2023 Annual Results Presentation 18 March 2024 2023 Annual ResultsHighlights RMB 14,346 m 10.9% Group's revenue RMB 1,030 m 11.8% globally as at 31 December 2023 8,583 branded stores Core Xtep brand's revenue Profit attributable to ordinary equity holders of the Company Professional sports segment's revenue Athleisure segment's revenue (Mainland China) RMB 11,947 m RMB 796 m RMB 465 m HK 8.0 cents1 Full year payout ratio: 50.0% Final dividend per Share RMB 1,794 m 21.6% Group's inventories RMB 1,255 m 119.5 ...

Xtep International Holdings Limited (Incorporated in the Cayman Islands with Limited Liability) Stock Code: 1368.HK 2024 Interim Results Presentation 20 August 2024 2024 Interim Results Highlights Group's revenue RMB 7,203 m 10.4% Gross profit margin 46.0% 3.1% pts Profit attributable to ordinary equity holders of the Company RMB 752 m 13.0% RMB 826 m 211.6% Interim dividend per Share HK15.6 cents Payout ratio: 50.0% MSCI ESG rating Upgraded to "A" China business Core Xtep brand achieving steady performance ...

Xtep International Holdings Limited (Incorporated in the Cayman Islands with Limited Liability) Stock Code: 1368.HK 2024 Annual Results Presentation 18 March 2025 2024 Annual Results Highlights Group's revenue RMB 13,577 m 6.5% RMB 1,250 m 57.2% Operating profit RMB 1,966 m 9.3% RMB 1,238 m Profit attributable to ordinary equity holders of the Company 20.2% Final dividend per Share 1 The proposed final dividend per Share will be subject to the approval of shareholders at the forthcoming annual general meeti ...

Investment Rating - The investment rating for the company is "Buy" and is maintained [8]. Core Insights - The retail performance of the main brand remains stable, with a year-on-year revenue growth in the mid-single digits for Q1 2025, primarily driven by footwear sales. The discount rate is between 70-75%, and the inventory turnover ratio is approximately 4 months. The subsidiary brand, Saucony, has shown a robust revenue growth of over 40% year-on-year [6][8]. - Continuous product launches and optimization of the product matrix are evident, with the introduction of the 360X 2.0 carbon plate running shoes and the flagship cushioning running shoes, enhancing the running shoe lineup [8]. - Looking ahead, the company is gradually implementing a Direct-to-Consumer (DTC) channel strategy, which is expected to drive revenue and profit growth. The projected net profits for 2025-2027 are estimated at 1.41 billion, 1.60 billion, and 1.82 billion respectively, with corresponding price-to-earnings ratios of 9, 8, and 7 times [8][10]. Summary by Sections Retail Performance - The main brand's Q1 revenue growth is in the mid-single digits year-on-year, with a discount range of 70-75% and an inventory turnover of about 4 months. Saucony's revenue growth exceeds 40% year-on-year [2][6][8]. Product Development - New products are being launched, including the 360X 2.0 carbon plate running shoes and the flagship cushioning running shoes, which enhance the overall product matrix [8]. Future Outlook - The company is focusing on DTC strategies, with expectations for revenue and profit growth. The projected net profits for 2025-2027 are 1.41 billion, 1.60 billion, and 1.82 billion, with P/E ratios of 9, 8, and 7 respectively [8][10].

Core Viewpoint - Cathay Securities maintains a positive outlook on Xtep International's (01368) competitive strength in the main brand running shoes sector, with a target price of HKD 6.45 for 2025, reflecting a lower-than-industry-average PE of 12X [1] Group 1: Financial Performance - The main brand's Q1 revenue showed single-digit growth year-on-year, with discounts remaining stable at 7-7.5%, and an inventory-to-sales ratio of approximately 4 months, indicating a healthy balance [2] - Xtep's Q1 functional running shoes sales demonstrated double-digit growth, showcasing the company's competitive edge in the running shoe market [3] Group 2: Brand Development and Strategy - The DTC (Direct-to-Consumer) reform is progressing as planned, with expectations to recover 400-500 stores by 2026, which may have a slight short-term impact on 2025 profits but is expected to enhance operational efficiency and customer experience in the long term [3] - Saucony's Q1 revenue increased by over 40% year-on-year, with a growth guidance of 30-40% for 2025, and plans to open 30 new stores, primarily in high-tier markets [4]

Core Viewpoint - Despite stable growth in revenue and profit margins, the valuation of Xtep International (01368) remains stagnant, raising questions about potential investment opportunities and risks in the market [1][12]. Financial Performance - In Q1 2025, Xtep's main brand achieved mid-single-digit year-on-year growth in retail sales, while its second growth brand, Saucony, saw over 40% year-on-year growth [1]. - Over the past five years, Xtep's revenue and net profit have compounded at rates of 13.53% and 24.64%, respectively [1]. - The company has maintained a consistent dividend policy, with a proposed final dividend of HKD 0.095 per share for 2024, leading to a total dividend of HKD 0.156 per share, a year-on-year increase of 221.7% [1]. Profitability Metrics - Xtep's gross margin improved from 38.9% to 43.2%, and net margin increased from 7.2% to 9.1% over the past five years [1][3]. - Return on equity (ROE) nearly doubled from 7.3% to 14.1% during the same period [1][3]. Cost Management - The overall expense ratio has remained stable, with advertising and promotion costs increasing but offset by optimized employee costs [2]. - In 2024, the combined advertising, employee, and R&D expense ratios were 26.3%, a slight increase of approximately 0.7 percentage points from 2020 [2]. Cash Flow and Debt - Xtep has strong cash flow, with an average net cash flow from operating activities exceeding RMB 1.2 billion over the past two years [5]. - As of December 2024, cash equivalents totaled RMB 2.98 billion, with short-term and long-term interest-bearing debts of RMB 1.16 billion and RMB 0.867 billion, respectively [5]. Brand Performance - Xtep operates two main brands: the mass-market brand Xtep and the high-end professional sports brand Saucony, with over 6,382 stores as of 2024 [7]. - The mass-market brand contributes over 90% of revenue, while Saucony's revenue share has increased significantly, with a compound annual growth rate of 104.3% from 2020 to 2024 [7][8]. Market Position and Valuation - Xtep's profitability is lower compared to peers, with accounts receivable as a percentage of revenue at 33.9%, significantly higher than competitors like Anta and Li Ning [5][6]. - Despite a lack of standout performance compared to industry leaders, Xtep's dual-brand strategy and consistent dividend payouts suggest limited downside in valuation [12]. Analyst Sentiment - Investment banks generally have a positive outlook on Xtep, with target prices above the current market price, indicating potential for future growth [11].

Investment Rating - The report maintains a "Buy" rating for the company [2][6][25] Core Views - The company's main brand shows steady growth, with a notable performance in professional sports, particularly in the children's segment, which is growing faster than the adult segment [6] - The company plans to optimize its multi-brand matrix by focusing on core running business and transitioning to a Direct-to-Consumer (DTC) model, which is expected to enhance its competitive position in the professional sports sector [6] - The company has healthy inventory levels and stable discount rates, maintaining its annual profit growth guidance of over 10% [6] Financial Data and Profit Forecast - Revenue projections for FY2023 to FY2027 are as follows: - FY2023: 143 billion RMB - FY2024: 136 billion RMB - FY2025E: 146 billion RMB - FY2026E: 158 billion RMB - FY2027E: 169 billion RMB - Net profit forecasts for the same period are: - FY2023: 10.3 billion RMB - FY2024: 12.4 billion RMB - FY2025E: 13.7 billion RMB - FY2026E: 15.0 billion RMB - FY2027E: 16.3 billion RMB - The company expects a gross margin improvement, with projections of 42% in FY2023, increasing to 45% by FY2027 [5][6][16]

Investment Rating - The report maintains a "Buy" rating for the company, expecting a relative return of over 20% within the next six months [6]. Core Insights - The company reported a mid-single-digit year-on-year growth in retail sales for its main brand in Q1 2025, with retail discounts ranging from 7% to 75% and channel inventory turnover of approximately four months. The subsidiary brand, Saucony, achieved over 40% year-on-year growth in retail sales [1]. - The company has been actively promoting public health and sports development since 2007, sponsoring 44 top marathon and road running events across China in 2024, including the prestigious Xiamen Marathon [2]. - The company aims to enhance its direct-to-consumer (DTC) business model to foster deeper and more personalized interactions with customers, thereby increasing brand loyalty and retention rates [3]. - Saucony has quickly become a prominent player in the running market, ranking among the top three in terms of wearing rates in Chinese marathons. The DTC strategy has driven over 100% compound annual growth in the professional sports segment's revenue from 2020 to 2024 [4]. Financial Projections - The company forecasts revenues of RMB 14.7 billion, RMB 15.8 billion, and RMB 17 billion for the years 2025 to 2027, with net profits of RMB 1.36 billion, RMB 1.52 billion, and RMB 1.69 billion respectively. Corresponding EPS is projected to be RMB 0.49, RMB 0.55, and RMB 0.61, with PE ratios of 9x, 8x, and 8x [5].

Investment Rating - The report maintains a "Buy" rating for the company, expecting a relative return of over 20% within the next six months [6]. Core Insights - The company reported a mid-single-digit year-on-year growth in retail sales for its main brand in Q1 2025, with retail discounts ranging from 7% to 75% and channel inventory turnover of approximately four months. The subsidiary brand, Saucony, achieved over 40% year-on-year growth in retail sales [1]. - The company has been actively promoting public health and sports development since 2007, sponsoring 44 top marathon and road running events across China in 2024, including the prestigious Xiamen Marathon [2]. - The company aims to enhance its direct-to-consumer (DTC) business model to foster deeper and more personalized interactions with customers, thereby increasing brand loyalty and retention rates [3]. - Saucony has quickly become a prominent player in the running market, ranking among the top three in terms of wear rate in Chinese marathons. The DTC strategy has driven over 100% compound annual growth in the professional sports segment's revenue from 2020 to 2024, achieving breakeven in 2023 [4]. Financial Projections - The company forecasts revenues of 14.7 billion RMB, 15.8 billion RMB, and 17 billion RMB for the years 2025 to 2027, with net profits of 1.36 billion RMB, 1.52 billion RMB, and 1.69 billion RMB respectively. Corresponding EPS is projected to be 0.49 RMB, 0.55 RMB, and 0.61 RMB, with PE ratios of 9x, 8x, and 8x [5].

Investment Rating - The report maintains a BUY rating for Xtep with a target price of HK$ 7.20, indicating a potential upside of 46.9% from the current price of HK$ 4.90 [3][10][18]. Core Views - The 1Q25 results are generally in line with expectations, with an encouraging trend observed in March 2025. The outlook for 2Q25E remains cautiously optimistic due to potential policy support and brand-specific growth momentum [1][10]. - Xtep is expected to benefit from a consumption trade-down effect amidst macroeconomic risks, with management maintaining positive sales growth guidance for FY25E [10][11]. - The company is focusing on enhancing operational efficiency and preparing for a direct-to-consumer (DTC) transformation, with plans to repurchase stores in the coming years [10][11]. Financial Summary - Revenue projections for FY25E are set at RMB 14,312 million, with a year-on-year growth of 5.4%. The net profit is expected to reach RMB 1,372 million, reflecting a growth of 3.6% [2][11]. - The earnings per share (EPS) for FY25E is projected at RMB 0.48, with a net profit margin of 9.6% [2][11]. - The company’s price-to-earnings (P/E) ratio is currently at 10x, compared to the target P/E of 14x for FY25E, indicating that the stock is undervalued relative to its historical average [10][18]. Market Performance - Xtep's market capitalization is approximately HK$ 12,910.7 million, with an average turnover of HK$ 82.9 million over the past three months [4][10]. - The stock has experienced a decline of 13.9% over the past month and 14.0% over the past three months, indicating a challenging market environment [6][10]. Shareholding Structure - The major shareholder is Mr. Ding Shui Po and family, holding 49.2% of the shares, followed by JPMorgan Chase & Co with 4.6% [5][10].