The company released the 24Q1 financial report. 24Q1 achieved revenue of 3.72 billion/+26.0%, including Mingchuang's domestic revenue of 2.29 billion/+14.2%, overseas revenue of Mingchuang of 1.22 billion/+52.6%, TOP TOY brand revenue of 210 million/ +55.1%, adjusted net profit of 62 million/ +27.7%, and an adjusted net profit margin of 16.6% /+0.2pct. The consumer market of interest is broad. The “1+3” moat of the company's “1 Chinese supply chain+global IP+global design+global channel” is stable. They are optimistic about the steady expansion of famous companies domestically, the overseas market continues to grow at a high rate, and the long-term growth brought about by TOP TOY's continuous incubation. Maintain a “Highly Recommended” rating.

Performance exceeded expectations, and overseas markets continued to grow rapidly. The 24Q1 company achieved revenue of 3.72 billion/+26.0%, mainly contributed by a 19.3% increase in the average number of stores and a 9% increase in same-store sales. Adjusted net profit of 620 million/ +27.7%, and the adjusted net profit margin was 16.6% /+0.2pct. Looking at the subregion, domestic Mingchuang's revenue in the quarter was 2.29 billion/+14.2%, mainly due to an average increase of 18.7% in the number of stores plus the same store contributing about 98% of the high base in the same period last year; Mingchuang's overseas revenue was 1.22 billion/+52.6%, contributing from an average increase of 19.7% in the number of stores plus a 21% increase in the same store growth. The revenue of the TOP TOY brand was 210 million/ +55.1%, which was contributed by an average increase of 32.2% in the number of stores and a 26% increase in same-store sales.

Expanding overseas stores rapidly, TOPTOY raised its goal of expanding stores. The total number of Mingchuang stores in 24Q1 reached 6630, a net increase of 217; the number of domestic stores at the end of the quarter was 4034, a net increase of 108; the number of stores in the overseas market at the end of the quarter was 2596, a net increase of 109 month-on-month, including 43 direct-run stores and a net increase of 66 third-party stores; by region, there was a net increase of 69 in Asia, a net increase of 19 in North America, a net increase of 11 in Europe, and a net increase of 4 in other regions. TOP TOY's net increase of 12 stores this quarter reached 160, continuing to maintain a strong development momentum. The target for opening stores has been raised from 50 stores to 100 stores during the year, and the expansion will continue to accelerate.

The gross margin continues to rise, and the sales expense ratio is well controlled. The gross margin of the 23Q4 company was 43.4% /+4.1pct, and the gross margin reached a new high. The sharp increase in gross margin was mainly due to an increase in the share of revenue in the overseas direct market, an increase in the share of sales of IP products, and an improvement in TOPTOY gross margin. The 24Q1 sales/management expenses ratio was 18.7%/5.1%, respectively, +3.8pct/-0.1pct. The sales rate was mainly due to the year-on-year increase in overseas direct store development expenses and the increase in advertising and promotion expenses, but it was reduced by 0.1 pct month-on-month, and the company's sales expenses rate was well controlled.

Investment advice. The consumer market of interest is broad. The “1+3” moat of the company's “1 Chinese supply chain+global IP+global design+global channel” is stable. They are optimistic about the steady expansion of famous companies domestically, the overseas market continues to grow at a high rate, and the long-term growth brought about by TOP TOY's continuous incubation. The company's adjusted net profit for FY2024E/25E/26E is estimated to be 25.5/32.3/3.91 billion, respectively, maintaining the “Highly Recommended” rating.

Risk warning: Store expansion falls short of expectations, and single store revenue growth falls short of expectations.