Strong short-term performance leads the industry, and FY2024's revenue is expected to increase by around 30%. In recent years, the company's revenue and net profit scale have continued to reach new highs. While establishing a leading position in down jackets, it has gradually developed into a functional apparel circuit. 1) FY2024H1 (for the six months ended 2023/9/30), the company's revenue/performance increased 21%/25% year-on-year to 7.47/92 billion yuan, respectively. 2) Considering the popularity of the company's brand terminal sales in the winter of 2023, we estimate that FY2024 brand down jacket business sales are expected to increase by 30% +/OEM business sales are expected to grow steadily. Taken together, it is estimated that the company's revenue will increase by about 30% for the full fiscal year/performance growth rate is expected to be faster than revenue, maintaining a high-quality growth trend. 3) In the past few years, the company maintained a high dividend payment policy and actively gave back to shareholders. The dividend payment rate for FY2019~FY2023 was around 80%.

The product matrix is rich: new categories of autumn down and sunscreen clothing have been added, and a comprehensive layout of functional clothing tracks. At this stage, we believe that the main logic of the company's product side has gradually changed from “volume and price increase” to “category expansion”: 1) In the past few years, the upward upgrading of the main brand has been very effective. Improved quality has driven product unit price+broadened clothing scenarios to drive sales volume growth, and profit quality continues to improve. The gross margin of the FY2023 Bosideng brand has reached 70.8%. 2) In recent years, the main brands have successively launched lightweight feather and sunscreen clothing, which is expected to replicate the successful experience of the winter down product system into new business categories and create a functional clothing product matrix. ① We estimate that sales of lightweight feathers in the FY2023 brand down jacket business have increased to about 20%. ② We estimate that the sales scale of branded sunscreen clothing in the summer of 2023 has reached 100 million yuan. We estimate that in 2024, we will continue to make major efforts to improve the product line, expand channel layout, and strengthen marketing volume. It is expected that the new sunscreen category will continue to bring growth to the business in the medium to long term.

Channel efficiency improvement: Focus on the fine management of individual stores, and e-commerce is expected to grow at a high quality. 1) Offline: In recent years, the company's offline channels have gone through several stages: optimizing and reducing inefficient stores (FY2014-2017), modernizing and upgrading large direct-run stores (FY2018-2020), and emphasizing the refined management of single stores (FY2021 to date). In recent years, the company has strategically focused on single-store management, targeting different store formats such as high-line/low-tier cities, shopping centers/street stores, etc., and is seeking suitable fine management: including differentiated product delivery, store display, store area, etc., to improve profit quality. At the end of FY2023, there were 3183 Bosideng brand stores (FY2017-FY2023 CAGR was only 1%, revenue CAGR was 19% during the same period). 2) E-commerce: Currently, sales account for 30% +. While the scale is growing rapidly, profit quality has also been significantly optimized. It is expected to maintain high-quality growth in the future.

Advanced supply chain strength: fine ordering model, upgraded quick reaction capability. 1) The company has maintained a low initial order ratio in recent years. The proportion of initial orders made by dealers during the year was less than 40% (we judge that this ratio is far lower than the average of four-season brands), and 60% of subsequent orders are placed on a rolling basis according to sales conditions, making timely and flexible additions using models such as pull-out, quick renewal, and quick reversal of small orders. 2) Thanks to efficiency optimization, the company's overall operating status remains healthy. FY2023 has an inventory turnover of 142 days (down 6 days from year on year) and 158 days of inventory turnover for FY2024H1 (down 20 days year on year). We believe that with the upgrading of digitalization and intelligence in the supply chain, subsequent operations are expected to maintain a healthy level.

Investment advice. 1) Due to strong seasonal characteristics caused by product attributes, the company's stock price fluctuated greatly in the past. 2) Over the past 2 years, along with the results of the company's expansion into new business categories, we judge that performance stability has increased, market expectations have gradually become consistent, and there is hope that the valuation center will rise in the future. We expect FY2024-2026's net profit to be 28.69/33.23/38.38 billion yuan, respectively, +34.2%/+15.8%/+15.5% year-on-year, corresponding to FY2025 PE 14 times, maintaining a “buy” rating.

Risk warning: Weak consumption environment; weather affects terminal sales; new category expansion results fall short of expectations.