The Zhitong Finance App learned that Anxin International released a research report stating that it maintains the Taobo (06110) “buy” rating and predicts EPS of 0.38/0.43/0.48 yuan for the next three fiscal years. In view of the company's continued expansion in brand cooperation, FY202520 PE was given, with a target price of HK$8. Against the backdrop of continued recovery in consumption, I believe the company can also resume steady growth as a downstream retailer. The company announced FY2024 results. Revenue increased 6.9% year on year, gross margin increased steadily by 0.1 pp, net profit to mother increased 20.5% year on year, and the annual dividend payout rate reached 101%, which is basically in line with expectations.

Anxin International's main views are as follows:

Retail and multi-brand recovery drives sales growth, and profitability recovered year over year

Against the backdrop of a gradual recovery in the consumer environment, the company achieved revenue of 28.93 billion yuan in FY2024, up 6.9% year on year. Among them, the revenue of the main brands (Nike and Adidas) increased 6.5% year on year to 24.83 billion yuan, and non-main brands (Puma, Converse, Weifu Group brands, Asics, Onitsuka Tiger, Skechers, NBA, Li Ning, HOKAONEONE and Kailorushi) increased 10.5% year on year to 3.89 billion yuan. Non-major brands grew better than main brands, mainly thanks to the company's expansion of new cooperative brands and broadened cooperative brands The sports segment has been subdivided. By channel, retail business increased 8.9% year on year to 24.7 billion yuan, wholesale business fell 3.3% year on year to 4.02 billion yuan, and retail channels are recovering well. Gross margin increased by 0.1 pp to 41.8% year over year, mainly due to improved discount rates and increased share of retail revenue. Driven by efficient management, net profit to mother increased 20.5% year over year to 2.21 billion yuan, and net profit margin increased 0.8 pp to 7.6% year over year. In addition, the company also focuses on shareholder returns. The annual dividend payout rate reached 101%, and the dividend payout rate for the past five fiscal years was over 100%.

Offline channels are continuously upgraded, and the online layout continues to be developed

As the impact of the epidemic gradually dissipated and offline customer flow returned, the company also continued to upgrade the offline store structure. The number of stores operated by the company during the fiscal year was 6,565, a net decrease of 421, and the number of net closed stores decreased significantly. Changes in the number and area of stores are in line with the trend of consumer recovery. The sales area of a single store increased by 6% year on year, the changes in stores of different area types were balanced, and the store efficiency and floor space efficiency of major and non-main brands were repaired year over year. The company continues to accelerate the deployment of professional sports fields (including Beiman, Asics, HOKA, and Kellstone), and the number of related stores is growing by number of units over the same period last year. The company achieved full-scene expansion through the global layout of physical stores+communities+live streaming of stores and characteristic IPs. By the end of the fiscal year, the number of applet stores had exceeded 2,000, and the stores had more than 100 live streaming accounts. Combining the diversification trend of online channels, the company formed a combination of platform e-commerce, content e-commerce, and private domain operations. The direct online business share reached 20-30%, and is deeply involved in the live streaming business of stores. The company continues to use online communities to promote user activity, use 80,000+ enterprise WeChat group communication services, video accounts, and convert mini-programs to build a closed loop of user operation.

Risk warning: macroeconomic downturn, weak consumption; store optimization falls short of expectations; inventory risk.