Incident: The company released its 23 annual report and 24Q1 report. In '23, the company achieved revenue/net profit to mothers/net profit deducted from non-net profit of 215/30/2.7 billion yuan, respectively; in '23, the company plans to pay a dividend of 5.6 yuan for every 10 shares, with a dividend ratio of 91% and a dividend rate of 6.1%; first disclosed a semi-annual dividend plan, the 24H1 dividend ratio did not exceed 70%; and achieved revenue/net profit deducted to mother of 62/9/900 million yuan in 24Q1, +9% YoY.
By brand: The main brand's revenue has grown steadily, and profitability has increased steadily. The main brand revenue in '23 was 16.5 billion yuan (+20% yoy), gross profit margin of 45.20%, +2.96pct; the main brand's overseas revenue in '23 was 300 million yuan (+24% yoy); 24Q1 main brand revenue was 5.1 billion yuan (+6% yoy), with a gross profit margin of 46.40%, +0.60pct year over year. The group buying business had revenue of 2.3 billion yuan (+1% yoy) in '23, gross profit margin of 46.82%, -1.78pct; 24Q1 revenue of 500 million yuan (+54% yoy), gross profit margin of 48.25%, -0.65pct year on year; the company innovated and developed a light and shadow composite cutting model, intelligent clothing manufacturing progressed steadily, and the businesswear group buying business is expected to continue to grow. Other brands had revenue of 2 billion yuan (+6% yoy), gross profit margin of 50.19%, -2.01 pct; 24Q1 revenue of 400 million yuan (-25% yoy), 24Q1 gross profit margin of 58.70%, +3.25 pct year over year. The decline in revenue was mainly due to the divestment of boys' and girls' businesses (23H1 revenue of 300 million yuan, loss of 43.61 million yuan).
Channel division: Focus on direct-run stores, and online revenue is growing steadily. On the offline side, the company's main brand promoted the construction of direct-managed stores, mainly shopping centers. In '23, the main brand had +198/ -164 direct-managed stores (34 net stores) and +15/-37 direct-managed stores in 24Q1 (22 net stores); in '23 and 24Q1, the company's overall direct-run store revenue was 4.5/1.4 billion yuan, +49%/+14%, gross profit margin of 62.62%/63.20%, year-on-year -0.55/+2.27pct; year-on-year, 23/24Q1 and overall franchise store revenue 139/41 billion yuan, +10%/+0% YoY, gross margin 40.
26%/41.74%, +1.55/-0.65pct year over year. In terms of e-commerce, revenue in 2012/24Q1 was 3.38 billion yuan, +14%/+34% year over year, gross profit margin 48.15%/47.64%, +8.27/ -0.51 pct year on year.
Overall profitability and operational efficiency continue to improve. Net interest rate of 13.56%/14.35% in '23/24Q1, +2.45/+0.36pct, the disposal of boys and girls in the subsidiary in '23 led to a marked increase in investment income (2016 million yuan vs. -6955 yuan in '22). In addition, the joint venture brand SPOTS (40% shareholding) contributed about 9 million yuan in investment income; the 23-year sales/management/finance/R&D expense ratio was 20.22%/4.47%/0.22%/0.22%/0.3% year over year, +1.77/- 0.93% year on year 0.49/+0.34/-0.11pct; 24Q1 sales/management/finance/R&D expenses ratio was 18.97%/5.24%/-1.02%/0.83%, +2.71/-0.51/+0.01pct; it is estimated that sales expenses increased significantly due to the increase in direct management share. In terms of operating capacity, the number of inventory/receivables turnover days in 23 was 283/18 days, -15/-3 days; 24Q1 inventory/accounts receivable turnover days were 240/14 days, -6/-4 days year over year. In terms of cash flow, net operating cash flow in 2012/24Q1 was 52.14 billion yuan, +67%/-4% year-on-year.
Investment advice: Looking ahead to 24 years, the main brand and group buying business are expected to maintain steady growth, and the joint venture brand Sportz is expected to continue to contribute to revenue growth. Net profit due to mother in 2024-26 is estimated to be $32.73/36.91/13 billion (the value was 31.70 billion yuan and 3.541 billion yuan before 24-25, up according to 23 and 24Q results), and the corresponding PE is 13/12/11 times, maintaining the “buy” rating.
Risk warning: poor terminal demand; industry competition risk; new brand cultivation risk; inventory management risk, etc.