Company Releases 2024 Interim Report

24Q2 revenue was 0.7 billion, a decrease of 1.1%; net profit to mother was 0.03 billion, a decrease of 52.9%; net profit after deduction was 0.03 billion yuan, a decrease of 57.4%. 24H1's revenue was 1.45 billion, up 5.5%; net profit to mother was 0.06 billion, down 46.6%; net profit after deduction was 0.06 billion yuan, down 43.9%; and end-of-period contract liabilities were 0.08 billion yuan, up 4.2% from the end of the previous year.

24H1 Revenue Growth System ① The company's multi-brand matrix collaborates to drive revenue growth; ② the steady expansion of multiple brands in the domestic market and the strengthening of operating efficiency to maintain a good growth trend; ③ the company's online multi-brand and multi-platform strategy achieved good results, and online sales revenue increased 33% year-on-year.

By brand, ELLASSAY's revenue was 0.58 billion, up 21.3%, accounting for 40%; Laurèl's revenue was 0.2 billion, up 27.5%; Ed Hardy & Ed HardX's revenue was 0.13 billion, down 19.7%, accounting for 9%; IRO revenue was 0.29 billion, down 17.1%, accounting for 20.1%, due to factors such as macroeconomic conditions, inflation, and weak consumption Among them, IRO's revenue in China was 0.131 billion, an increase of 20%; self-portrait revenue was 0.24 billion yuan, an increase of 12.5%, accounting for 16.3%.

By channel, offline revenue was 1.18 billion, up 1.4%, accounting for 82.1%; online revenue was 0.26 billion, up 33.2%, accounting for 17.9%.

24H1 gross profit margin 69.2%, same increase of 1.75pct; among them, ELLASSAY gross profit margin 69.2%, same decrease of 1.1 pct; Laurèl gross profit margin 70.5%, same decrease of 5.2%; Ed Hardy & Ed HardX gross margin 62.2%, same increase of 3.3 pct; IRO gross margin 62.22%, same increase of 2.3 pct; self-portrait gross margin 82.3%, same decrease 0.3 pct; in terms of cost ratio, sales rate 50%, same increase 4.7 pct, mainly due to the increase in revenue of 24H1 brands, an increase in labor costs and store expenses. At the same time, the company increased its advertising efforts, leading to an increase in brand promotion expenses; the 24H1 net interest rate was 6.0%, a decrease of 4.3 pcts.

The brand matrix showed resilience in countercyclical cycles, and online sales achieved breakthroughs

In the first half of 2024, the company's brands made active breakthroughs online, and achieved good growth in domestic revenue offline through collaboration between store upgrades and single-store efficiency improvement. On the offline side, the company has fully implemented cost reduction and efficiency, starting with the details of terminal services to improve the efficiency of single stores. At the same time, the company continued to steadily expand high-quality stores, and the size of domestic stores remained relatively stable; affected by uncertainty in the overseas macro environment, the company actively promoted an inefficient store optimization strategy, and closed 5 stores in overseas markets on 24H1.

By the end of the 24H1 period, the company had 300 ELLASSAY brand stores; 84 domestic Laurèl brand stores. While the brand continues to expand the core business district channels in Tier 1 and 2 cities, the quality of operation continues to improve; 89 Ed Hardy series brand stores, Ed Hardy series brands will focus on integrating online and offline omnichannel marketing resources to promote light luxury trend culture to a larger target market; IRO has a total of 109 global stores, including 62 in China; self- The Portrait brand has 61 direct-run stores, and the company will further promote the self-portrait brand's business expansion in mainland China; Nobis has opened 2 direct-run stores in Beijing and Shanghai.

On the online side, the company's multi-brand and multi-platform online development strategy continued to grow well:

ELLASSAY continued to grow rapidly on Tmall, and continued to break through rapidly on the Douyin platform, driving a 63% increase in online revenue; Laurèl achieved excellent growth in both Tmall and Vipshop, joining the first tier of Tmall and Vipshop women's suit categories during the 618 period, and online revenue also increased 61%; IRO actively explored Douyin and Xiaohongshu live streaming while the Tmall platform developed steadily. Online revenue in China also increased 34%; self-portrait maintained the first tier of international brand performance on Tmall, while the Douyin and platforms achieved significant breakthroughs. Self-portrait's online revenue also increased by nearly 30%.

Adjust the profit forecast to an “increase in holdings” rating

Based on 24H1's performance and considering negative factors in overseas markets, we adjusted our profit forecast. The expected return for 24-26 is 1.4, 1.8, and 0.23 billion yuan (original value was 2.41/3.15/3.79), and PE is 17X, 13X, and 10X, respectively.

Risk warning: adverse changes in the external market environment; counterfeiting of products and illegal online shopping; impairment of goodwill; unfavorable expansion of new e-commerce channels, etc.