Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The report highlights a divergence in brand performance, with increased expenses leading to pressure on net profit. The company is focusing on high-quality and sustainable development, which has resulted in strategic investments despite a challenging domestic consumption environment [7][8]. Financial Performance Summary - **Revenue and Profit Forecasts**: - Total revenue for 2023 is projected at 5,254 million, with a decline to 5,068 million in 2025, followed by a recovery to 5,860 million by 2027. - Net profit is expected to decrease from 697.85 million in 2023 to 404.65 million in 2025, before increasing to 541.66 million in 2027 [1][8]. - **Brand Performance**: - Revenue changes for various brands in H1 2025: Baoxini (-9.60%), Haggis (+8.37%), Baonia (-22.53%), Lefeiye (+20.48%), and Kaimiqie & TB (-11.41%). Lefeiye's growth is attributed to its positioning in the outdoor segment [7]. - **Channel Performance**: - Online sales increased by 17.65%, while direct sales grew by 2.33%. However, franchise and group purchase channels saw declines of 16.66% and 20.94%, respectively [7]. - **Profitability Metrics**: - Gross margin remained stable, slightly increasing to 68.39%. However, the expense ratio rose significantly, leading to a net profit margin decline to 8.25% [7][8]. - **Cash Flow and Inventory Management**: - Operating cash flow for H1 2025 was 0.95 billion, down 31.92% year-on-year, primarily due to decreased revenue and increased brand investments. Inventory was well-controlled, with a reduction of 5.52% from the beginning of the year [7]. - **Valuation Metrics**: - The report adjusts the net profit forecasts for 2025 and 2026 down to 4.05 billion and 4.74 billion, respectively, with corresponding P/E ratios of 14 and 12 [7][8].

Core Viewpoint - The company reported a decline in revenue and net profit for the first quarter of 2025, attributing the downturn to decreased sales, increased expenses, asset impairment provisions, and reduced government subsidies [1][3]. Financial Performance Summary - In Q1 2025, the company's revenue was 1.303 billion, a year-on-year decrease of 3.66%, and the net profit attributable to shareholders was 170 million, down 31.90% [1]. - For the full year 2024, the company reported revenue of 5.153 billion, a decline of 1.91%, and a net profit of 495 million, down 29.07% [2][3]. - The operating cash flow for 2024 was 702 million, a decrease of nearly 40% compared to the previous year [2]. Brand Performance Analysis - The main brands, including Baoxini, HAZZYS, and Baoniao, collectively accounted for approximately 87.16% of total sales, with only HAZZYS showing a slight increase of 1.29% [9][10]. - Baoxini's revenue fell by 8.35%, while Baoniao's decreased by 2.89% [9][10]. - The company has focused on a multi-brand strategy, which has been a key driver of growth, but the main brands are now facing challenges [8][11]. Market Environment and Challenges - The overall apparel industry is under pressure due to a slowing macroeconomic environment and a decline in consumer spending, particularly affecting clothing demand [3][13]. - The men's apparel market in China has shown limited growth potential, with many consumers opting for custom suits rather than ready-to-wear options [13]. - The company faces competition from both domestic and international brands, with a significant market share held by foreign high-end brands [13]. Strategic Moves and Future Outlook - The company has begun acquiring the American outdoor brand Woolrich, aiming to enhance its product offerings and brand portfolio [24][32]. - Woolrich's acquisition is seen as a potential avenue for growth, although it does not include contributions from the European market, which is its primary revenue source [32]. - The company is also investing in a new R&D center in Shanghai to support the global development of Woolrich [32]. Conclusion - The company is navigating a challenging market landscape with declining revenues and profits, while attempting to diversify its brand portfolio through strategic acquisitions and investments in new product lines [37].