.04pct to 83.14% year on year, showing the strength of leading brands. 2) Franchise: There was a slight decline in revenue in 23, mainly due to a decline in single-store revenue. The number of franchised stores was 648 as of the end of 23, a net increase of 36 home/yoy +5.88% compared to the end of the year, corresponding to -7.5% year-on-year revenue. We judge that the franchisee channel was mainly affected by inventory digestion and delivery in '23; the gross margin of the franchise channel in '23 was -0.7 pct to 70.27% year on year. 3) Online: The revenue growth rate in 23 was slower than in recent years, and gross margin was +7.2pct to 70.62% year on year. We judge that online channel discount contraction+price increase ratio increased in 23, which had a certain impact on revenue growth.
24Q1 Profitability was further improved and inventory turnover was optimized. 1) Gross profit margin: +0.32pct to 76.03% year-on-year in 24Q1. The high gross margin level was maintained in a sluggish market environment, and the brand's high-end positioning and brand value were highlighted. 2) Period expense ratio: 24Q1 +0.91 pct to 41.33%. Among them, sales/management/R&D/finance expenses rates were -0.22/+1.22/ +0.13/ -0.22pct to 33.03%/6.10%/3.18%/-0.98%, respectively. The increase in management expenses was mainly due to increased wages, remuneration and rental expenses. 3) Net profit margin: comprehensive gross profit margin, expense ratio and other profit and loss items (24Q1 asset impairment loss decreased by 34.8 million yuan year-on-year), 24Q1 net profit margin +0.68pct year-on-year to 28.55%. 4) Inventory: As of 24Q1, inventory was 645 million yuan/yoy -1.2%. The number of inventory turnover days was shortened by 40 to 200 days year-on-year. Inventory turnover improved, storage age structure was optimized, and the proportion of out-of-season inventory items declined. 5) Cash flow: Net cash flow from operating activities in 24Q1 was 540 million yuan/yoy +7.34%. As of the end of 24Q1, the monetary capital was 3.23 billion yuan, which was abundant.
Ying h? Profit prediction and investment rating: The company is a leader in high-end sports fashion apparel. Performance growth and profitability have remained at the leading level of peers over the years. After the epidemic was liberalized in '23, performance growth was faster than in '22, and 24Q1 maintained rapid growth in a sluggish market environment. At the same time, profitability steadily increased, and inventory turnover continued to improve, reflecting the company's advantage in positioning a high-end + sports circuit. Considering the weak domestic consumption environment, we slightly adjusted net profit from RMB 1,18/1.44 billion yuan to RMB 1,16/1.41 billion yuan for 24-25, increasing the predicted value of RMB 1.67 billion for 26 years, corresponding to PE 15/12/10X for 24-26, respectively. The dividend ratio increased and maintained the “buy” rating.
Risk warning: Weak economy and consumption, new brand expansion falls short of expectations, etc.