20240320-招银国际-中国利郎-01234.HK-Impressive_FY24E_guidance_with_decent_yield_10页_1mb

Summary

• Key Highlights: China Lilang (1234 HK) reported strong FY23 results with sales and net profit growth of 14% and 18% YoY, exceeding expectations due to successful new products and improved operational efficiency. The company maintained a 10% dividend yield, supported by robust working capital management and a reduced inventory days-to-sale ratio to 170 days.

• FY24E Guidance: The company set an ambitious 15% retail sales growth target for FY24 (up to 20% for e-commerce), driven by enhanced product innovation, better inventory control (including logistics upgrades), expanding smart casual segment, and store renovations. This leads to upward revisions in profit forecasts.

• Valuation: Analyst recommends "BUY" with a target price raised to HK$5.75 (29.2% upside), based on a 10x FY24E P/E and an 8% yield. The robust earning outlook and conservative macro assessment position China Lilang favorably.

• Financial Performance: FY23 gross margin improved to 48.2%, and OP margin reached 17.2%. Sales CAGR projected at 11% over 2023-26E, underpinned by steady revenue growth and rising profitability.

• Growth Drivers: Key factors include successful new products (high sell-through rates), efficient inventory management, segment diversification (smart casual growth), and strategic store developments, ensuring resilience in the competitive apparel sector.