According to Guosen Securities' research report, China Lilang (01234) had a year-on-year increase of 7.3% in revenue to 1.6 billion yuan in the first half of 2024, and net income attributable to the parent increased by 3.6% to 0.28 billion yuan. Among them, the revenue of the main series increased by 4.5% year-on-year to 1.21 billion yuan, and the light commercial series benefited from the promotion of the new retail Olay channel and increased by 17.3% year-on-year to 0.39 billion yuan. The online retail sales volume increased by 37.0% year-on-year. Gross margin decreased by 1.8 percentage points year-on-year to 50.0% mainly due to the payment of related repurchase compensation for terminating the cooperation with the distribution partner in Heilongjiang and changing the product combination which caused the average unit price to decrease. The company plans to distribute an interim dividend of 13 Hong Kong cents per share and a special dividend of 5 Hong Kong cents per share, with a dividend payout ratio of 72%.
The bank pointed out that the management has lowered the full-year retail growth target to 10%. Due to the overall impact of the apparel retail market environment, the retail growth target for 2024 has been lowered from 15% to 10%. It is expected that the performance in the second half of the year will be better than that in the first half of the year, taking advantage of the strengths of autumn and winter products, and strive to achieve a 30% or more growth in new retail business for the whole year. In terms of store numbers, the company aims to achieve a net increase of 50-100 stores and complete the seventh-generation decoration project for 400 stores to enhance the brand image.
The bank stated that the consumption environment was weak in the first half of the year but the company still achieved positive growth in revenue, and the profit margin was slightly affected by changes in channels and product combinations. At the same time, the company has long maintained a stable and high level of dividends. Affected by the decline in consumer spending power this year, the bank slightly lowered its profit forecast, expecting a net profit of 0.57/0.65/0.73 billion yuan in 2024-2026 (previous values were 0.59/0.68/0.75 billion yuan). Based on the downward revision of profit forecast, the bank slightly lowered the target price to HKD 4.6-5.2 (previous value was HKD 5.2-5.5), corresponding to 9-10x PE in 2024, and maintained the rating of "outperform the market".