Core views:
24Q1 revenue grew rapidly, and profits were under slight pressure. 24Q1 revenue was 1,842 billion yuan, up 45.30% year on year. Net profit due to mother was 101 million yuan, up 15.06% year on year; after deducting non-net profit of 96 million yuan, up 13.61% year on year.
Revenue: Rapid growth, continuing the boom trend. On the product side, strengthen product self-research and increase the contribution of new products. On the regional side, North America has finished phasing out and entering a growth range. It is expected that supply chain problems will be solved in the future, and growth will accelerate. On the channel side, Amazon and the market growth trend is similar. The new platform expects OTTO to maintain the trend and increase the contribution of newly opened SHEIN and TK.
Profit: Ocean freight costs affect profitability. (1) The 24Q1 gross margin decreased by 0.8 pct year-on-year, mainly due to the Red Sea incident. The company fully covered shipping costs, mainly European routes and retail sales, which were mostly affected by shipping surcharges. In addition, the rise in last-end logistics costs also had an impact, but the decline in procurement costs had a certain negative impact on gross profit. The impact of shipping is expected to continue in the future, but it is expected to ease after a new round of long-term negotiations, while final logistics costs are expected to be mitigated by transforming VC and other models, and procurement costs will be further improved through the construction of procurement platforms, etc. (2) The 24Q1 sales expenses rate increased by 1.6 pct year-on-year. It is expected that promotional expenses will increase to absorb inventory. At the same time, the company places emphasis on off-site advertising, and brand investment has increased. In addition, the company had exchange losses in Q1, which is expected to reduce costs and increase efficiency in the future, and the net interest rate is expected to recover.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be 4.9/6.2/73 billion yuan, corresponding to a valuation of 19/15/13x. The current export boom is high. The company strengthens brand awareness, consolidates large supply chain barriers, and has continued growth. The company is given a 24-year 25xPE valuation, corresponding to a reasonable value of 30.26 yuan/share, and maintain a “buy” rating.
Risk warning. Risks such as international environmental uncertainty, exchange rate fluctuations, and raw material price fluctuations.