Brief performance review
On August 5, '24, the company disclosed a performance report. 1H24 achieved revenue of 11.472 billion yuan, a year-on-year increase of 24.54%; net profit to mother was 1.878 billion yuan, an increase of 29.04% year-on-year.
Among them, Q2 achieved revenue of 6.707 billion yuan, up 20.8% year on year; realized net profit of 1.091 billion yuan, up 11.9% year on year. Overall, it was within the previously disclosed forecast range, and the net profit growth rate was close to the forecast limit, which was in line with previous expectations.
Management analysis
Volume and price have risen sharply and the boom has been maintained: split according to volume and price, the company achieved sales volume of 62.18 million pairs in a single quarter in 2Q24, up 19.6% year on year, and ASP increased 1% year on year. The volume increase mainly benefited from the continuous progress of cooperation with new customers, a steady increase in the share of major customers, and the increase in price is expected to benefit from an increase in the share of high unit price brands. From April to April '24, Fengtai's revenue increased 4.4%/16.6%/0.8%, respectively; Yuyuan's manufacturing business revenue increased 2.5%/8.3%/2.9%, respectively, and continued to lead the revenue of Huali Group in the same industry.
Gross profit margin and net interest rate increased year on year: 1H24's net profit margin increased 0.57 pct to 16.37% year on year, mainly benefiting from increased gross margin and stable fee control; 1Q24 net interest rate fell slightly by 1.3 pct due to exchange exchange, and is expected to maintain positive growth under comparable standards.
Downstream customer upward guidance, and the boom is expected to continue: Deckers, one of the company's core customers, raised its FY25 performance guidance (as of 25/03/31) based on the recent strong performance of 1Q25 (as of 24/06/30). The company's revenue is expected to grow 10% for the whole year. Among them, the Hoka brand is expected to grow by about 20%, and UGG is expected to grow by about the number of units. Considering the recent increase in annual performance guidelines of several sports brands (Adidas, Skechers, etc.), the company's orders are expected to benefit from a recovery in demand in the sports industry and maintain steady growth.
The company's production capacity is expanding as scheduled, and H2 is expected to continue to have strong production and sales. The company's new plant in Indonesia was put into operation in the first half of the year. Construction progressed in an orderly manner, and production capacity was gradually released. At the same time, combined with a recovery in overseas demand and active brand inventory replenishment, the company's orders are expected to maintain steady growth and drive performance improvement.
Profit Forecasts, Valuations, and Ratings
Considering the company's excellent customer structure, maintained downstream demand, and the company's outstanding ability to control fees, the performance is expected to continue to grow steadily. From 2024 to 2026, we expect the company to achieve revenue of 240.8/ 277.9/ 31.78 billion yuan and net profit to mother 38.9/ 4.5/5.15 billion yuan, corresponding to PE of 16.78/14.49/12.67 times, respectively, maintaining a “buy” rating.
Risk warning
RMB exchange rate fluctuates; overseas demand weakens; income tax rates rise.