As travel continues to resume and the industry pattern is optimized, the company's globalization and multi-brand layout are expected to drive steady growth in performance and increase in market share. Profit margins are expected to continue to rise under continuous improvement of the product & channel structure and strict cost control. The company's net profit for 2024-2026 is estimated to be US$470 million, US$529 million, and US$590 million, respectively, with year-on-year growth rates of 13%, 13%, and 11%, respectively. Corresponding to 24PE10.6X and 25PE9.5X, the valuation has a cost-effective advantage and maintains a “highly recommended” rating.
Company Highlight 1: Travel continues to resume, and the company's multi-brand, multi-category, multi-channel business format, and global layout drive steady growth. Global travel is gradually recovering and growing steadily. There is still room for recovery in China's international civil aviation passenger traffic, and luggage is expected to grow at the same time as a highly related consumer product. The company is committed to globalization, multi-brand, and omni-channel development. In 24Q1, Asia/North America/Europe accounted for 40%/33%/20% of revenue, Samsonite/Tumi/US Travel accounted for 51%/23%/18%, and DTC/wholesale channels accounted for 37%/63%. The global layout is conducive to calming risk fluctuations in a single region, and differentiated brands have built a complete product matrix to drive steady growth in the company's performance. From 2009 to 2019, the company's total revenue CAGR was 13.5%, which grew steadily; the 2020-2023 revenue CAGR was 33.8%, 2023 revenue of US$3.68 billion, and 2024Q1 revenue of US$860 million, all exceeding the same period in 2019.
Company Highlights 2: Optimizing the competitive landscape of the industry, and diversified brand matrices to help increase the company's share. Since 2020, the concentration of the suitcase market has continued to rise. In 2022, the company ranked first in the global suitcase market with a 15.9% share, and has an absolute advantage. The company has achieved full coverage from popular to high-end positioning through the three brands of American Travel, Samsonite, and Tumi. We believe that it is difficult for emerging Internet luggage brands and high-end luxury brands to have a long-term impact on the company. The leading position is still stable, and there is room for share growth.
1) The high-end brand RIMOWA has more luxury and fashion attributes, while Tumi positions itself as a high-end business brand and focuses on product functionality; the price range of RIMOWA's main products is also higher than Tumi. Therefore, there is a clear distinction between brand positioning, price band, and target customer base, making it difficult to form direct competition.
2) Low-cost Internet brands have limited room to grow, and they do not directly compete with Samsonite. First, the difference in product strength: The price range of Internet brand trolley cases is concentrated within 500 yuan. They mainly use PC fabric and aluminum alloy pulls, and lack the ability to iterate on products. The pricing range of the US Travel 500 to 1900 and the Samsonite 1500 to 5000 is higher, and the profit margin is greater, and product development continues to advance. Samsonite's materials alone include Curv, Roxkin, Recyclex, etc., which have obvious advantages in product detail accumulation and development. Second, the difference in business models: Suitcases are low-frequency durable consumer goods, and the replacement cycle is long. For Internet brands that follow the cost-effective route, customer acquisition is almost equivalent to a one-time investment, and they face fierce competition in this price range. Without brand premium support, it is difficult to survive for a long time. Therefore, we believe that the influence of Internet brands on Samsonite is limited in the long term. It is more about competition for products with the same price range and integration of low price white cards, but the room for growth is limited.
Company Highlight 3: Structural improvements & flexible fee control, profit margins are expected to continue to rise. The company's high-margin Tumi/Samsonite brand, DTC channels, and the Asian region's revenue share continued to rise. The gross profit margin reached 60.4% in 24Q1. The gross margin has been rising steadily since 2021 and has reached an all-time high. Flexible control on the cost side is currently at an all-time low. The management fee rate has declined steadily since 2021, to 6.6% in 24Q1, and has basically returned to the level before 2019 (6% to 7%). On the marketing cost side, take advertising expenses as an example. They are basically adjusted according to the business environment and sales scale, and the overall range is relatively stable (5% to 7%). The share of fixed SG&A in net sales has continued to decline since 2021. 24Q1 was 24.9%, a significant decrease from 29.7% in the same period in 2019. Taken together, the adjusted EBITDA profit margins of 2023 and 2024Q1 both reached new highs, reaching 19.3% in 2023 and 18.8% in 24Q1, while the pre-2019 level was generally 15.5% to 17.5%. Net profit to mother of $417 million and $80 million was achieved in 2023 and 24Q1 respectively, both of which reached record highs.
Maintain a “Highly Recommended” rating. The company's revenue for 2024-2026 is estimated to be US$3,982 billion, US$4.363 billion, and US$4.747 billion, respectively. The net profit scale was US$470 million, US$529 million, and US$590 million, respectively, with year-on-year growth rates of 13%, 13%, and 11%, respectively. Corresponding to 24PE10.6X and 25PE9.5X, the valuation has a cost-effective advantage and maintains a “highly recommended” rating.
Risk warning: risk of demand falling short of expectations, geopolitical and international trade risks, risk of declining brand share and profit margins due to increased market competition, risk of exchange rate fluctuations, risk of systemic fluctuations in Hong Kong stocks.