Investment advice: Maintain the 2024-2026 EPS forecast of 0.50/0.57/0.65 yuan. Considering the company's stable leading position in the mass apparel sector, give 2024 PE 15 times higher than the industry average, maintain the target price of 7.50 yuan, and maintain the “gain” rating.

Incident: 2024Q1's revenue/net profit attributable to mothers/net profit deducted from mother was 31.4/3.5/340 million yuan, respectively, +4.6%/+11.4%/+15.5% year-on-year. The performance was in line with expectations.

Q1 Revenue grew steadily, and gross margin reached a record high. 2024Q1's revenue was +4.6% year over year. Considering the continuous decline in the number of company stores over the past year, we expect the 2024Q1 same-store revenue increase to drive steady revenue growth in the 2024Q1 environment. Q1 gross margin was +2.3 pct to 46.63% year over year, a record high in recent years. We judge that it mainly benefited from the narrowing of discounts and the increase in the share of direct revenue. The Q1 sales/finance expense ratio was +1.1/-1.1 pct year on year, and the management/R&D expense ratio remained flat and increased slightly. Therefore, the cost side was relatively stable, and the deduction of non-return income increased 15.5% year over year.

In the first quarter, the company calculated an inventory depreciation of 115 million yuan, an increase of 34 million yuan over 2023Q1, and a year-on-year decrease of 7.43 million yuan in government subsidies. As a result, net profit attributable to mother only increased 11.4% year on year.

It is expected to grow steadily throughout the year, and the company also has high dividend attributes. On the one hand, the company will continue to promote the product management system and steadily improve the efficiency of single store operations; on the other hand, the company will accelerate the layout of Ole and shopping center stores and optimize and transform existing stores. The number of stores is expected to rise steadily, and the company's annual performance is expected to grow steadily. In addition, the company has continued to give back high dividends to shareholders for many years. The dividend ratio in 2023 is 72%. The high dividend is expected to be maintained in 2024, and the corresponding dividend rate will remain at 5-6%.

Risk warning: The improvement in store efficiency falls short of expectations, and the progress of store expansion falls short of expectations