Incident Overview

The company released the 24H1 performance report. 24H1's revenue/net profit/net profit deducted non-net profit was 11.47/1.844 billion yuan, up 24.54%/29.04%/28.43% year on year, of which 24Q2 company revenue/net profit to mother was 6.707/1.091/1.068 billion yuan respectively, up 20.9%/12.0%/10.8% year over year. Performance was at the upper limit of forecast, better than market expectations; excluding exchange rate effects, Q2 '24 The company's revenue/net profit to mothers/net profit after deducting non-net profit were 0.945/0.154/0.15 billion US dollars (24Q2 exchange rate of 1 US dollar = 7.1 yuan), an increase of 19.3%/10.6%/9.4% year-on-year.

Analytical judgment:

Q2 Volume growth drove revenue growth, and net interest rates remained high despite a month-on-month decline. The company sold 0.062 billion pairs of sneakers in 24Q2, up 19% year on year; the estimated RMB price/US dollar price was 108.2 yuan/15.2 US dollars, up 1.4%/0.1% year on year. Excluding exchange rate effects, the net interest rate in 24Q2 remained flat at 16.26%, down 1.29/0.26pct month-on-month. We analyzed that the depreciation of the Vietnamese dong contributed to Q2, and according to our estimates, the capacity utilization rate remained high.

Investment advice

According to our analysis, (1) Currently, the market is mainly concerned about the high base of inventory replenishment in 24Q4, and there is a risk that revenue growth will slow or cut orders due to expectations of the US recession, but we believe that the company's own advantage is that some downstream brands DECKERS and other small and medium-sized brands are still in a high growth stage, and NIKE still has room to increase its share. (2) Judging from the brand's recent situation, DECKERS/NIKE/PUMA expects annual revenue to grow by 10%/declining units/growing units; (3) The two new plants are currently in a climbing phase, contributing to the increase in production capacity.

Maintaining the previous profit forecast, the 24-26 revenue forecast is 23.5/27.2/31.1 billion yuan; 24-26 net profit forecast of 3.893/4.534/5.228 billion yuan; corresponding to the 24-26 EPS forecast of 3.34/3.89/4.48 yuan, and the closing price of 55.88 yuan on August 5, 2024 corresponding PE is 17/14/12X, respectively, considering that the company's major customers still have room to increase their share. The company is still expected to rapidly expand and maintain production next year “Buy” rating.

Risk warning

Downstream inventory removal is later than expected risk; production progress is later than expected risk; systemic risk.