The company's 24H1 revenue increased 2.3% year over year, and net profit changed -8%. 24H1 recorded revenue of 14.35 billion yuan, +2.3% year on year; gross profit margin of 50.4%, +1.6 pct year on year; realized net profit of 1.95 billion yuan, -8.0% year on year; net profit of 13.6%, -1.5 pct year on year. 24H1 China's clothing retail sales accumulated +0.8% year-on-year. Faced with macroeconomic environmental pressure, the company operated steadily and achieved positive revenue growth. The main reasons for the improvement in gross margin during the reporting period were 1) improved discounts on new products; 2) e-commerce platforms picked up and discounts decreased; 3) the share of direct management increased; 4) reduced preparation for depreciation of calculated inventory. The decline in net interest rates was mainly due to the sales expense ratio of +2.0pct compared to the year-on-year period, mainly due to increased publicity efforts during the sports year/increase in direct management and e-commerce business expenses. The company announced an interim dividend of 0.3775 yuan per share, with a dividend ratio of 50%, +5pct year-on-year.
Traffic growth slowed in 24Q2, and offline passenger flow was under pressure. In 24Q2, the growth rate of Li Ning brand's omni-channel traffic slowed down compared to Q1, and the number of lower/medium units of total flow/offline flow decreased. Direct marketing/distribution/e-commerce turnover remained flat, high unit numbers declined, and high unit numbers increased (Q1 was medium unit increase/medium unit decline/20% to 30% low growth, respectively). Offline traffic pressure comes from a decline in the number of units in passenger traffic, while online passenger flow increased by 10% to 20% in the middle. Similar to the trend in turnover, 24H1 Li Ning's revenue was 13.72 billion yuan, +4.0% year-on-year, with direct-business/distribution/e-commerce revenue +4.0%/-3.0%/+15.0% year-on-year respectively.
In addition, Li Ning Young earned 0.38 billion yuan (-28.0%) and overseas revenue 0.25 billion yuan (-14.0%).
The running category led the growth, and the brand's professional attributes were further strengthened. By category, the turnover growth rate of 24H1 company's running/fitness/basketball/sports life was +25%/+7%/-20%/-7% year-on-year, respectively. The company has built a mature professional running shoe matrix. The total sales volume of “Ultralight”, “Red Rabbit” and “Flying Electric” series running shoes exceeded 5 million pairs during the period (4.3 million pairs in the same period last year, +16.3% year over year), driving rapid growth in the running category. The company stepped up research and development efforts and continued to launch professional sporting goods supported by technology. The proportion of sales in professional categories such as running, fitness, and basketball increased by 1 pct to 66% year-on-year during the period, and the brand's professional attributes were further strengthened.
The number of 24H1 channels is stable, and the overall channel inventory is controllable. At the end of the period, Li Ning Brand Direct Sales/Li Ning Brand Distributors/Li Ning Young stores were -3/+2/+10 to 1495/4744/1,438 respectively. The number of units in channel inventory at the end of the period increased year on year. The overall inventory turnover was +0.1 to 3.9 months year over year, and the share of new product inventory was -4 pct to 83% year over year. The company adjusted the distribution and delivery dynamics to control channel inventory, and the overall health is currently.
Profit forecasting and valuation. The company further expands its influence in the professional sports market, and continues to optimize the channel structure and improve operational efficiency. We expect the company's net profit for 2024/2025 to be 3.17/3.37 billion yuan, giving PE a valuation range of 13-15X in 2024, converted according to the corresponding reasonable value range of 17.33-19.99 yuan/share, and maintain the “superior to market” rating.
Risk warning. The same store and online growth rate fell short of expectations, China's Li Ning's potential weakened, possible future changes in management brought about strategic uncertainty, and sales of fist products fell short of expectations.