Core views:

The Company announced the draft 2024 Stock Options and Restricted Stock Incentive Plan. Among them, in terms of the stock option incentive plan, the company plans to grant 20 million stock options to incentive recipients, accounting for 4.22% of the company's total share capital when the plan was announced. Of these, 18.501 million shares were granted for the first time, and 1.499 million shares were reserved. In terms of the restricted stock incentive plan, the company plans to grant the incentive target approximately 3.3531 million shares of the company's restricted shares, accounting for about 0.71% of the company's total share capital at the time the plan was announced. The incentive targets a total of 144 people, who are key management personnel working in the company. The exercise price for stock options is 15.81 yuan/share, and the grant price for restricted stock is 7.91 yuan/share. The exercise ratios for stock options granted for the first time were 30%, 30%, and 40%. The performance assessment target is that the net profit growth rate for 2024-2026 is not less than 15%, 32%, and 50% based on 2023 net profit. The sales restrictions for granted restricted stocks are lifted at 30%, 30%, and 40%. The performance assessment target is that the net profit growth rate for 2024-2026 is not less than 15%, 32%, and 50% based on 2023 net profit. If the equity incentive plan is implemented in the future, it is expected to guarantee the long-term development of the company.

I am optimistic that the company's revenue and net profit will grow in 2024. First, the pressure on the company's 2024Q1 performance was mainly affected by the high base for the same period last year, and spring clothing sales affected by the cold spring season. 2024Q2 and 2024Q3 correspond to a lower base for the same period last year, and the weather gradually warmed up in late March 2024. Second, the effects of the company's organizational transformation are expected to be further evident. At the same time, in 2024, the company will focus on promoting tasks including upgrading the brand image, focusing on core categories, building core exploits, accelerating the expansion of franchises, consolidating its position in the e-commerce industry, and upgrading the supply chain. Finally, the introduction of the draft equity incentive plan and the recent active increase of the company's shares by executives showed confidence.

Profit forecasting and investment advice. EPS for 2024-2026 is expected to be 1.21 yuan/share, 1.51 yuan/share, and 1.80 yuan/share, respectively. Referring to the average valuation of comparable companies, the company was given a price-earnings ratio of 15 times in 2024, corresponding to a reasonable value of 18.21 yuan/share, maintaining a “buy” rating.

Risk warning. The risk of increased market competition, failure to accurately grasp changes in market trends, and slow supply chain response.