Core Insights - The apparel industry in China is experiencing a slowdown in growth, with retail sales of clothing reaching 1,071.62 billion yuan in 2024, reflecting a mere 0.1% increase year-on-year, a significant decline of 15.3% compared to 2023 [1] - Among 25 selected publicly listed companies in the apparel sector, only 7 reported increases in both revenue and net profit, while 10 companies experienced declines in both metrics [1][2] Revenue and Profit Overview - In 2024, 15 companies reported a decline in net profit, and 13 saw a decrease in revenue. Notably, 10 companies experienced declines in both revenue and net profit [2] - Companies with declining performance include: - Baoxini: Revenue of 5.153 billion yuan, down 1.91%; net profit of 495 million yuan, down 29.07% [2][3] - Hailan Home: Revenue of 20.957 billion yuan, down 2.65%; net profit of 2.159 billion yuan, down 26.88% [2][3] - Sanfu Outdoor: Revenue of 800 million yuan, down 5.45%; net profit loss of 21 million yuan, down 158.83% [2][3] - Anzheng Fashion: Revenue of 2.034 billion yuan, down 6.23%; net profit loss of 124 million yuan, down 365.03% [2][3] - Aimer: Revenue of 3.163 billion yuan, down 7.71%; net profit of 163 million yuan, down 46.56% [2][3] Losses and Underperformance - Six companies reported losses, including: - Ge Li Si: Loss of 310 million yuan [4][5] - Sanfu Outdoor: Loss of 21 million yuan [4][5] - Anzheng Fashion: Loss of 124 million yuan [4][5] - Xinhe Shares: Loss of 67 million yuan [4][5] - Meibang Clothing: Loss of 195 million yuan [4][5] - Annai: Loss of 115 million yuan [4][5] Performance Rankings - The top three companies in revenue growth are: - 361 Degrees: 19.6% growth [7] - Tanshan: 14.44% growth [7] - Anta Sports: 13.6% growth [7] - The bottom three in revenue growth are: - Meibang Clothing: -49.79% [7] - Annai: -20.7% [7] - Xinhe Shares: -20.1% [7] Net Profit Growth Rankings - The top three companies in net profit growth are: - Urban Beauty: 197% growth [9] - Anta Sports: 52.4% growth [9] - Tanshan: 48.5% growth [9] - The bottom three in net profit growth are: - Meibang Clothing: -715.45% [9] - Ge Li Si: -392.99% [9] - Anzheng Fashion: -365.03% [9]

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 "Positive" outlook on the textile and apparel industry [2]. Core Insights - The textile and apparel sector outperformed the market, with the SW textile and apparel index rising by 1.6% from April 14-18, 2025, surpassing the SW All A index by 1.3 percentage points [6]. - Retail sales of clothing and textiles showed steady improvement, with a year-on-year growth of 3.4% in the first quarter of 2025, totaling 386.9 billion yuan [30]. - Textile exports rebounded significantly in March, with a year-on-year increase of 12.9%, driven by accelerated shipments of previously placed orders [10][37]. Summary by Sections Industry Performance - The SW textile and apparel index increased by 1.6%, outperforming the SW All A index by 1.3 percentage points during the specified period [6]. - The SW apparel and home textiles index rose by 1.4%, while the SW textile manufacturing index also increased by 1.6% [6]. Retail Sales - In March, clothing retail sales grew by 3.6% year-on-year, slightly up from 3.3% in January-February [13]. - The total retail sales of clothing, shoes, and textiles for the first three months reached 386.9 billion yuan, reflecting a 3.4% increase year-on-year [30]. Export Data - In the first quarter, China exported textiles and apparel worth 66.3 billion USD, a year-on-year increase of 0.6% [37]. - March saw textile and apparel exports amounting to 23.4 billion USD, marking a 12.9% year-on-year growth [37]. Cotton Prices - As of April 18, 2025, the national cotton price index was reported at 14,252 yuan per ton, with a weekly increase of 0.2% [40]. - The main contract for Zhengzhou cotton was priced at 12,885 yuan per ton, reflecting a 0.6% increase [40]. Market Trends - The report highlights the necessity for domestic demand to improve in 2025, especially in light of changing international trade dynamics [15]. - The focus on new outdoor activities, new business models, and supportive policies is emphasized as key growth areas [15]. Company Performance - 361 Degrees reported a 10-15% year-on-year growth in its main brand for the first quarter of 2025, with e-commerce sales increasing by 35-40% [28]. - Xtep International's main brand sales grew in the mid-single digits, with a significant increase of over 40% for the Saucony brand [28]. - The annual report for Baoshihua indicated a revenue of 5.15 billion yuan, down 1.9% year-on-year, with a net profit decline of 29.1% [28].

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].

Investment Rating - The report maintains a "Buy" rating for the company [3][5]. Core Views - The company has shown steady revenue growth in Q1 2025, with a year-on-year increase in revenue in the single digits. The retail discount level is between 70-75%, and inventory turnover days are around 4 months, indicating stable operational quality [1][2]. - The e-commerce business is performing exceptionally well, with expected sales growth of over 20% due to the Spring Festival. The company is optimizing its store structure and plans to initiate a Direct-to-Consumer (DTC) transformation in the second half of 2025 to enhance retail efficiency [1][2]. - The company's subsidiary, Saucony, has become a new growth driver, with revenue growth exceeding 40% in Q1 2025. The brand has already surpassed 1 billion yuan in revenue in 2024 and is undergoing a brand revitalization process [2]. - For 2025, the company is expected to achieve a revenue growth of approximately 7% and a net profit growth of around 10% [2][3]. Financial Summary - The company's projected financials for 2025 include: - Revenue: 14,519 million yuan, a year-on-year growth of 6.9% - Net profit: 1,365 million yuan, a year-on-year growth of 10.3% - Earnings per share (EPS): 0.49 yuan [4][3]. - The company is expected to maintain a Price-to-Earnings (P/E) ratio of 9 times in 2025, indicating a favorable valuation [3][4].