17 Aug 2023
1H23 revenue increased by 18.0% YoY to Rmb4.31bn, with core brand retail value up by low-teens/low-teens YoY and that of 361º Kids up by +20-25%/+20-25% YoY in 1Q/2Q. GPM edged up by 0.2ppt YoY to 41.7%, as GPM of 361º Kids increased by 1.7pptn YoY to 42.4% due to upgrade of product mix with higher AWP new products and increase in ecommerce sales mix. GPM of footwear/ apparel/ accessories/ shoe soles were flat/ -1.4/ -4.3/ +13.1 ppt YoY to 43.5%/ 40.1%/ 31.3%/ 20.5%. Selling expense surged by 26% YoY to Rmb758m (selling expense ratio – 1H23: 17.6%, 1H22: 16.5%) as A&P and E-commerce related charges such as commissions were up by 14%/69% YoY with more online activities held to promote the brand and increase in logistic charges in online biz, while admin expense was up by 16.6% YoY to Rmb286m due to a 23% increase in R&D costs but partially offset by a 11% YoY decrease in staff costs due to amortization of FV of stock options granted to staff. Finance cost was up by 98% YoY to Rmb9.2m as newly added Rmb249m of new bank loans for additional WC. Effective tax rate was slightly up to 22.1% (1H22: 21.3%). As a result, NP surged by 27.7% YoY to Rmb704m, which accounted for 74% of our FY23 new estimates of Rmb951m.