In the first quarter of '24, revenue was -0.73% year over year, and net profit to mother increased +31.08% year over year. In the first quarter of 2024, the company achieved operating income of 650 million yuan, -0.73% year on year; realized net profit of 0.41 million yuan, +31.08% year on year; realized net profit after deduction of 30 million yuan, an increase of +3.16% year on year; basic earnings per share was 0.02 yuan, compared to 0.01 yuan for the same period last year. Among them, the reason for the increase in net profit was the increase in income from the company's sale of the printing and dyeing workshop assets, houses and land.

Gross margin increased significantly, and investment in sales expenses continued to increase. The company's gross margin for the first quarter of 2024 was 40.79%, +3.52 pct year over year. On the cost side, the cost rate for the first quarter of 2024 was 36.63%, +3.60pct year on year. Among them, sales expense rate/management expense rate/R&D expense rate/financial cost ratio were 27.32%/6.92%/0.80%/1.59%, respectively, and +4.62pct/-1.29pct/-0.31pct/+0.57pct year-on-year, respectively. The company's net interest rate for the first quarter of 2024 was 6.45%, compared to 1.68pct.

It received a total of 7.3 million yuan in government subsidies, increasing current profit and loss. On April 25, 2024, Hongdou Co., Ltd. announced that since December 2023, the company and its holding subsidiaries have received a total of 7.3012 million yuan in various government subsidies related to revenue. The Dongzha Subdistrict Office of the Nanhu District People's Government of Jiaxing City received 5.7708 million yuan in February 2024 as a result of a case-by-case discussion; the Xishan District Bureau of Industry and Information Technology of Wuxi City distributed 40.00 funds for industrial development in Xishan District in April 2024, and other subsidies of 1,130,400 yuan. The above government subsidies received by the company and its holding subsidiaries are all other income and are directly included in current profit and loss.

Investment advice: The company has a 65-year brand history, a strong foundation, focusing on classic and comfortable menswear strategies, increasing independent product development and creating a new image of all-round comfort to meet the needs of consumers for comfortable menswear products. The company is actively upgrading channels. It is expected that online technology will continue to gain strength in the future, and the company still has plenty of room for development. It is predicted that the company's 2024-2026 EPS will be 0.03 yuan, 0.03 yuan, and 0.04 yuan respectively, and the corresponding PE will be 101.4X, 85.0, and 75.1X, respectively, maintaining an “increase in holdings” investment rating.

Risk warning: market risk, product development risk, operation management risk, credit risk, liquidity risk.