incident. On May 21, 2024, the company issued an announcement stating that Amway Co., Ltd. recently received an official email notice from Adidas (Adidas) of Germany. Amway Co., Ltd. and Amway Vietnam have simultaneously become qualified suppliers of Adidas in Germany. The supplier codes are Q4E001 (China) and Q4E002 (Vietnam), respectively. They mainly provide footwear products such as polyurethane synthetic leather, TPU, water-based breathable leather, and microfiber polyurethane synthetic leather.

The company actively develops customer orders, and the benefits of the Vietnamese factory continue to be realized. Amway Vietnam's production and sales did not reach the break-even point in 2023 due to large investment in early employees, product and market development, and depreciation factors, resulting in a total loss of 20.62 million yuan. However, with the gradual increase in customer orders and the gradual release of production capacity, Amway Vietnam's sales volume in the second half of the year increased by about 316% year-on-year compared to the first half of the year. Since 2023Q4, Amway Vietnam's production and sales have grown steadily, and the overall trend is improving. Since 2024, the company has successively passed supplier certifications from Nike of the United States (February 24) and Lezhibao of the United States (April 24). Among them, Amway Vietnam accounts for a small proportion of Nike's internal procurement, and there is plenty of room for future development. Amway Vietnam is currently actively promoting Nike Laboratory certification and is expected to receive substantial orders in the second half of 2024, generating revenue contributions.

Adidas's global influence is remarkable, and the growth in economic efficiency is worth looking forward to. Germany's adidas (adidas) was founded in 1949 and is headquartered in Germany. It has three major series: the sports performance series Performance (three stripes), the sports tradition series Originals (clover), and the sports fashion series Neo (spherical LOGO). It is an influential sports and leisure brand in the world. Total revenue in 2022 and 2023 was 167.087 billion yuan and 168.399 billion yuan respectively, of which footwear revenue was 92.1 billion yuan and 95.4 billion yuan respectively. In May '24, the German Adidas headquarters and Vietnam factory both passed certification, which is a new driving force and a new growth point for the company's growth. On the one hand, this shows the company's comprehensive level of strength in product R&D and design, process technology, quality management, production control, etc., and has once again been recognized by world-class sports brands, which is conducive to further expanding the company's footwear international sports and leisure brand customer base; on the other hand, after Adidas's large-scale orders are formed, it is expected that the company's sales revenue will further increase and achieve better economic benefits.

Investment advice: The company is a domestic PU synthetic leather company. In the future, demand for new eco-friendly products will increase and expand and release from downstream customers. In addition, the Vietnamese factory will soon enter a period of capacity release, and the company's performance is expected to grow significantly in the future. We expect the company's net profit for 2024-2026 to be 2.02.62 billion yuan, and 316 million yuan, EPS 0.93, 1.21, and 1.46 yuan, respectively. The current price (May 21, 2024) corresponding PE is 17x, 13x, and 11x, respectively, maintaining the “recommended” rating.

Risk warning: the risk of fluctuating raw material prices, the risk of increasing natural gas supply and costs, the risk of production capacity not being fully utilized, etc.