Expected 2Q24 non-IFRS net profit of 0.64 billion yuan, a year-on-year increase of 13%. We expect the company's 2Q24 revenue to be 4 billion yuan, an increase of 23% year-on-year. Non-IFRS net profit of 0.64 billion yuan, up 13% year on year. The profit growth rate was slower than revenue growth mainly due to the high base due to the contribution of foreign exchange earnings in the previous year, as well as the cost implications of rapid overseas exhibition stores in the first half of this year.
Key points of interest
Domestic business is expected to accelerate month-on-month, while overseas growth is in line with expectations. Although the second quarter was a relatively low season for Mingchuang Premium's main domestic and overseas business, the domestic business grew well, driven by the new IP Chiikawa and O2O business. We expect domestic stores to remain flat year-on-year in 2Q24, compounding the net increase of about 70-80 stores. We expect domestic revenue to increase 16% to 2.26 billion yuan year-on-year in 2Q24. On the overseas side, we expect 2Q24's overseas direct sales and agency markets to maintain rapid store expansion, and the direct sales market revenue is expected to maintain a year-on-year increase of more than 60%. Although the agency market faced rising shipping costs during the period, we expect 2Q24 revenue growth to stabilize at about 15%. TOPTOY has been optimizing the product structure and improving operating efficiency for several consecutive quarters, and we expect 2Q24 to continue to maintain rapid store openings and revenue growth.
The gross margin is expected to stabilize at 43% + month-on-month, and the advance of overseas direct operating expenses will slightly affect the net interest rate. Considering the increase in the share of IP products with high gross margins, we expect 2Q24 gross margin to continue to rise to 43.5% year on year and be stable from month to month. At the same time, considering that the rapid opening of overseas direct stores in the first half of the year will increase operating costs and certain cost investment requirements (while the peak season for overseas business is in the second half), and the positive impact of the exchange revenue contribution of about 66 million yuan in the same period last year will be eliminated, we expect 2Q24's non-IFRS net profit margin to be about 16.1%, corresponding to non-IFRS net profit of 0.64 billion yuan, an increase of 13% over the previous year.
IPs such as Zootopia and Chiikawa 2.0 are being added one after another, which is expected to bring good sales contributions. The company is committed to becoming the world's number one IP design retail group. The Chiikawa products launched at the end of March not only contributed to sales, but also enabled Mingchuang Premium to establish a new channel operating experience as a pop-up store. Currently, IP series such as BT21 and Zootopia are achieving good sales. The company has officially announced that Chiikawa 2.0 will soon be launched 1. We have long been optimistic about Mingchuang Premium's global IP strategy supported by China's strong supply chain capabilities.
Profit forecasting and valuation
Keep the company's 2024/25 EPS forecast of $2.15/2.59 unchanged. Currently, Hong Kong stocks correspond to 15/12 times 2024/25 non-IFRS P/E, and US stocks outperform the industry ratings, but considering the downward trend in the industry valuation center, the target price for Hong Kong stocks and US stocks was lowered by 20% to 49.52 HKD/25.56 US dollars, corresponding to 20/17 times the 2024/25 non-IFRS P/E and Hong Kong equities/US stocks.
risks
The retail environment fell short of expectations, channel store openings fell short of expectations, and new business development fell short of expectations.