China Lilang (1234) H2 2024 earnings summary

Executive summary

• Revenue reached RMB 3,650 million in 2024, up 3.0% year-over-year, with profit attributable to shareholders at RMB 461.1 million and a gross profit margin of 47.7%.

• Smart casual collection revenue surged 27.2%, offsetting a 3.0% decline in the core collection due to DTC transition and distributor compensation.

• E-commerce and new retail sales grew 24%, driven by expansion on platforms like TikTok, Pinduoduo, and Poizon, and a shift to new product sales.

• The group implemented a DTC model in key regions, recovering distributor rights and optimizing channels, with positive operational results.

• Final and special dividends totaled HKD 0.30 per share, maintaining a 73.1% payout ratio.

Financial highlights

• Gross profit margin decreased by 0.5 percentage points to 47.7%, mainly due to one-off distributor compensation and lower inventory provision reversal.

• Operating profit fell 9.5% to RMB 552.5 million; profit attributable to shareholders dropped 13.1% to RMB 461.1 million.

• Operating cash flow was RMB 527.3 million; net cash position at year-end was RMB 1,072.4 million.

• Selling and distribution expenses rose due to higher direct retail and online store costs, while advertising and renovation expenses declined.

• Administrative expenses were RMB 188 million, mainly due to higher employee salaries and bonuses.

Outlook and guidance

• Plans to expand the DTC model and add a net increase of 100 stores in 2025, focusing on premium malls and outlets.

• Targeting at least 10% overall sales growth and 15%+ new retail growth in 2025, with 80% of online sales from new products.

• Launching high-end golf apparel brand Munsingwear in China and expanding into Malaysia.

• Continued investment in R&D, product quality, automation, and supply chain efficiency to capture younger and middle-class consumers.