Matters:
In the first half of the year, the company's revenue increased 25% year-on-year to 7.76 billion yuan, and the gross profit margin was 43.7% (+4.1pct). Adjusted net profit (non-IFRS) was $1.24 billion, up 18% year on year. Adjusted net profit margin was 16.0%, 17% for the same period in '23, but excluding exchange losses, 24H1 adjusted net interest rate was 16.2% (16.1% for the same period in '23)
Q2 revenue increased 24.1% year over year to 4.035 billion yuan, gross margin was 43.9% (39.8% in the same period last year), compared to 39.8% in the same period in 2023; adjusted net profit increased 9.4% year over year to 0.625 billion yuan, and adjusted net interest rate was 15.5% (17.6% for the same period in '23). Excluding exchange gains and losses, the adjusted net interest rate for Q2 was 15.6% (15.5% for the same period in '23)
Commentary:
The opening of stores accelerated, and the same stores were still supported. In the first half of '24, the total number of Mingchuang Premium stores worldwide was YTD+455 to 6868, with 4115 stores in China, YTD+189, with a total increase of 107 in the first and second tier, accounting for more than 50%; 2,753 overseas, YTD+266, of which 171 were added in the direct market and 95 in the agency market. North America and Asia Pacific (excluding China) are still the company's key overseas markets. In the first half of the year, Latin America/North America/Asia Pacific (excluding China) /Europe/ other regions added 32/62/151/13/8 stores, and the number of stores reached 584/234/1484/244/207 at the end of the period. The corresponding same-store sales growth rate was 21%/12%/15%/10%/-1%, respectively. Driven by BT21 series IP products, the growth rate of the same stores in the Latin American market was impressive in the first half of the year.
The overseas direct sales market maintained high growth. 24H1 Mingchuang's domestic business revenue increased 16% to 4.593 billion yuan, Mingchuang's overseas agent market grew 19% to 1.21 billion yuan, the direct sales market grew 70% to 1.522 billion yuan, and the overall overseas growth was 43%. In terms of revenue structure, Mingchuang's share of domestic revenue decreased by 5 pct to 59%, overseas agency market revenue share decreased by 1 pct to 15%, overseas direct sales market revenue share increased by 5 pct to 20%, and TOP TOY's share increased by 1 pct to 6%.
The company is actively exploring new models and new IPs, such as pop-up stores and 24-hour supermarket stores. At the same time, it is also developing popular IPs such as CHIIKAWA and Little Bear this year to support domestic same-store recovery. 24H1 Mingchuang domestic same-store recovered to 98.3% in the same period last year. The average order price increased by 0.9%, the average transaction volume fell 2.5%, and the GMV of offline stores increased 16.1%. TOP TOY, another of the Group's brands, achieved profits for three consecutive quarters. In the first half of the year, TOPTOY stores grew 47 to 195, revenue increased 38% to 0.429 billion yuan, and the same store grew 14%.
The gross margin reached a new high. The gross margin of 24H1 company reached 43.7% (+4.1pct), mainly due to the increase in gross margin in the overseas direct market. The sales expense ratio increased by 5 pcts to 19% due to the increase in the cost of opening direct stores in North America, and the management expense ratio remained unchanged at 5%.
Continued returns to shareholders. The company plans to pay dividends in the first half of the year accounting for 50% of the adjusted net profit for the first half of the year, 8.30. The company's board of directors approved a HK$2 billion share repurchase plan, accounting for 4.8% of the closing market value of the day.
Profit forecast and valuation: North American stores performed well after switching to self-operation, and maintained the guideline for 900-1100 net new stores this year. We raised our 24-26 EPS forecast to $2.23, $2.77, and $3.51 (previous value was $2.06, $2.55, $3.18), and the corresponding valuation was 14X/11X/9X, with reference to comparable companies, and the corresponding valuation was 20 times over 24, corresponding to a target price of HK$48.62, maintaining the “recommended” rating.
Risk warning: Market competition is intensifying, the consumer industry is weak, franchisees' willingness to open stores falls short of expectations, raw material costs are rising, and overseas macroeconomics are declining.