Company Releases 2024 Interim Report

24Q2 revenue was 2.82 billion, up 10.1%; net profit to mother was 0.21 billion, up 0.7%; net profit after deduction was 0.2 billion yuan, up 8.2%. 24H1's revenue was 5.96 billion, up 7.1%; net profit to mother was 0.55 billion yuan, up 7.1%; net profit after deduction was 0.54 billion yuan, up 12.7%.

By product, casual wear was 1.81 billion, up 7.7%, accounting for 30.5%; children's clothing was 4.07 billion, up 6.4%, accounting for 68.4%.

By channel, online was 2.69 billion, up 3.4%, accounting for 45.3%; direct management was 0.7 billion, up 5.0%, accounting for 11.8%; franchise revenue was 2.4 billion, up 11.8%, accounting for 40.3%.

24H1 gross profit margin was 46.1%, an increase of 1.5pct; of these, the gross profit margin for casual wear was 38.6%, a decrease of 2.1 pct; the gross profit margin for children's clothing was 49.6%, an increase of 3.1%;

24H1's sales rate of 26.0%, an increase of 0.8 pct, was due to a year-on-year increase in advertising and service fees; the management fee rate was 4.8%, a decrease of 0.2 pct; the financial rate was -2.2%, the same decrease of 0.8 pct; the R&D rate was 2.0%, the same increase of 0.2 pct; and the net profit rate of 24H1 remained stable at 9.3%.

Expand in-store efficiency and develop global channels healthily

The company has established an online and offline omni-channel retail system including specialty stores, supermarkets, shopping centers, outlets, e-commerce, mini-programs, etc. 24H1 has accelerated channel construction, upgraded retail channel management capabilities, and improved external expansion efficiency and internal operational efficiency. The 24H1 clothing inventory turnover period was 159 days, and the inventory balance decreased by 10.3% year-on-year.

By the end of the 24H1 period, the company had 8140 stores, a net increase of 203; of these, there were 839 direct-run stores, a net increase of 158; the average efficiency of stores was 4158.65 yuan/square meter/half year (23H1 was 4098.29 yuan/square meter/half year); 7185 franchised stores, a net increase of 21; 116 joint stores, a net increase of 24. Looking at online platforms, the transaction amount on the Tmall platform was 2.69 billion, and the return rate was 61.9%; the Douyin transaction amount was 1.26 billion, and the return rate was 43.3%.

Promote brand building and completely renew Shinsema

The company has two major brands, the popular casual wear brand “Semma” and the mid-priced “Barabara” children's clothing brand. By the end of the 24H1 period, the company had 2,755 casual wear stores and 5,385 children's clothing stores. The transformation and upgrading of the 24H1 Semma brand has reorganized the brand positioning, product positioning and development model to provide a full-scene shopping experience for families; the company promoted the “New Semir” model nationwide, and the first flagship store was reopened at the Hangzhou Federation of Trade Unions Building. By the end of the 24H1 period, Xinsema had opened more than 200 stores.

The Barabara brand continues to strengthen mental products, focus on core categories, and strengthen brand marketing; at the same time, the company has accelerated its overseas market layout. In the first half of the year, Barabara successfully opened seven stores in Vietnam and entered the Southeast Asian e-commerce platform Shopee. In terms of other brands, the double children's sports brands ASICS Kids and PUMA Kids brands have accelerated development; joint brands SHUKU and VIVID-BOX have started online sales.

Adjust profit forecasts to maintain “buy” ratings

Based on the 24H1 performance, the company's revenue and net profit increased slightly. We adjusted the profit forecast. The expected return for 24-26 is 1.23 billion, 1.38 billion, and 1.56 billion (original values were 1.347/1.517/1.686 billion yuan, respectively); PE is 10X, 9X, and 8X, respectively.

Risk warning: risk of changes in raw material prices; risk of inventory management and price decline; risk of import and export trade; risk of macroeconomic fluctuations, etc.