The company's 2024Q2 performance continued to grow steadily. In Q2, the company achieved revenue of 4.04 billion/yoy +24.1%, operating profit increased 8.9% year on year, adjusted net profit of 0.625 billion/yoy +9.4%, and adjusted net profit margin of 15.5% /yoy-2.1pct. Among them, Q2 exchange losses reached 4.2 million, and revenue for the same period last year was 66.1 million. Excluding related effects, adjusted net profit increased 24.6% year over year. Foreign exchange was mainly due to the large amount of US dollars on the company's accounts in the same period last year, and the US dollar exchange rate increased dramatically. At the same time, the company paid an interim cash dividend of 0.62 billion, accounting for about 50% of adjusted net profit; and the company announced that it will repurchase no more than HK$2 billion within the next 12 months.
Looking at Mingchuang China's business, 2024Q2 Mingchuang China achieved revenue of 2.308 billion/yoy +18.2%, adding 81 new stores to 4115, and recovering to 98.3% in the first half of the year. Among them, customer unit prices increased 0.9% year on year, and customer order volume fell 2.5% year on year. In January-July, the same store recovered to 97% in the same period last year. Due to the low base after September, the same store is expected to return to 98-102% of the same period last year throughout the year.
Looking at overseas business, 2024Q2 Mingchuang achieved revenue of 1.51 billion/yoy +35.5% overseas, adding 157 stores to 2,753. In the first half of the year, the number of stores increased 21.8% year on year, and same-store sales increased 16.3% year over year. Among them, sales in the direct market increased 70% year on year, accounting for 56% of revenue.
Looking at the TOP TOY business, 2024Q2 achieved revenue of 0.215 billion/yoy +24.2%, adding 35 to 195 stores. Among them, TOP TOY increased 14% compared to the same store in the first half of the year. Growth in Q2 slowed down due to last year's high base, and revenue growth is expected to reach 45-55% in Q3 as store openings continue to accelerate.
The gross margin continued to rise steadily, and the acceleration in store opening led to an increase in sales expenses. Single Q2 achieved a gross profit margin of 43.9% /yoy+4.1pct, mainly due to 1) the successful implementation of Mingchuang China's IP strategy and an increase in gross margin for new products; 2) an increase in the share of overseas direct revenue with high gross margin; 3) TOP TOY's gross margin increased due to the increasingly mature store model. The Q2 net sales and distribution/general administrative/financial revenue ratios were 20.5%/5.7%/-0.2%, respectively, compared with +5.7/+0.6/+0.9pct, respectively. The rapid increase in overseas direct-run stores led to an increase in sales and distribution expenses.
Risk warning: Macroenvironmental risks, new product launches fall short of expectations, industry competition intensifies.
Investment advice: Relying on its strong domestic supply chain system and channel layout, Mingchuang China's business is developing steadily, and its gross margin continues to increase through a high-margin IP strategy, and the profit level continues to improve; at the same time, overseas direct stores are being opened at an accelerated pace, and the agency business continues to deepen cooperation with high-quality agents, and the overseas market continues to grow rapidly with the support of a dual model. At the same time, the success of the TOP TOY model will also contribute a second growth curve to the company in the future. We maintained the company's 2024-2026 net profit of 2.755/3.33/3.958 billion yuan, and the corresponding PE was 14/11/10x, maintaining the “superior to the market” rating.