Adhering to a high-quality multi-customer strategy, good reputation attracts cooperation
The company is currently a high-quality manufacturer in the industry, attracting customers to actively seek cooperation with its good reputation.
In addition, the company's factory is large, and when accepting customers, it comprehensively considers various factors such as order size, future continuous growth, and the degree of compatibility between the two teams. The company's customer strategy is a high-quality multi-customer strategy, and there is no specific limit on the number of cooperative brands.
In 2023, the company's revenue from the top five customers totaled 16.6 billion, accounting for 82% of total revenue. Deckers is a major customer of Huali Group and recently released the latest financial report. For details:
Deckers: Beautiful performance, increased profit guidelines
FY25 full-year guidance (24/4/1-25/3/30): revenue of 4.7 billion dollars, up 10%, maintaining the guideline; gross profit margin of 54.0% (53.5% of the previous guideline); OPM of 19.5%-20% (previous guideline 19.5%); EPS 29.75-30.65 USD/share (previous guidance 29.5-30.0 dollars/share) FY25Q1 (24/4/1-24/6/30) revenue of 0.83 billion, up 22% (USD, same below) by brand Look, HOKA/UGG/Teva earned 0.55/ 0.22/0.05 billion, +30%/+14%/-4%, respectively.
Gross margin was 56.9%, up 5.6pct; net margin was 14.0%, up 4.6pct; OPM was 16.1%, up 5.6pct. Inventories were 0.75 billion, up 1.7% year over year.
Deckers grew excellently, and Hoka and UGG continued to perform well; we expect Deckers to bring significant order increases to Huali; at the same time, it also reflects Huali's forward-looking ability to explore and incubate customers.
Earlier, Huali announced its 24H1 performance forecast. Revenue increased by 20%-30% in the first half of the year, mainly due to the steady increase in the company's share of major customers and continued progress in cooperation with new customers.
There are differences in the performance of different brands. For the supply chain where customers are concentrated (Shenzhou/Huali/Yuyuan), the customer's own development cycle is more important than the industry system replenishment cycle; in the past two years, Deckers have become dark horses, Hoka and UGG have continued to be beautiful, and the importance of product innovation and brand renewal is evident; in the past two years, Hoka has achieved structured growth through differences in technology and stories. Among them, Hoka focuses on thick/lightweight/cushioning/fashion, catering to outdoor and commuting needs.
Maintain profit forecasts and maintain “buy” ratings
The company has achieved remarkable results in strengthening cooperation with high-quality customers. Major customers have grown excellently, driving the company's order growth.
We estimate that the company's net profit for 24-26 will be 3.89/4.43/4.95 billion yuan, EPS will be 3.3/3.8/4.2 yuan/share, respectively, and the corresponding PE will be 17/15/14X, respectively.
Risk warning: Downstream demand falls short of expectations; rising raw material and labor costs; capacity expansion falls short of expectations; exchange rate fluctuations and other risks.