24H1 revenue also increased 10.4%, and net profit to mother increased 13%

The company released its semi-annual report. 24H1 revenue of 7.2 billion increased by 10.4%. Among them, the main 24H1 brand increased 6.6%, the revenue of the professional sports division (Sauconie and Mille) increased by 0.59 billion by 72.2%, and the revenue of the fashion division (Gastway, Palatin) increased 9.7% with 0.82 billion. Among them, mainland China accounted for 39% of the fashion division's revenue and the same increase of 85.7%.

By revenue category, footwear revenue of 4.45 billion increased by 14.3% (share increased to 61.7%), clothing revenue of 2.61 billion increased by 4.3%, and accessory revenue of 0.15 billion increased by 11.8%.

24H1's net profit to mother increased by 13% to 0.75 billion, of which the professional sports division contributed 0.032 billion; the group plans to pay an interim dividend of 15.6 HK cents per share, with a dividend rate of 50%.

24H1 gross profit margin 46% increased by 3 pcts, net profit margin 10.4% increased by 0.2 pct24H1 Group's overall gross profit margin 46% increased by 3.1 pcts, mainly due to increased DTC business contribution. By brand, the gross profit margin of the main brand 24H1 by 43.9% increased by 0.8 pct, mainly due to the increase in e-commerce gross margin and revenue share; the gross profit margin of the professional sports division increased by 56.8% by 14.8 pct, mainly due to the acquisition of all shares of the Sauconnie and Melle joint venture during the period; the gross profit margin of the fashion sports division of 53.4% increased by 11.4 pcts, mainly due to the increase in the DTC model's contribution to the Chinese market and a decrease in demand for inventory clearance.

24H1 Group's operating profit margin of 15.2% increased by 0.1 pct, and the net interest rate of 10.4% increased by 0.2 pct. Among the various rates, the main employee costs increased significantly as a proportion of revenue, due to the increase in employee expenses brought about by business expansion and the acquisition of joint ventures in the professional sports division.

The number of offline stores has remained stable. Emerging e-commerce platforms have grown rapidly and the number of offline stores has remained stable. As of the end of 24H1, TEP Adult had 6578 stores in mainland China and overseas, a net increase of 7; TEP Kids had 1,706 stores in mainland China, a net increase of 3 from the beginning of the year; and Sauconi had 128 stores in the mainland, a net increase of 18.

The e-commerce business 24H1 increased by more than 20%, accounting for more than 30% of TEP's main brand revenue; live streaming and social e-commerce platforms are developing rapidly, and retail sales of Douyin, DeWoo, and WeChat video accounts have also increased by more than 80%. Running products led to e-commerce growth. Online sales of the Group and Xtrek's main brands increased by 50% and 40% respectively during the 618 period.

Focusing on running, Sauconi strengthens brand building

The main brand of Xtrex continues to consolidate its running ecosystem and strengthen R&D capabilities. It launched 360X and other footwear models in the first half of the year, and consumer feedback was good; Sauconi strengthened its brand promotion efforts in various areas this year to drive growth, continue to expand its product matrix and accelerate the opening of new image stores in high-tier cities; Millet broadened its product line and continued to strengthen trail running and outdoor attributes.

Maintain profit forecasts and maintain “buy” ratings

We are optimistic that the company's main brand will maintain a leading position in the market with cost-effective products, and that financial performance is expected to improve after the divestment of KP; the business will be more streamlined and more focused on the running track. In addition, Saucone and Millet are expected to receive more favorable resources from the Group, accelerate growth, and realize their brand and product strength.

We expect the company's 24-26 revenue to be 16 billion yuan, 17.9 billion yuan, and 19.8 billion yuan respectively; net profit to mother will be 1.21 billion yuan, 1.41 billion yuan, and 1.65 billion yuan respectively; corresponding EPS will be 0.46 yuan/share, 0.53 yuan/share, and 0.63 yuan/share; corresponding PE will be 11/9/7X, respectively.

Risk warning: Market competition intensifies; market acceptance of new products falls short of expectations; terminal consumption falls short of expected risks, etc.