Market Outlook - The global athletic shoe market is expected to continue its stable growth over the next 5 to 10 years, driven by consumer demand for comfort and health-oriented lifestyles [2][5] - Emerging markets have significant potential for growth in athletic shoe penetration compared to developed regions like the US and Europe [2] Financial Performance - In Q1 2025, the company experienced a significant increase in new customer orders, particularly from brands like Adidas and New Balance, contributing to revenue growth [3][6] - The gross margin has seen a decline due to the initial inefficiencies of new factories and the onboarding of new employees, which is expected to improve as operations stabilize [3][9] Production and Capacity - The company is currently in a production peak season with full order books and no significant cancellations reported [5][9] - New factories are being established in Vietnam and Indonesia, with the latter expected to have a capacity of over 60 million pairs annually, starting production in mid-2024 [8] Strategic Partnerships - The company is actively pursuing partnerships with emerging brands and has already begun collaboration with Asics [3][4] - There is a focus on automating production processes to enhance efficiency and reduce reliance on skilled labor [3][7] Risk Management - The company is monitoring the impact of potential tariff changes on its operations in Southeast Asia and has prepared various response strategies [9] - Despite uncertainties in the global trade environment, the company plans to maintain its investment pace in production capacity in Indonesia and Vietnam [8]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][34]. Core Views - The company is expected to achieve a revenue of 24.006 billion yuan in 2024, representing a year-on-year growth of 19.35%, driven by the recovery of orders from sports shoe manufacturers as inventory issues ease [1][8]. - The net profit attributable to shareholders is projected to grow by 20% to 3.84 billion yuan in 2024, with a stable gross margin of 26.8% [1][8]. - The company plans to increase its annual cash dividend payout ratio to approximately 70% of net profit for 2024, up from 43.76% in 2023 [1][8]. Revenue and Profit Growth - The company sold 223 million pairs of sports shoes in 2024, a year-on-year increase of 17.5%, with an average selling price of approximately 107.3 yuan, reflecting a slight increase of 1.6% [2][13]. - The top five customers accounted for 79% of total revenue, a decrease of 3 percentage points year-on-year, indicating a diversification in the customer base [2][13]. - The company has established a partnership with Adidas, which is expected to contribute significantly to revenue growth starting in 2025 [2][28]. Financial Projections - The company forecasts net profits of 4.304 billion yuan, 5.002 billion yuan, and 5.746 billion yuan for 2025, 2026, and 2027, respectively, with year-on-year growth rates of 12.1%, 16.2%, and 14.9% [3][34]. - The reasonable valuation range for the company is maintained at 73.1 to 79.5 yuan, corresponding to a price-to-earnings ratio of 20-22x for 2025 [3][34]. Operational Efficiency - The company's return on equity (ROE) is projected to be 22.0% in 2024, reflecting a year-on-year increase of 0.8 percentage points [17][35]. - Capital expenditures are expected to reach 1.7 billion yuan, primarily for capacity expansion, with new factories in Vietnam and Indonesia commencing production [1][17]. Market Position - The company has consistently outperformed its peers in the industry, with a compound annual growth rate of 8.0% from 2022 to 2024, while competitors experienced declines [27][29]. - The company is well-positioned to benefit from the recovery of major clients like Nike and the new partnership with Adidas, which is anticipated to drive significant revenue growth [27][28].

Group 1: Sales and Market Impact - The company's sales revenue from the U.S. market is estimated to account for approximately 40% of total sales, with the U.S. being the largest consumer market for athletic shoes [2] - The company has developed different response plans regarding the U.S. tariffs on imports from Vietnam and Indonesia, maintaining close communication with clients [2][3] - Despite the uncertainty in the global trade environment, the company will not adjust its strategic plans for the construction of new factories in Indonesia [3] Group 2: Raw Material Sourcing - In 2024, over 50% of raw materials for the Vietnam factory will be sourced locally, while the proportion from mainland China has decreased to about 30% [4] - The company operates a processing model in Vietnam, where raw materials are imported duty-free, and only processing fees are charged [4] Group 3: Production Capacity and Technology - The company’s supercritical physical foaming midsole technology is considered to be at a leading level in the industry, with production capacity currently tight [5] - The company plans to continue investing in expanding production capacity to meet demand for this technology [5] Group 4: Financial Performance and Profit Distribution - The company's net profit margin has remained stable at around 15%-16% since 2021, reflecting effective cost and expense management [7] - The cash dividend ratio for 2024 is set to approximately 70% of net profit, with previous years showing cash dividends of 89% in 2021, 43% in 2022, and 44% in 2023 [16] Group 5: Future Outlook and Client Relations - The company is optimistic about 2025 orders, with no significant changes expected in actual orders compared to forecasts [8] - Average selling prices will fluctuate based on client and product mix, with the company monitoring these changes closely [9] - The company maintains a multi-client model, which enhances its market adaptability and attracts new clients [14]