CICC Securities: Maintains "Neutral" rating on GOODBABY INTL (01086) with target price raised by 70% to HK$1.32

CCB released a research report stating that due to the continuous growth of the multi-brand portfolio of GOODBABY INTL (01086), the company's profit forecast for 2024/2025 has been raised by 37%/26% to HK$360 million and HK$400 million, respectively, and introduced a profit forecast of HK$450 million for 2026. The rating is maintained as "Neutral," considering that the company's performance enhancement will drive an increase in valuation, and the target price has been raised by 70% to HK$1.32. The company announced a profit forecast for 2024: it is expected to achieve a net profit of HK$325-375 million, a year-on-year increase of 55.9%-79.9%. If calculated at the midpoint of the net profit value of HK$350 million, the year-on-year increase in net profit for 2024 is 67.9%, with a corresponding net profit of HK$163 million in 2H24, a year-on-year decrease of -8.9%. The 2024 performance forecast is in line with market expectations. Key points from CCB are as follows: The bank predicts a low double-digit year-on-year revenue growth for the company in 2024. The bank estimates that the Cybex brand will continue its strong growth momentum, mainly benefiting from the expansion in the global market; the Evenflo brand will achieve moderate growth; the blue-chip business will have a higher growth rate, mainly due to the end of destocking, significant rebound in orders; and the gb brand is still in a period of transition and scale adjustment, with a decrease in revenue. A favorable brand portfolio will improve gross margin and profitability significantly. The bank expects a slight increase in the company's gross margin in 2024, mainly due to economies of scale and an increase in the proportion of high-margin brand revenue, but partly offset by the rise in global shipping costs and unfavorable exchange rate fluctuations in 2H24. In terms of other income and gains, the bank predicts a decrease in income from the sale of property, plant and equipment, and rights of use assets in 2024. Regarding expenses, the bank predicts a year-on-year decrease in expense ratio due to the increase in revenue scale, while the financial expense ratio will benefit from a decrease in loan balances and interest rates. Overall, based on a net profit midpoint of HK$350 million, the company's net profit margin for 2024 is expected to increase year-on-year by +1.4ppt to 4.0%. The continuous development of the multi-brand portfolio provides room for further improvement in profit margins. Looking ahead to 2025, the bank expects Cybex to continue expanding its global market share, the Evenflo brand to launch innovative product combinations, the gb brand to continue adjustments, and the blue-chip business to maintain stability. The bank believes that a favorable brand portfolio is expected to continue to improve the company's overall profit margin, while considering the reduction of the company's debt and operational leverage brought about by overseas interest rate cuts, the bank expects there is still room for improvement in profit margins, which may bring performance flexibility. Risks include strategic brand development falling behind expectations, risks of rising shipping costs, and risks of exchange rate fluctuations.