Investor Notes - Phillip Securities (HK) Ltd

30 Sep, 2024 (Monday)

AIR CHINA(753)
Analysis：
As the 2024 National Day holiday approaches, the tourism market is showing signs of full recovery. According to the "2024 National Day Travel Forecast Report" released by Ctrip, this year`s National Day holiday travel boom is expected to return in full swing, especially with a significant increase in demand for long-distance and outbound travel. The visa processing volume on the Ctrip platform has surged by 70% compared to last year. Furthermore, data from Flight Manager shows that due to the overlap of the 2023 Mid-Autumn Festival with the first day of the National Day holiday, the high travel intensity resulted in a higher base number, coupled with the impact of this year`s Typhoon "Beibei," leading to a year-on-year decrease in the daily average volume of civil aviation passengers during the Mid-Autumn Festival holiday. However, looking ahead to the upcoming National Day holiday (October 1st to October 7th), the daily passenger transport volume is expected to exceed 2.3 million, an 8.3% increase year-on-year. Meanwhile, the central government recently announced a series of policies, many of which are related to stimulating consumption. The focus of future fiscal policies may tilt towards benefiting people`s livelihoods and promoting consumption. Supporting low and middle-income groups and boosting the trend of consumption upgrading may be key areas of focus. The shift in the focus of fiscal expenditure is expected to enhance the efficiency of fiscal stability and growth.
Strategy：
Buy-in Price: $4.08, Target Price: $4.50, Cut Loss Price: $3.70

Report Review of August 2024

Sectors:

TMT, Semiconductors, Consumer & Healthcare （Eric Li）

This month I released reports of 361 DEGREES INT. (1361.HK).

During 2023FY, 361 Degrees International Limited (361 Degrees) recorded a revenue of RMB8,423.3mn, increasing 21.0% YoY. Profit attributable to the equity shareholders of the Company was RMB961mn, representing a YoY increase of 28.7%. A total dividend of HK20.4 cents per ordinary share (equivalent to RMB18.7 cents), representing a dividend payout ratio of 40.2%.

In terms of product segment, sales of the company's two core product lines, namely footwear and apparel, increased by 23.0% YoY and 9.8% YoY respectively. For the year under review, the proportions of total revenue of footwear and apparel sales were slightly increased from 41.0% to 41.7% YoY and slightly decreased from 35.2% to 31.9% YoY of the total revenue respectively. This was mainly due to the increase in proportion of sales revenue from 361 Degrees Kids from 20.7% to 23.2% of the total revenue for the year under review, which in turn affected the proportion of sales of various products to total revenue. The average wholesale price (AWP) of footwear and apparel edged up by 3.0% and 0.5% year-on-year respectively. The increase in footwear's and apparel's AWP was mainly due to the upward adjustments of the wholesale prices of the existing products across different product lines in order to cover the increase in cost of production and reflect the continuous brand image enhancement; the upgrade of product mix by launching a variety of new products with a higher AWP; and the increase in proportion of sales revenue generated from the e-commerce business which has a higher AWP than the sales made to distributors, above reasons contributed to increase in AWP as compared to that of last year. In addition, the sales volume of footwear and apparel products increased by 19.4% and 9.4% YoY, respectively.

In recent years, as China's consumer preferences leaned towards specialisation, diversification, and cost effectiveness, the company positions as a "professional, youthful, and internationalised" brand. The company has built a diversified brand matrix based on professional functions and its own-branded IP. With 2024 bringing numerous international and domestic sports events, including the highly anticipated Paris Olympics, which are expected to stimulate a broader participation in sports and increase consumer demand. We expect 2024-2025 EPS to be RMB0.49 and RMB0.53 respectively, with PT of HKD4.02, implies a FY2024E P/E of 7.47x (~2-yrs historical average). Our investment rating is “Accumulate”.

Click Here for PDF format...

Writer Info

Research Team

Tel: + (852) 2277 6555

Email:
research@phillip.com.hk

Enquiry : 2277 6666 OR investornotes@phillip.com.hk
If you cannot read this e-mail in the proper format, please click here to view the web version.

Information contained herein is based on sources that Phillip Securities (Hong Kong) Limited and/or its affiliates ( the “Group”) believe to be accurate. The Group does not bear responsibility for any loss occasioned by reliance placed upon the contents hereof. The Group (or its employees) may have interests in relevant investment products. For details of different products’ risks, please view the Risk Disclosures Statement on http://www.phillip.com.hk.

If you DO NOT wish to receive further marketing emails from us, please click HERE to opt-out.