FY2024 maintained a high dividend payout rate, and its global operating capacity was further strengthened. Maintaining the “buy” rating, the FY2024 company achieved revenue of 28.93 billion yuan (+6.9% year over year, same below), net profit to mother of 2.21 billion yuan (+20.4%), continued to be high, with a payout rate of 101% for the full fiscal year, and a payout rate of more than 100% over the past five years. Considering the pressure on sales in March-April, we lowered FY2025-2026 and added FY2027 profit forecasts. The estimated net profit is 24.8/27.8/3.11 billion yuan (originally 25.3/2.87 billion yuan), the corresponding EPS is 0.4/0.4/0.5 yuan, and the current stock price corresponds to PE 11.6/10.3/9.2 times. International brands are recovering, cooperating with the Canadian high-end cross-country running shoe brand Norda, and the sporting goods platform Digital Fanatics are rich in business formats to maintain a “buy” rating .
Backward brands have made significant progress, business indicators have improved, and global operating capacity has been further strengthened, and FY2024Q1-Q4's total sales recorded 20-30% low growth, low order decline, low double growth, and low order growth. By brand, FY2024's main brand revenue was 248.34 yuan (+6.5%), accounting for 86.5%, and revenue of other brands was 3.89 billion yuan (+10.5%). Backward brands made significant progress, with an annual revenue growth rate of 7% as the tangent (FY2024H1 as 7.4% tangent), and the weighted average growth rate of brands above the tangent line was Zhongshuang (FY2024H1 was Zhongshuang). Brands below the tangent line had low single negative growth (FY2024H1 was negative growth in the middle order), excluding Neo's closure of stores and negative sales restrictions for Yezzy The next factor was low order growth (FY2024H1 was a slight increase). According to the model, FY2024 retail/wholesale revenue was 247/4.02 billion yuan, +8.9%/-3.3%, and direct management accounted for +1.5pct to 86.0%. Among them, the proportion of direct online sales increased to 20-30%, with more than 80,000 enterprise WeChat groups and 2,000 applet stores.
Offline stores were opened accurately and efficiently, and professional sports brand stores expanded. As of FY2024, the FY2024H2 sales area increased month-on-month. The number of stores was 6144 (net of 421), -6.4% compared with the same period. Among them, the number of specialty sports brand (Northface/Assys/Hoka/Glorstone) stores increased by the number of units over the same period last year. The gross sales area of FY2024 was -0.8% year-on-year, and -1.7% /flat/ +0.5%/+0.4% in the four quarters, reflecting the renewed month-on-month growth of the FY2024H2 sales area and +6% of the single-store sales area, which was reflected in multi-brand and multi-area stores.
FY2024 gross margin expanded, operating profit margin increased under operating leverage & fee control, and abundant cash profitability: FY2024 gross profit margin of 41.8% (+0.1pct), FY2024H1/H2 -0.9/+0.98pct, respectively. The improvement was mainly driven by an increase in the share of new product sales driven the improvement in the discount rate and increase in the share of retail revenue. FY2024's cost rate for the period was 32.7% (-1pct), mainly due to the restoration of business leverage for all brands. Among them, the rent rate was +0.27pct to 13.5%, the employee expense ratio was 10.1% (-0.6pct), and the number of employees decreased 4.9% year over year to 29,000. The average labor efficiency increased year on year, reflecting the increase in operating efficiency. FY2024 had an OPM of 9.6% (+0.6pct) and a net profit margin of 7.64% (+0.8pct) to mother. Excellent operating capacity: As of FY2024, inventory was 6.284 billion yuan (+0.58%), inventory turnover days were 136 days (-13.4 days), and net cash was 1.4 times net profit attributable to mother.
Risk warning: Consumer confidence has recovered, international brands have recovered, and new brand cooperation has fallen short of expectations.