Company Releases 2024 Interim Report

24Q2's revenue was 6.707 billion, up 20.83%; net profit to mother was 1.091 billion, up 11.94%.

24H1's revenue was 11.472 billion, up 24.54%; net profit to mother was 1.878 billion, up 29.04% from the same period.

24H1 sold 0.108 billion pairs of sneakers, an increase of 18.64%.

24H1 performance growth is due to ① increased demand in the sneaker market; ② increase in customer performance of well-known sports brands; ③ expansion of the company's sales share to major customers; ④ increase in new customers.

By product, 24H1's sports and leisure shoes revenue was 10.23 billion, up 24.0%; outdoor footwear revenue was 0.61 billion, an increase of 27.16%; and sports sandals/slippers and other revenue was 0.6 billion yuan, an increase of 31.2%.

By region, US revenue was 9.93 billion, up 30.79%; European revenue was 1.27 billion, down 9.5%.

24H1's gross profit margin was 28.23%, an increase of 3.63pct; of these, the gross profit margin for sports and leisure shoes was 28.85%, an increase of 3.73pct; the gross profit margin for outdoor footwear was 19.48%, an increase of 0.82pct; the gross profit margin for sports sandals/slippers and others was 26.23%, an increase of 7.13pct; the net profit margin was 16.37%, the same increase of 0.57pct.

24H1 Increased capacity utilization and continued expansion of production capacity

The sharp increase in the company's capacity utilization rate was mainly due to a decrease in capacity utilization due to the decline in the company's orders in the same period last year, as well as the resumption of orders from 24H1 and the promotion of cooperation with new customers. The 24H1 capacity utilization rate was 97.32%, an increase of 11.32pct.

In the first half of 2024, the company's two new factories in Vietnam (a finished shoe factory and a shoe material factory, respectively) and a new finished shoe factory in Indonesia were put into operation. In the second half of 2024, the company will continue to build new factories in Indonesia and continue to expand or build new plants in Vietnam.

Accumulate high-quality customer resources and reduce sports brand inventory

With years of accumulated development and design capabilities, good product quality, mass supply capacity and quick response ability, the company has accumulated valuable resources for world-renowned sneaker customers, giving the company a clear advantage in market competition. The company's many years of sneaker development, design and manufacturing experience have increased the company's close cooperation with major customers, and its good reputation has also helped the company expand new customers.

Major overseas sports brands are gradually releasing revenue guidelines for the new year. There are differences in the expected revenue growth rate of each brand. The estimated revenue growth rate is concentrated at 5%-10%, and some sports brands expect revenue growth to reach 30%. As the inventory of sports brands gradually eased in the second half of 2023, orders from sneaker manufacturers began to gradually recover from the fourth quarter of 2023.

Maintain profit forecasts and maintain “buy” ratings

Increased demand in the sneaker market, the increase in customer performance of well-known sports brands, the expansion of the company's sales share to major customers, and the increase in new customers are the main factors driving the company's performance growth. We estimate that the company's net profit for 24-26 will be 3.89/4.43/4.95 billion yuan, EPS will be 3.3/3.8/4.2 yuan/share, respectively, and the corresponding PE will be 19/17/15X, respectively.

Risk warning: international trade risk, multinational operation risk, rising labor cost risk, customer and production base concentration risk, etc.