As the world's leading manufacturer of sports, leisure and fashion footwear, Jiuxing Holdings has maintained steady, moderate and positive orders over the past three years with strong production capacity, high human efficiency, and high-quality products and customer structure. At the same time, increase profitability through automation and efficiency improvement. At present, the company's products and customer structure are of high quality, production capacity is expanding in an orderly manner, and the track boom is steady. The company is expected to continuously improve profitability while maintaining stable order growth.

The company's net profit for 24-26 is estimated to be 0.16 billion US dollars, 0.18 billion US dollars, and 0.2 billion US dollars. The current market capitalization corresponds to 24PE8X and 25PE7X, which is covered by a highly recommended rating for the first time.

A leading sports & casual shoe OEM with more than 30 years of experience in the industry. The company has strong R&D and production capabilities. It produces products in styles including sports, luxury, casual fashion, etc., and has close cooperation with brands such as Nike, Balenciaga, Coach, etc., with the top five customers accounting for 60% +. Since 2012, the company has continued to expand production capacity in Southeast Asia, and has production capacity in Vietnam, Indonesia, the Philippines, etc. As of 2023, the company's overseas production capacity accounted for 74% (Vietnam accounts for 51%).

The industry boom is relatively stable, and the competitive landscape continues to be optimized. Overseas demand has gradually stabilized since 2023H2 (the US apparel retail growth rate has maintained medium to low single-digit growth in the past year+the Southeast Asian footwear export growth rate has rebounded), and the inventory pressure on downstream brands has decreased markedly, and since 23Q4, it has entered the inventory replenishment stage. Brands continue to streamline the supply chain structure, Nike and Adi's share of high-quality suppliers continues to increase, and companies with strong production capacity and multi-regional layout of production capacity will gain more share.

The core competitiveness of Jiuxing Holdings: high level of R&D, high quality customer & product structure, reasonable production capacity layout, industry-leading employee production capacity & labor efficiency, continuous stability and high dividends.

1) High level of R&D: The company's annual R&D expenditure rate is 2%-3%, which is at the leading level in the industry (average is 1%-2%). At the same time, the company has strong mold production capacity, quickly realizes sample production according to the brand's design concept, co-creates new products with the brand, and has a stronger ability to obtain orders for new products.

2) High quality customer and product structure: The company's cooperative customers are leading sports, fashion and luxury goods, with stable orders & higher shipping unit prices. The company's top five customers remained at 60% +, and Nike, the company's largest customer, accounted for about 35% in the past five years. Since 2010, the company's ASP has remained at $25+, and the company's ASP has increased from $26 to nearly $30 in the past five years, far higher than competitors in the same industry.

3) Reasonable production capacity layout: In 2012, production capacity was gradually transferred to Southeast Asian regions such as Indonesia, Bangladesh, and Vietnam. The company's overseas production capacity increased from 55% in 2019 to 74% in 2023, with Vietnam's share of production capacity increasing from 43% in 2021 to 51% in 2023. Strong ability to accept global orders.

4) Strong employee productivity & high level of human efficiency: The company's employees have a long training cycle, but they can manufacture more categories (sports, fashion, luxury goods). Through employee proficiency improvement, automation level improvement, and product structure optimization, the company's per employee revenue increased from 0.02 million US dollars in 2013 to 0.037 million US dollars in 2023, and per capita profit generation increased from 0.0016 million US dollars in 2013 to 0.0035 million US dollars in 2023.

5) Continued stable high dividends: Since the company went public, the dividend ratio has remained 70% +, which is close to Fengtai. Compared with Yuyuan (50%-70%), it has better stable investment returns.

Profit forecasting and investment advice. The company's production capacity has been expanded in an orderly manner, and in the face of macroeconomic fluctuations, the company's product and customer matrix advantages have gradually become prominent. The company's revenue for 2024-2025 is expected to be $1.59 billion, $1.68 billion, and $1.79 billion, with year-on-year growth rates of 6%, 6%, and 6%. Considering the continuous improvement of the company's orders and the continuous improvement of efficiency. Net profit was $0.16 billion, $0.18 billion, and $0.2 billion, with year-on-year growth rates of 13.5%, 12%, and 11%. The current market capitalization corresponds to 24PE8X and 25PE7X, and the first coverage gives a highly recommended rating.

Risk warning: Exchange rate fluctuations affect profit risk, risk of new plant expansion in Vietnam and Indonesia falling short of expectations, and risk of companies being pressured to take orders due to poor overseas demand.