Core views:

The company released its 2024H1 financial report. According to the company's financial report, in the first half of 2024 (H1), the company's revenue was 1.6 billion yuan (YOY +7.3%), and net profit was 0.28 billion yuan (YOY +3.6%). By business, the main series revenue was 1.212 billion yuan (YOY +4.5%), and the light business series revenue was 0.388 billion yuan (YOY +17.3%); the gross margin was 50.0% (-1.8pct year on year), mainly because the company terminated the Heilongjiang distributor cooperation and switched to DTC model Payment compensation, and average price decreased due to changes in product portfolio); sales expense ratio was 29.1% (+2.4 pct year over year, mainly due to increased advertising and direct store expenses), management fee ratio 5.0% (+0.1 pct year over year), net interest rate 17.5% (year over year -0.6 pct); inventory turnover days 189 days, -22 days year over year; accounts receivable turnover days were 39 days, year over year -12 days. 2024H1 has 2,709 stores, +63 over the same period; retail sales of 2024H1 online stores also increased 37%. The company plans to pay an interim dividend of HK18 cents per share. In addition, the company cooperated with Descente to establish a joint venture and obtained the right to operate its golf apparel brand MUNSINGWEAR in China. It is expected to exhibit in the 25th year.

2024H2's revenue is expected to accelerate. According to the company's financial report, the company's overall sales growth target for 2024 is 10%, 2024H1 revenue growth is expected to accelerate: (1) the Group aims to increase 50-100 stores and complete the seventh-generation renovation project of 400 stores within 2024; (2) the Group plans to implement the DTC model throughout the Northeast region, which is expected to improve channel operation efficiency and profitability; (3) the Group continues to actively lay out new retail business. The new retail business target is to achieve 30% + growth throughout 2024. 2024H2

Profit forecasting and investment advice. The company's earnings per share for 2024-2026 are expected to be RMB 0.47/0.53/0.59, respectively. Referring to the comparable company average, the company was given 10 times PE in 2024, corresponding to a reasonable value of RMB 4.69 per share. In terms of exchange rate, the Hong Kong dollar used 0.92:1 for RMB, corresponding to a reasonable value of HK$5.10 per share, maintaining a “buy” rating.

Risk warning. Channel management risks, industry competition risks, extreme climate risks.