Key points of investment:
The company released the 2024 mid-year performance report. The profit was at the upper limit of the forecast range and exceeded expectations. 24H1 achieved revenue of 11.5 billion yuan, a year-on-year increase of 24.5%, net profit of 1.88 billion yuan, a year-on-year increase of 29.0%, after deducting non-attributable net profit of 1.84 billion yuan, and a year-on-year increase of 28.4%. The company previously released a performance forecast. The year-on-year growth rate of 24H1 revenue and net profit to mother is expected to be in the 20% to 30% range. Actual performance is within the forecast range, revenue is at the center of the forecast range, while profit is close to the upper limit of the forecast range, and profit exceeds expectations. Since the exchange rate of the US dollar to RMB did not fluctuate much in the first half of the year, it is expected that USD-level revenue and profit will be close to that of RMB. According to calculations, 24Q2 achieved revenue of 6.71 billion yuan, a year-on-year increase of 20.8%, net profit to mother of 1.09 billion yuan, a year-on-year increase of 11.9%, after deducting non-net profit of 1.07 billion yuan, and a year-on-year increase of 10.8%. Huali's 24Q2 revenue growth rate far exceeded the performance of peers Fengtai and Yuyuan (shoe making department) over the same period, demonstrating its own growth.
24H1 volume growth is accelerating, average prices are rising to the next level, order recovery is strong, and there is a clear trend of high value. According to the company's announcement, split volume price: 1) Sales volume: 24H1 sales volume: 0.108 billion pairs, up 18.25% year on year, of which 24Q1/Q2 sales volume was 0.046/0.062 billion pairs, up 18.4%/18.2% year on year, reaching about 89%/97% in the same period in '22. As the inventory level of downstream sports brands became normal, 24H1 orders improved at an accelerated pace compared to 23Q4 (23Q4 sales volume increased by about 5% year on year), reflecting the company's high flexibility in the order recovery process. 2) Average price: According to revenue and sales estimates, 24H1 RMB caliber ASP was about 107 yuan, up 5.3% year on year. Among them, 24Q1/Q2 increased 10.0%/2.3% year on year respectively. Customer structure optimization in the first half of the year drove overall ASP increase, high unit price customers contributed more revenue, and new customer orders generally had higher unit prices. However, as the product order structure of various brand customers gradually stabilized, the 24Q2 ASP growth rate slowed down from month to month.
Improve operations and improve plant efficiency to drive improved profitability. 24Q1 gross margin increased by 5.0 pct to 28.4% year over year, higher than the high gross margin in a single quarter in 23 (gross margin reached 26.5% in 23Q3), which is a high level for the same period in a single quarter. The sharp increase in gross margin is due to the company's continuous strengthening of operational improvements, and the efficiency of the old factory is gradually improving. Revenue growth has led to the release of scale effects, and gross margin is expected to remain high in 24Q2. The net interest rate for 24H1 was 16.4%. Among them, 24Q1/Q2 was 16.5%/16.3% respectively, up 3.4 pct/year on year and down 1.3 pct. 24Q2 continued the net interest rate level of more than 16%. Taking into account the existence of exchange gains in 23Q2, the net interest rate due to mother in 24Q2 is expected to increase year-on-year if exchange factors are excluded.
The company is the world's leading professional manufacturer of sneakers. 24H1's performance growth has accelerated, growth has been shown, business quality has improved again, medium- to long-term growth can be expected, and the “buy” rating is maintained. In the short term, 24 years have entered the inventory replenishment cycle, and orders have grown rapidly; in the medium to long term, the company has gradually increased its share in the supply chain of old customers, actively promoted the expansion of new customers, and at the same time had sufficient reserves for capacity expansion. 24H1 has already begun to build a new factory, and it has a foundation for growth in the medium to long term. Maintaining the profit forecast, the net profit for 24-26 is estimated to be 3.91/4.52/5.26 billion yuan, corresponding to PE of 17/14/12 times, maintaining the “buy” rating.
Risk warning: Downstream core customer order demand has shrunk; the progress of new production capacity falls short of expectations; competitors have greatly expanded production, etc.