The company's 1Q2024 revenue also increased 26.0%, and the profit attributable to the company's equity shareholders increased 25.1%

On May 14, the company announced its 2024 quarterly report: 1Q2024 achieved operating income of 3.72 billion yuan, an increase of 26.0%, realized profit attributable to the company's equity shareholders of 580 million yuan, an increase of 25.1%, corresponding to the basic EPS of 0.47 yuan, an increase of 27.0%; realized adjusted net profit of 620 million yuan, an increase of 27.7%.

The company's 1Q2024 consolidated gross margin increased by 4.09 pct year on year, and the cost ratio increased by 3.86 pct1q2024. The company's comprehensive gross margin was 43.41%, up 4.09 percentage points year on year. There was also an increase of 0.26 percentage points from month to month, and the gross margin level reached a new high. The year-on-year increase in the company's gross margin was mainly due to: 1) the rapid development of the direct sales market overseas, and the share of revenue continued to increase, from 46.0% in the same period of the previous year to 58.0%; 2) the continuous optimization of the TOP TOY product portfolio to products with higher profitability led to an increase in gross margin.

The 1Q2024 company's expense ratio for the period was 24.26%, up 3.86 percentage points year on year and 0.23 percentage points month on month. Among them, the sales/management/finance expenses ratio was 18.69%/5.14%/0.43%, respectively, with a year-on-year change of +3.83/-0.11/ +0.14 percentage points, respectively. The company's sales expenses ratio increased significantly year over year, mainly due to the increase in expenses such as wages, rent, depreciation and amortization brought about by the company's business development, as well as the increase in promotion and advertising expenses brought about by strategic upgrades and immediate retail business development. However, it fell 0.11 percentage points from month to month, and expenses were well controlled from month to month.

1Q2024 Speeding up store openings and maintaining high growth in overseas direct sales

1Q2024 was the fastest first quarter for the company to open stores. By the end of 1Q2024, the company had more than 4,000 stores in mainland China. The company's overseas direct sales market continued to maintain a high growth rate. 1Q2024's overseas direct sales revenue increased 92% year on year, with a year-on-year growth rate of more than 80% for four consecutive quarters.

The company has broad development space, and the rating was upgraded to “buy”

The company's domestic business is developing steadily, and Chiikawa's joint performance is excellent, further enhancing the company's product strength and IP co-branding capabilities; the overseas market space is vast, and the company's rich overseas experience and supply chain capabilities help the rapid development of overseas business. The company's 1Q2024 performance slightly exceeded our expectations. We were responding to a slight increase of 1.9%/2.1%/2.2% of the profit attributable to the company's equity shareholders in 2024/2025/2026 to 28.0/34.3/4.12 billion yuan, corresponding to EPS of 2.22/2.72/3.27 yuan. The company's cost-effective consumption+interest consumption business model is in line with current consumer mentality. Long-term accumulated supply chain capabilities help its overseas business develop rapidly, and we upgraded the company's rating to “buy”.

Risk warning: Store expansion falls short of expectations, passenger flow recovery falls short of expectations, and consumption recovery falls short of expectations.