Investment Rating - The report maintains a "Buy" rating for the company, with a target price set at 5.66 HKD, indicating an expected return of over 20% within the next six months [1]. Core Viewpoints - The strategic sale of KP Global Investment Limited, which includes the brands Gaiswei and Paladin for 150 million USD, aims to reduce brand losses and refocus on the core running business [1][2]. - The company plans to distribute a special dividend of approximately 150 million USD to reward investors following the completion of the sale [1]. - The financial restructuring is expected to optimize the company's performance, with projected revenues for 2024-2026 at 16 billion, 17.9 billion, and 19.8 billion RMB, respectively, and net profits of 1.17 billion, 1.34 billion, and 1.51 billion RMB [2]. Summary by Sections Investment Rating - The company is rated as "Buy" with a target price of 5.66 HKD [1]. Financial Performance - The company reported a loss of approximately 9 million USD for the two brands in Q1 2024, with expectations that losses for 2024 will be similar to those in 2023 [1]. - The asset-liability ratio stands at 48.5%, with a net asset value per share of 3.70 HKD [1]. Strategic Initiatives - The sale of KP Global is seen as a move to eliminate ongoing losses and improve cash flow, allowing the company to focus on its main brand and enhance collaboration among its brands [1]. - The company aims to leverage strong cash flow from its main brand to support the growth of its other brands, such as Saucony and Merrell [1].

Investment Rating - The investment rating for the company is "Buy" and is maintained [4] Core Views - The company plans to divest KP Global (fashion sports division) to improve profitability, with the divestiture expected to enhance earnings for the current and next year [5][6] - The divestiture is anticipated to optimize cash flow and allow the company to focus on the running market, enhancing the competitive advantage of the main brand and its collaboration with Saucony [6] Summary by Sections Event Description - The company announced the sale of KP Global for $150 million, which was initially acquired for $260 million in 2019. The divestiture is expected to alleviate the financial burden from continuous losses [5] - KP will redeem $65 million of convertible bonds issued to Hillhouse in 2021, while the company will issue a new $500 million convertible bond with a 3.5% interest rate [5] - The cumulative losses from KP since its acquisition amount to $154 million, and the company will receive a convertible bond from KP worth $154 million, allowing for a potential 30% equity stake in KP [5] Event Commentary - The divestiture is expected to improve profitability, as KP reported losses of $23 million and $31 million in 2022 and 2023, respectively. The company anticipates similar losses for 2024 [6] - The company has optimized its inventory levels and is expected to enhance gross margins and advertising expenses in 2024. The professional sports brand continues to show high growth [6] - The financial forecasts for the company are optimistic, with expected net profits of RMB 1.24 billion, RMB 1.52 billion, and RMB 1.67 billion for 2024, 2025, and 2026, respectively, corresponding to P/E ratios of 12, 9, and 9 times [6][8]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HK$6.72, representing a potential upside of 20% from the current price of HK$5.60 [1][2][4]. Core Views - The company plans to divest its loss-making subsidiary KP Global, which is expected to positively impact profits in the short term [4][5]. - Following the divestiture, the company anticipates revenue and net profit growth of 9.0% and 24.8% year-on-year, reaching RMB 15.64 billion and RMB 1.29 billion, respectively, in 2024 [4][5]. - The report highlights improvements in inventory management and sales performance, with online revenue expected to grow by approximately 14% due to a low base effect [5][6]. Summary by Sections Financial Projections - Revenue for 2024 is projected at RMB 15.64 billion, with a slight decrease in estimates for 2024-2026 due to the impact of KP Global's divestiture [6][8]. - The company expects a net profit of RMB 1.29 billion in 2024, reflecting an 8.5% increase from previous estimates [6][8]. - Earnings per share (EPS) for 2024 is estimated at RMB 0.49, with subsequent years showing continued growth [7][8]. Market Performance - The company’s market capitalization is approximately US$1.89 billion, with a three-month average daily trading volume of US$8 million [2][4]. - The stock has a price-to-earnings (P/E) ratio of 10.6 for 2024, indicating a favorable valuation compared to peers [9][10]. Strategic Initiatives - The divestiture of KP Global is expected to streamline operations and enhance profitability, with a special dividend of US$151 million planned for shareholders [4][5]. - The company aims to expand its product offerings and improve store efficiency, with plans to open 180 new stores in 2024 [5][6].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has strategically divested its loss-making KP Global business for $151 million, which is expected to enhance its financial structure and focus on the running market. The divestiture is anticipated to improve the company's profitability and cash flow, allowing for a stronger focus on its main brands, including Saucony and Hoka, which are expected to see more marketing and product line expansion [2][3] Financial Projections - The company forecasts net profits for 2024, 2025, and 2026 to be RMB 12.17 billion, RMB 13.38 billion, and RMB 15.81 billion respectively, with corresponding EPS of RMB 0.46, RMB 0.51, and RMB 0.60. The current stock price corresponds to PE ratios of 9.89, 8.99, and 7.61 for the same years [2][3][4] - Revenue projections for 2024, 2025, and 2026 are RMB 15.39 billion, RMB 15.83 billion, and RMB 17.78 billion, with growth rates of 7.31%, 2.81%, and 12.35% respectively [3][4] - The company's return on equity (ROE) is expected to improve from 11.62% in 2023 to 14.47% by 2026 [5]

Investment Rating - The report assigns a "Buy" rating to Xtep International (1368) [1]. Core Views - Xtep International plans to divest KP assets and distribute a special dividend of USD 151 million to shareholders, which is expected to enhance the company's performance in 2024 and provide future benefits from KP's potential listing [2]. - The projected net profit for Xtep International from 2024 to 2026 is estimated at RMB 1.16 billion, RMB 1.31 billion, and RMB 1.48 billion respectively, with corresponding price-to-earnings (PE) ratios of 11, 10, and 9 times [2]. Summary by Sections Company Overview - Xtep International is involved in the textile and apparel industry, focusing on sportswear [1]. Financial Performance - The company reported a revenue of RMB 14.346 billion in 2023, with a year-on-year growth of 11% [4]. - The net profit for 2023 is projected to be RMB 1.03 billion, reflecting a 12% increase from the previous year [4]. Business Strategy - The divestment of KP is expected to clarify the business structure, focusing on running as the main brand, which will enhance synergy [2]. - The main brand's cash flow will support the future development of subsidiaries such as Saucony and Merrell, providing them with more financial resources [2]. Market Performance - The main brand's sales in April met expectations despite adverse weather conditions in the south, while northern sales performed better than anticipated [3]. - The main brand is currently offering discounts at 75%, showing an improvement in inventory turnover [3]. Future Outlook - If the divestment and related transactions are completed as planned, the company anticipates a reduction in losses from KP, which will positively impact overall profitability [2]. - Shareholders are expected to receive a dividend of HKD 0.447 per share, translating to a dividend yield of approximately 8% based on the closing price [2].

Investment Rating - The investment rating for the company is "Buy" (maintained) [2][9]. Core Views - The company plans to strategically divest KP to its controlling shareholder for USD 151 million, with proceeds distributed as a special cash dividend of approximately HKD 0.447 per share. This divestment is expected to be completed by the end of August 2024 and will alleviate profit pressure by an estimated HKD 0.6 billion and HKD 1.8 billion for the fiscal years 2024 and 2025 respectively [2][4]. - Post-divestment, the company will focus on the running market, developing three major brands: Xtep, Saucony, and Merrell. More resources will be allocated to enhance the Saucony and Merrell brands, which are expected to contribute positively to profitability [2][4]. - The divestment is anticipated to improve the company's financial statements, with revised net profit forecasts for 2024-2026 being HKD 12.3 billion, HKD 15.4 billion, and HKD 17.6 billion respectively, up from previous estimates [2][4]. Financial Summary and Valuation Metrics - The company reported a revenue of HKD 12.93 billion in 2022, with projections of HKD 14.35 billion for 2023 and HKD 15.33 billion for 2024, reflecting a year-over-year growth of 29.1%, 10.9%, and 6.9% respectively [6]. - Net profit for 2022 was HKD 922 million, with forecasts of HKD 1.03 billion for 2023 and HKD 1.23 billion for 2024, indicating a year-over-year growth of 1.5%, 11.8%, and 19.4% respectively [6]. - The company's gross margin is projected to improve from 40.9% in 2022 to 43.9% by 2026, while net margin is expected to rise from 7.1% to 10.0% over the same period [6].

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Insights - The company is strategically selling its loss-making brands "Gai Shi Wei" and "Pa La Ding" under KP Global for USD 151 million to its major shareholder, the Ding family, and will distribute the entire amount as a special dividend to enhance shareholder returns [3] - The sale is expected to improve the company's financial performance by eliminating ongoing losses from these brands, which have accumulated over USD 100 million in losses since their acquisition in 2019 [3] - The company plans to focus on its core running business, enhancing its competitive position in the market [3] Financial Data and Earnings Forecast - The company reported a revenue of RMB 143.5 billion for FY2023, representing a year-on-year growth of 10.9% [6] - The net profit for FY2023 was RMB 10.3 billion, with a year-on-year increase of 11.8% [6] - The forecasted net profits for FY2024, FY2025, and FY2026 are RMB 11.5 billion, RMB 13.0 billion, and RMB 14.6 billion respectively, with corresponding PE ratios of 11, 10, and 9 [4][12] - The company aims for a double-digit revenue growth target for the year, supported by strong sales performance in Q1 2024 [3][10] Shareholder Returns - The special dividend from the sale will amount to approximately HKD 0.447 per share, resulting in a dividend yield of about 8.2% based on the latest closing price [3] - The transaction is expected to be completed in the second half of the year, with benefits reflected in the 2024 financial results [3] Business Focus - The company will streamline its brand portfolio to concentrate on the running segment, with plans to leverage its main brand for the mass market and other brands for niche markets [3] - The overall business structure will be simplified, allowing for more focused resource allocation and accelerated brand development [3]

Investment Rating - The report maintains a "Buy" rating for Xtep with a target price of HKD 7.63, reflecting a 40.4% upside from the current price of HKD 5.43 [3][6]. Core Insights - Xtep's short-term outlook has improved due to increased arrangements, leading to a 2% to 5% upward revision in FY24E - 26E net profit estimates [1][6]. - The valuation remains attractive at 10 times FY24E P/E and a 14% yield, supporting the positive outlook [1][6]. - The strategic disposal of K&P is seen as beneficial, as it alleviates impairment risks and allows Xtep to focus on its core market segments [2][6]. Financial Summary - Revenue projections for FY24E, FY25E, and FY26E are estimated at HKD 15,371 million, HKD 15,713 million, and HKD 17,298 million respectively, with a compound annual growth rate (CAGR) of 6% for sales and 20% for net profit [6][7]. - The net profit for FY24E is revised to HKD 1,275 million, with subsequent years showing growth to HKD 1,479 million in FY25E and HKD 1,763 million in FY26E [7][8]. - The report indicates a projected diluted earnings per share of RMB 0.483 for FY24E, increasing to RMB 0.560 in FY25E and RMB 0.668 in FY26E [7][8]. Strategic Actions - Xtep plans to acquire K&P for USD 151 million, with the entire consideration paid as a special dividend of HKD 0.447 per share, representing approximately 8% of the current market capitalization [1][2]. - The company will redeem Hillhouse's K&P convertible bonds at a total value of USD 65 million, which will further streamline its capital structure [1][2]. - Xtep aims to enhance cash flow and dividend payments, allowing for accelerated expansion of its Saucony brand, which has reached breakeven [2][6].

Investment Rating - The report maintains a BUY rating for Xtep with a new target price of HK$7.63, reflecting a 40.4% upside from the current price of HK$5.43 [4][7]. Core Views - The strategic disposal of K&P is expected to enhance short-term growth and improve cash flow, leading to a revision of FY24E-26E net profit estimates upwards by 2% to 5% [2][7]. - The valuation remains attractive at 10x FY24E P/E, compared to an 8-year average of 15x, alongside a 14% dividend yield for FY24E [7]. Financial Summary - Revenue projections for FY24E are set at RMB 15,371 million, with a growth forecast of 10.1% for FY26E [3][9]. - Operating profit is expected to increase from RMB 1,464.3 million in FY24E to RMB 2,557.2 million by FY26E, indicating a positive trend in profitability [3]. - Net profit is forecasted to rise from RMB 912.3 million in FY24E to RMB 1,775.7 million in FY26E, reflecting a strong growth trajectory [3]. Earnings Revision - The report revises FY24E net profit to RMB 1,275 million, FY25E to RMB 1,479 million, and FY26E to RMB 1,763 million, with respective growth rates of 3.6%, 2.2%, and 4.6% [8][9]. - Gross margin is expected to remain stable around 42.3% for FY24E, while EBIT margin is projected to improve to 14.1% by FY25E [8]. Market Performance - Xtep's stock has shown a 39.9% increase over the past three months, outperforming the market [5]. - The company has a market capitalization of HK$14,307.2 million, with significant shareholding by Mr. Ding Shui Po and family at 49% [5].

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