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martingalecasino| Behind Taobo's (06110) performance returns to growth: "hidden dangers" in the cash flow statement

时间:2024-05-25 23:07:38浏览次数:2

The capital market does not seem to be convinced of the growth report card after two consecutive declines in performance in 06110.

On May 22nd, the company announcedMartingalecasinoThe company announced its full-year results for the 2023 fiscal year 2024. According to the performance report, the company achieved revenue of 289 in the fiscal year ended February 29.Martingalecasino.33 billion yuan (unit: RMB, the same below), an increase of 6% over the same period last yearMartingalecasino.87%MartingalecasinoThe profit attributable to the company's equity holders is 2.213 billion yuan, an increase of 20.5% over the same period last year. Revenue and net profit growth were below Citigroup's expectations of 8 per cent and 21 per cent, respectively.

Growth fell short of expectations, and the capital markets were hardly flattering. As of May 24, the closing price was HK $5.08, down more than 11% for two consecutive trading days, with a total market capitalization of about HK $31.5 billion.

Major brokerages have also lowered their target prices. UBS said it cut its earnings per share forecast for the 2025-2027 fiscal year by 3% to 4%, taking into account its earnings forecast for fiscal 2024 and the recent weak sales trend, reducing its target price from 7.50 yuan to 7.30 yuan. According to a research report released by Guoxin Securities, based on the general environment in which consumer demand has slowly recovered since the beginning of 2024, the performance forecast for the fiscal year 2025-2026 has been lowered, and the net profit for the fiscal year 2025-2027 is expected to be 2.3 billion yuan, 2.51 billion yuan and 2.7 billion yuan, respectively. The reasonable valuation range is reduced to HK $6.80-7.20.

Once upon a time, as the leader of China's sports shoes and clothing retail track, Toubou also had a glorious moment when its performance flew with the stock price. In fiscal year 2021, the company's revenue was 36.009 billion yuan, an increase of 7% over the same period last year, and its net profit was 2.77 billion yuan, an increase of about 20% over the same period last year. At that time, the company had nearly 8000 stores across the country, with a layout in more than 300 cities. It can be said that "wherever there is well water, they all sing Liu Yong ci." In March of that year, the company's share price stood at a high of HK $13.78, corresponding to a market capitalization of more than HK $85 billion.

Between peaks and troughs and violent ups and downs, what have you experienced, and how can you get out of the predicament?

Retail-driven performance recovery cannot hide the decline in the ability of enterprises to create cash

Over the past year, the pace of domestic consumption recovery and the change of demand have become more volatile, posing certain challenges to the operation of consumer retail enterprises.

Although growth has been achieved in the most recent full fiscal year, vertical observation shows that revenue and net profit have declined for two consecutive years, and this growth has not yet returned to previous years' levels.

Specifically, with the resumption of the offline consumption scene, the retail business is still the core driver of performance growth. During the period, the retail business achieved revenue of 24.703 billion yuan, accounting for 85.4% of the total revenue, an increase of 8.9% over the same period last year. It is also the only growing sector of all the business sectors of the company. During the period, wholesale business, joint venture fee income and e-sports 's income fell 3.3%, 2.9% and 28% respectively compared with the same period last year.

It is worth noting that the retail driver is based on stores. As of February 29, 2024, there were 6144 directly operated stores, with the total number of stores down 6.4% year on year, gross sales area down 0.8% year on year, and individual store sales area up 6.0% year on year. In an extended time line, the number of the company's stores has plummeted, nearly 2000 more than it closed in 2021. Thankfully, the rate of decline in Toubao stores is much slower than in the previous fiscal year.

According to brand classification, Nike and Adidas belong to the company's "main brands" section, Puma, Converse, Weifu Group brand Vance, north, Arthur, Skage and so on belong to the "other brands" section. During the period, assist brands and other brands recorded growth, especially the growth rate of "other brands" was 10.5% higher than that of "main brands" by 6.5%. Although the proportion has a trend of growth and decline, it is not yet obvious. More than 80% of Gao Bo's performance comes from the "main brand" and is still strongly bound with Nike Adi.

Despite the repeated emphasis on "efficiency", the financial results do not seem to be significant.

In fiscal year 2024, the overall expense rate of the company's gross profit margin fell only 1 percentage point to 32.8%, and the growth of gross profit margin was negligible, rising 0.1 percentage points year-on-year to 41.8%.

martingalecasino| Behind Taobo's (06110) performance returns to growth: "hidden dangers" in the cash flow statement

According to other indicators, during the period, the number of inventory turnover days was shortened by 13.4 days to 136 days compared with the same period last year, and the inventory amount increased by 0.6% to 6.28 billion yuan compared with the same period last year.

Inventory turnover is accelerated, and the improvement is more significant. However, with domestic sportswear brands vertically, it can be found that the inventory turnover is higher than that of peers. In 2023, Anta inventory turnover days are 121 days, Li Ning inventory turnover days are 62 days, special step inventory turnover cycle is 88.5 days, 361-degree inventory is maintained at about 90 days, all are lower than Pao.

More importantly, there has been a decline in the ability to generate cash.

According to Zhitong Financial APP, the ratio of its own cash-generating capacity (net cash flow of operating activities / total cash flow) continued to decline in the 2022-2024 fiscal year, at 3.25,1.84 and 1.6 respectively. The decline in the ratio shows that the ability to create cash is gradually weakening, the financial base is loose, and the ability to repay debt and external financing are affected.

In addition, despite the return to growth, the cash flow of operating activities can not hide the decline. In the 2022-2024 fiscal year, the net cash flow of the company's operating activities was 5.69 billion yuan, 4.351 billion yuan and 3.129 billion yuan respectively, while accounts receivable and notes for the same period were 1.107 billion yuan, 102.2 billion yuan and 1.33 billion yuan respectively. It goes up and down, indicating that the quality of its profits is declining. Moreover, in fiscal year 2024, the net increase in cash flow returned to negative value (- 401 million yuan).

The result of multi-brand layout of Adi Nike and Adi Nike remains to be tested.

In the past year, it has signed up a number of new brands, including HOKA ONE ONE and Kellogg, and invested in Lengshan, a snow retailer, which owns the Chinese agency of several international snow brands such as Burton and Nitro. From the new partners, we can see that it has obvious intention to broaden the multiple layout of vertical areas in sports, outdoor, cross-country and so on. But in the financial report, Nike and Adidas are still the "main brands", accounting for more than 80% of the revenue.

This means that if the growth of Nike and Adidas slows, Gao Tou will also face development challenges.

According to Zhitong Financial APP, Adidas Greater China has achieved four consecutive quarters of growth: greater China contributed revenue of 900 million euros in the first quarter of 2024, up 8% from a year earlier. Revenue in greater China rose 4 per cent year-on-year to $1.863 billion year-on-year and 8 per cent year-on-year on a year-on-year basis, according to Nike's second-quarter fiscal 2024 results (2023.8.31-2023.11.30). Greater China is also the second fastest growing region for Nike. However, if you take a closer look at Nike's businesses in the Greater China region, footwear revenue fell 1 per cent year-on-year to $1.361 billion, clothing grew 19 per cent to $469 million and equipment grew 32 per cent to $33 million.

However, the two giants are still facing tremendous pressure. Adidas's fiscal year 2023 revenue was 21.427 billion euros, a year-on-year decrease of 5%; Nike's revenue in the second fiscal quarter of fiscal year 2024 only increased by 1% year-on-year. In the third quarter, not only did revenue growth fall to 0.3%, but net profit growth also turned negative. Net profit decreased by 5.48% year-on-year and 25.73% month-on-month. According to foreign media reports, Nike's headquarters in Oregon has made two layoffs and is expected to complete the layoffs before the end of fiscal 2025.

The industry has not yet emerged from the "cold winter", and the further intensification of competition in the Chinese market will also put international giants such as Adidas and Nike under more performance pressure. Global management consulting firm McKinsey pointed out in the latest "2024 Sporting Goods Report" that among the top 20 sports brands in China's sports market in 2023, local companies account for 60% of the market share, and the territory of global sports goods giants is being divided by Chinese companies and emerging sports brands such as lululemon and Gymshark.

Brands and dealers have lost their lips and teeth, and the subsequent growth of the main brands has been weak, which has also adversely affected Taobo's growth.

In fact, Tobo's business is not easy to do. The growth rate of the shoe and apparel retail industry began to slow down in the second half of last year.

At the end of April this year, HSBC Research released a report stating that the market share growth space of top international brands will be limited. In the first quarter of this year, the overall growth rate of domestic clothing companies was weak. The bank expects Taubo's revenue growth in fiscal year 2025 to be 6.7%, and net profit will fall 11.1% to 2.345 billion yuan.