[This week's special topic: Amer Sports' 2024Q1 business performance exceeded expectations, and Archaeopteryx's growth was high] Amer Sports' 2024Q1 business performance exceeded expectations, and the company expects its profit to be close to $200 million in 2024. Amer Sports 2024Q1 revenue increased by 13% year-on-year to $1.2 billion, including EMEA/America/Greater China/Asia Pacific revenue of+1%/flat/+51%/+34% respectively. After adjustment, gpm increased by 1.1 pcts to 54.3%. Due to the growth of SG&A expenses, adjusted opm decreased by 2.4 pcts to 11% year-on-year, and all operating indicators exceeded expectations. Looking forward to 2024, the company expects double digit revenue growth (Q2 is expected to increase by 10%), 54% gpm and 10.5%~11% opm, and the net profit is expected to be at the upper limit of US $150 million to US $200 million.
Technical Apparel: Archaeopteryx grows rapidly and has excellent growth performance worldwide.
In 2024Q1, the revenue of Technical Apparel business with Archaeopteryx as the core brand increased by 44% to US $510 million (a year-on-year increase of 48% on a currency neutral basis). The unexpected growth of Technical Apparel business mainly benefited from the excellent growth performance of Archaeopteryx worldwide. In terms of channels, DTC's channel revenue grew by 46%. On the one hand, DTC's rapid growth benefited from the increase in net store opening (19 stores in 2024Q1), on the other hand, its sales volume drove the growth of the same store and e-commerce business; Wholesale channel revenue increased by 40%. At the profit margin level, 2024Q1 was limited by the fluctuation of exchange rate, and the adjusted OPM of Technical Apparel business decreased by 0.4 pcts to 23%.
Outdoor Performance: The delivery of wholesale business in the Americas is weak. In 2024Q1, the revenue of the Outdoor Performance business with Salomon as the core brand increased by 6% to US $400 million (a year-on-year increase of 6% on a currency neutral basis). In terms of channels, the revenue of DTC business in 2024Q1 increased by 42%, and the wholesale business revenue declined by 3% year on year due to the fluctuation of consumption environment in the Americas; By region, in 2024Q1, the Greater China, Asia Pacific and EMEA regions all showed year-on-year growth, while the revenue in the Americas declined. In terms of profit margin, in 2024Q1, with the increase of DTC's business share, the gross profit margin of business increased, but at the same time, SG&A expenses also increased significantly year on year. In general, the adjusted OPM of Outdoor Performance decreased by 3.4 pcts to 4.9% year on year.
Ball&Racquet Sports: In the high base, the sales revenue declined by 14%, and the profit margin declined by 10.4 pcts. In 2024Q1, the business revenue of Ball&Racquet Sports with Wilson as its core brand decreased by 14% to US $273 million (14% year-on-year decrease on a currency neutral basis). Due to the high base in the same period, Wilson's sales growth in its core business areas was limited to some extent. At the profit margin level, the deepening of discounts and changes in the product portfolio had a negative impact on the gross profit margin. At the same time, the decline in revenue led to an increase in the proportion of rigid expenses. In 2024Q1, after the adjustment of the business, opm fell 10.4 pcts to 4% year on year.
[View of this week]
Sports shoes and clothing: short-term steady growth, healthy inventory of industry companies, focusing on target companies with strong performance certainty and growth. Give priority to [Anta Sports] with high performance certainty in 2024, which corresponds to 17 times of PE in 2024 (19 times of PE in 2024 after excluding the one-time income of 1.6 billion yuan). Focus on [Li Ning]. The share price corresponds to 15 times PE in 2024.
Clothing brand: The valuation is at a low level and the operation is healthy. The year-on-year growth rate of the segment water flow from 2024Q2 is expected to be higher than that of 2024Q1. The high-quality target of smooth channel expansion, gradual release of performance and attractive dividends still deserves continued attention.
It is recommended to accelerate the expansion of stores to drive growth in 2024, and the current valuation is attractive, which corresponds to 15 times of PE in 2024. Pay attention to the medium - and long-term channel growth that is stronger than the industry, and the performance is expected to be released steadily, corresponding to the PE of 10 times in 2024.
Under the current investment environment, those with stable operation and high dividend quality are still worthy of continued attention. It is recommended to focus on the stable operation of the Volkswagen men's wear leader [Hailan Home]. In the past three years (2021-2023), the cash dividend rate exceeded 85%, corresponding to a PE of 14 times in 2024. Pay attention to the home textile leader [Fuanna], the cash dividend rate has exceeded 90% in the past three years (2021~2023), and wind is expected to be 15 times PE in 2024.
We recommend the down jacket leader [Bosideng] with strong certainty and rapid growth of FY2024 performance. The current share price corresponds to 16 times of FY2024PE, and the valuation has room to rise.
Textile manufacturing: the improvement of orders in 2024 is expected to continue to drive the year-on-year growth of the sector's performance. Looking forward to the whole year, we estimate that in 2024, the capacity utilization rate of sector companies is expected to improve significantly year on year, and the revenue and performance will grow rapidly under a low base. The trend of sustainable good fundamentals is more certain. Recommended track leaders [Shenzhou International, Huali Group, Weixing Shares], corresponding to PE of 19/20/22 times in 2024.
Gold jewelry: The short-term demand performance is stable, focusing on the continuous improvement of product strength and the rapid expansion of the industry leader. Since 2024, the demand for terminal gold jewelry has been stable. In the medium and long term, we judge that gold jewelry head companies will continue to increase their share by opening stores and expanding e-commerce business, while strengthening the creation of product differentiation to lay a competitive foundation. We suggest paying attention to the leading companies with continuous store expansion, strong brand power and steady performance growth. Their performance growth stability is expected to lead the industry. We should pay attention to [Lao Fengxiang, Zhou Dasheng, Chaohongji]. The current share price corresponds to 16/13/13 times of PE in 2024.
[Recent key reports]
Taobo: Terminal retail gradually improved and FY2024 revenue grew steadily. The company's FY2024 revenue increased by 7% year on year, and its performance increased by 20.5%. The company's FY2024 (March 2023 February 2024) revenue increased 6.9% year on year to 28.933 billion yuan, and its gross profit margin slightly increased by 0.1pcts to 41.8% year on year. During the period, the special support given to the company by brand customers decreased year on year. However, thanks to the improvement of retail discounts and the increase in the proportion of retail revenue, the company's gross profit margin still rose slightly year on year, and the sales expense ratio decreased by 0.9pcts to 28.9% year on year, The management expense ratio decreased by 0.2 pcts to 3.9% year on year, the net profit attributable to the parent increased by 0.9 pcts to 7.6% year on year, and the net profit attributable to the parent increased by 20.5% to 2.2 billion yuan year on year. The profitability improved significantly. The company announced to pay the year-end dividend of 5 cents/share and the special dividend of 15 cents/share, together with the interim dividend of 16 cents/share, the dividend payout ratio for the whole fiscal year was 100.9%, and the dividend yield calculated based on the closing price on May 22, 2024 was 7%, and the dividend payout remained at an excellent level.
Risk tip: the consumption environment fluctuates, the exchange rate fluctuates, and the store expansion is less than expected.
