According to a research report released by Huaxi Securities, it maintains a 'buy' rating on China Lilang (01234), considering the company's downward adjustment of its store opening guidance in 2024 and downward revision of its profit forecast. The revenue forecast for 2024-2026 is adjusted from 408/462/520 million yuan to 389/428/484 million yuan, and the net profit attributable to the parent company for 2024-2026 is adjusted from 61/70/80 million yuan to 56/60/67 million yuan.

The report states that in 2024H1, the company's revenue/net profit/operating cash flow net amount were 1.6/0.28/0.22 billion yuan, a year-on-year increase of 7.3%/3.6%/-63.3%. The company distributed a mid-term dividend of HKD 0.13 per share, as well as a special mid-term dividend of HKD 0.05 per share, with a dividend yield of 8.8%. The company signed an agreement with its subsidiary and Descente Ltd. and its subsidiary Shanghai Descente Commerce Ltd. to establish a joint venture company named Wanxingwei China. China Lilang contributed 0.15 billion yuan and holds a 54% stake in Wanxingwei China, which will operate in China and engage in the design, sales, and distribution of Munsingwear-branded products. The company expects to officially launch Munsingwear-branded products in 2025.

The bank analyzes that (1) in the short term, China Lilang is expected to open a net increase of 50-100 stores offline in 2024, and the opening speed is slightly lower than the initial guidance of 100-200 stores at the beginning of the year. The newly opened stores are mainly shopping mall stores and outlet stores. In addition, the company plans to complete the seventh-generation decoration project of 400 stores by 2024. The income growth rate is expected to be lowered from 15% to 10%; In terms of online, the company plans to use new retail businesses such as Douyin live broadcast to achieve more than 30% year-on-year growth in new retail business in 2024. (2) In the medium term, the company's light business series, e-commerce channels, and international expansion still have growth potential. The company plans to open its first store in Malaysia. (3) In the long term, the company is optimistic about the second growth curve brought by the establishment of the joint venture company Wanxingwei (China) in the golf apparel market, even though the golf apparel market capacity is currently small (according to data from Huajing Industrial Research Institute, the market size of China's golf supplies market will reach 362.6 million yuan in 2023, with the golf apparel market accounting for 139.9 million yuan), it has sports and outdoor properties, which is conducive to attracting incremental customers for the company; and according to the data of Jiemian website, Wanxingwei currently has only 23 stores and a 23 financial year revenue of 69 million yuan, with large room for store expansion and store efficiency improvement in the future.