Huaxi Securities released a research report stating that it maintains a "buy" rating on Bosideng (03998), analyzing its future space: In the short term, the market was concerned about warm November temperatures affecting the sales of down jacket products this year, but it can be seen that temperatures have dropped significantly recently. In recent years, the company has maintained a low proportion of first orders, so dealers can place rolling orders based on sales after the temperature drop, and timely and flexibly supplement through pull-type replenishment, small orders for quick response, and other methods.

In the medium term, the company continues to launch sun protection clothing, lightweight down jackets, second iteration upgrades, as well as one garment three wear assault jackets, down jackets, etc., with continuous innovation of new products, focusing on outdoor activities. The proportion of seasonal products in the company is expected to further increase, smoothing out cyclical fluctuations; channel efficiency improvement: emphasis on fine management of individual stores, a significant increase in the efficiency of direct-operated stores, and strengthening the opening of peak season pop-up stores. In the future, the company still has room to control expenses, and the net margin is expected to improve; in the long term, there is still room for the company's market share to increase.

Main views of Huaxi Securities:

Event Overview

The company's FY24/25H1 revenue/net profit attributable to equity holders is 880.4/113 million yuan, an increase of 17.8%/23% year-on-year, achieving rapid growth in the current context mainly benefiting from the successful progress of new product categories such as sun protection clothing, lightweight down jackets, leading to a significant increase in store efficiency. In H1 of FY24/25, the company received government subsidies of 0.196 billion yuan (compared to 0.11 billion yuan in the same period last year). After deducting the impact of government subsidies and other factors, the net profit attributable to equity holders increased by 23% year-on-year. The company plans to distribute a mid-term dividend of 6 Hong Kong cents per share.

The revenue of down jackets/main brand Bosideng increased by 23%/19%, with a significant increase in efficiency of direct-operated stores.

(1) From a business perspective, the revenue of down jackets/OEM/women's wear/diversified outfits in FY24/25H1 was 60.63/2.316/0.308/0.117 billion yuan. (2) Looking at down jacket brands, Bosideng/Xuezhongfei/Bingjie generated revenues of 5.28/0.39/0.021 billion yuan, with year-on-year growth of 19.4%/47.1%/61.5%. Xuezhongfei focuses on high-performance-price down jackets, continues to focus on online channels for fast growth, while Bingjie significantly shrinks offline distribution channels, successfully transitioning to online, resulting in increased growth. (3) Breaking down the down jacket sales by channel, the revenue from direct-operated/wholesale/other (raw material sales) was 2.262/3.429/0.372 billion yuan, with year-on-year growth of 36.7%/12.6%/54.5%. Online revenue was 1.396 billion yuan, a 23.2% increase, resulting in offline direct-operated revenue of 0.866 billion yuan, a 66.2% increase year-on-year. (4) Looking at internal and external growth, the company has 3,188 stores, with direct-operated stores increasing by 18 to 1,154. This led to a significant increase in efficiency of direct-operated stores/single-store shipments by approximately 73.7%/16.7% to 0.75/1.68 million yuan/half-year; currently, the proportion of stores in first and second-tier cities is 26.3%.

The gross margin remains stable, while the sales expense ratio is decreasing.

(1) In FY24/25H1, the company's gross margin was 49.9%; broken down by business, the gross margins for brand down jackets/OEM/women's outfits/diversified outfits were 61.1%/20.1%/61.8%/27.6% respectively. (2) In FY24/25H1, OPM/net margin attributable to the parent company were 16.7%/12.8%, increasing by 0.2/0.3 percentage points year-on-year. The selling expense ratio decreased by 1.4 percentage points to 25.8%, mainly due to the company's continuous strengthening of daily operational expense control and focus on cost efficiency; the administrative expense ratio increased by 0.9 percentage points year-on-year to 8.7%, mainly due to the increase in the amortization of options expenses granted to employees in November 2023; the financial expense ratio decreased by 0.1 percentage points year-on-year.

The number of fans on various e-commerce platforms has been steadily increasing.

In the interim report for the 24/25 fiscal year, Bosideng brand gained over 1.3 million new fans on Tmall and JD.com platforms, with over 1 million new members; as of September 30, 2024, the Bosideng brand had a total of over 19 million members on Tmall and JD.com platforms. At the same time, the Bosideng brand gained over 0.5 million new fans on Douyin platform, totaling over 9.5 million fans.