Introduction to this report:
2024Q2 revenue growth was in line with expectations, and the profit side fluctuated due to the impact of faster overseas store expansion costs and exchange; overseas store expansion was released at an accelerated pace, and peak season performance in the second half of the year is worth looking forward to.
Key points of investment:
The performance was in line with expectations, and the rating was “increased”. The company maintains an estimated 2024-2026 revenue of 17.356/20.98/25.101 billion yuan, respectively, and adjusted net profit of 2.869/3.448/4.132 billion yuan, respectively. Considering that domestic store expansion is expected to be matched and released, overseas store expansion and superposition IP strategies are being promoted, and there is room for growth. 20xPE will be given in 2024, the target price will be maintained at HK$49.60, and the “gain” rating will be maintained.
Performance summary: 2024Q2 achieved revenue of 4.035 billion yuan/yoy +24.1%, including overseas revenue of 1.51 billion yuan/yoy +35.5%, domestic revenue of 2.525 billion yuan/yoy +18.1%; adjusted net profit of 0.625 billion yuan/yoy +9.4%. The overall performance was in line with expectations.
Brand upgrades and increased overseas share have driven gross margins to record highs. 2024Q2 revenue was 4.035 billion/yoy +24.1%, adjusted net profit of 0.625 billion/yoy +9.4%, adjusted net interest rate of 15.5% /yoy-2.1pct, adjusted net profit excluding exchange profit and loss, increased 24.6%.
The rapid increase in performance is mainly due to: ① the continuous expansion of domestic and overseas store layout; ② domestic same-store sales recovery rate of 98.3%, driven by IP such as Chiikawa, etc.; ③ overseas and TOPTOY store openings accelerated, and same-store sales maintained double-digit growth, driving rapid revenue growth. 2024Q2 gross margin increased month-on-month and year-over-year, mainly due to: ① direct management's share of overseas revenue contribution increased from 45.7% in 2023Q2 to 55.7%; ② domestic gross margin increased by benefiting from IP strategies and brand upgrade strategies; ③ product portfolio shifting to more profitable products, TOPTOY gross margin increased; net interest rate fluctuated quarterly, mainly due to upfront costs and exchange profit and loss fluctuations brought about by the acceleration of overseas store expansion.
IP boosts brand potential and accelerates the release of overseas stores. IP boosts the potential of domestic and overseas brands, and franchisees are actively willing to expand stores. In a single quarter of 2024Q2, there was a net increase of 81 domestic stores, a net increase of 157 overseas stores, and a net increase of 35 TOPTOY; maintaining the target of a net increase of 350-450 for the whole of 2024, a net increase of 550-650 overseas stores, and a net increase of 100 TOPTOY stores.
Based on: ① the continuous advancement of the major domestic store strategy is expected to drive a continuous increase in the share of IP sales; ② driven by direct management in overseas markets, operating leverage will gradually be released as the product portfolio is optimized and the share of IP sales increases; it is expected that there is still plenty of room for the company's IP sales share to increase, and the IP Design and Retail Group is worth looking forward to.
Risk warning: Fluctuations in shipping costs and customs policies, and the risk of same-store expansion falling short of expectations.