Core Viewpoint - Daiwa has made slight adjustments to the 2025 earnings forecast for Xtep International (01368), while lowering the 2026 earnings per share forecast by 2% to reflect a potential slowdown in revenue growth for the core Xtep brand. The firm maintains a "Buy" rating for the company, with a target price raised from HKD 6.6 to HKD 7, based on a consistent 12x price-to-earnings ratio applied to the average earnings per share for 2025-2026 [1][2]. Group 1 - Xtep International's net profit for the first half of this year increased by 6.4% year-on-year on a comparable basis, exceeding both Daiwa's and market consensus expectations by 19% and 17%, respectively. This growth was primarily driven by strong operational cost control and an increase in operating profit margin for the professional sports segment (Saucony and Merrell brands), which rose by 6.1 percentage points to 10% [1]. - Despite the better-than-expected performance, Daiwa only made minor adjustments to the 2025 forecast due to anticipated seasonal weakening of operating profit margins in the second half of the year, along with potential increases in marketing activities and related costs for Saucony [1]. - The most notable aspect of Xtep International's performance is the resilience of operating profit margins in both the mass market and professional sports segments, despite a slowdown in revenue growth in the first half of 2025. However, the firm believes that profit margins may not be sustainable in the second half of 2025 due to upcoming product launches and store openings [1]. Group 2 - Daiwa believes that Xtep International's children's clothing business will provide further upside potential, with management expecting growth in this segment to surpass that of the adult market. On a comparable basis, the firm forecasts approximately 5% earnings growth for the company in 2025 [2].

Group 1 - The core viewpoint of the report is that Daiwa has made slight adjustments to the earnings forecast for Xtep International (01368) for 2025, while lowering the 2026 earnings per share forecast by 2% due to potential slowdown in core brand revenue growth [1] - Daiwa maintains a "Buy" rating for the company, with a target price raised from HKD 6.6 to HKD 7, based on a consistent 12x price-to-earnings ratio applied to the average earnings per share for 2025 and 2026 [1] - Xtep International's net profit for the first half of this year increased by 6.4% year-on-year on a comparable basis, exceeding Daiwa's and market consensus expectations by 19% and 17% respectively, driven by strong operational cost control and improved operating profit margin in the professional sports segment [1] Group 2 - Despite the better-than-expected performance, Daiwa only made slight adjustments to the 2025 forecast, anticipating a decrease in operating profit margin in the second half of the year due to seasonal factors and increased marketing costs for Saucony [1] - The most notable aspect of Xtep International's performance is the resilience of operating profit margins in both the mass market and professional sports segments, despite a slowdown in revenue growth in the first half of 2025 [1] - The company is expected to face challenges in maintaining profit margins in the second half of 2025 due to product launches and store openings, including the release of Triumph 23 in July 2025 and lifestyle products in Q4 of this year [1] Group 3 - Daiwa believes that Xtep International's children's clothing business will provide further upside potential, with management expecting growth in this segment to outpace that of the adult market [2] - On a comparable basis, Daiwa forecasts the company's earnings growth to be approximately 5% in 2025 [2]

Core Viewpoint - The sportswear sector is experiencing a rise in stock prices, with notable increases for companies such as Anta Sports, Xtep International, Li Ning, and Tabo. [1] Company Summaries - Anta Sports (02020) saw a stock price increase of 4.08%, reaching 97 HKD, supported by strong performance in its diversified brand operations, including Descente and Kolon Sport, which contribute to long-term sustainable growth. The current stock price corresponds to a 2025 PE ratio of 17 times. [1] - Xtep International (01368) increased by 3.74% to 6.38 HKD, with a stable performance from its main brand and growth potential from its new brand Saucony, leading to a 2025 PE ratio of 11 times. [1] - Li Ning (02331) rose by 2.72% to 18.5 HKD, recommended for its long-term earnings elasticity, with a 2025 PE ratio of 18 times. [1] - Tabo (06110) experienced a 2.21% increase to 3.24 HKD, noted for its high dividend yield, making it a company of interest. [1]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][32][34] Core Views - The company reported a 7.1% year-on-year revenue growth to 6.84 billion RMB and a 21.5% increase in net profit to 910 million RMB for the first half of 2025, driven by improved profitability in ongoing operations and reduced losses from the divestment of KP [1][9] - The main brand showed steady growth with a 4.5% increase in revenue to 6.05 billion RMB, while the professional sports brands (Saucony and Merrell) experienced a significant 32.5% revenue growth to 790 million RMB [2][22] - The company is focusing on Direct-to-Consumer (DTC) strategies, planning to open 100-200 DTC stores in 2025 and a total of 300-400 by 2026, with a capital expenditure of approximately 400 million RMB [3][31] Summary by Sections Financial Performance - Revenue for the first half of 2025 reached 6.84 billion RMB, with a net profit of 910 million RMB, reflecting a 22% increase in net profit [1][9] - The gross margin remained stable, with a slight decrease of 0.1 percentage points year-on-year [1][14] - The company plans to distribute an interim dividend of 0.18 HKD per share, maintaining a payout ratio of 50% [1][16] Brand Performance - The main brand's revenue grew by 4.5% to 6.05 billion RMB, with e-commerce channel revenue increasing by double digits [2][21] - The professional sports segment saw a revenue increase of 32.5% to 790 million RMB, with a significant improvement in operating profit margin [2][22] Market Strategy - The company is enhancing channel management and implementing a DTC strategy to adapt to market changes, which may have a short-term impact on revenue and profit margins but is expected to benefit long-term growth [3][31] - The focus on the running category is anticipated to drive steady growth for the main brand, while professional sports brands are expected to maintain rapid growth and improve profitability [32][34] Financial Projections - The company forecasts net profits of 1.4 billion RMB, 1.49 billion RMB, and 1.6 billion RMB for 2025, 2026, and 2027, respectively, with year-on-year growth rates of 13.2%, 5.9%, and 7.7% [32][33] - The reasonable valuation range is set at 6.1 to 6.6 HKD, corresponding to a PE ratio of 11-12x for 2025 [32][34]

Core Viewpoint - Goldman Sachs has set a new target price of HKD 7.1 for Xtep International (01368), up from HKD 7, based on a projected price-to-earnings ratio of 13 times for 2025, maintaining a "Buy" rating due to attractive risk-reward dynamics [1] Financial Performance - Xtep International's net profit for the first half of the year exceeded Goldman Sachs' forecast by 12%, driven by higher-than-expected other income and revenue, while core business revenue met expectations [1] - The company has reiterated its guidance, expecting a net profit growth of over 10% year-on-year for 2025, supported by positive sales growth and a cautiously optimistic outlook for the consumer environment in the second half of 2025 [1] Market Outlook - Goldman Sachs remains encouraged by the robust growth in Xtep's core business, particularly in the running market, despite uncertainties related to non-functional products and the macroeconomic environment [1] - The firm holds a constructive view on the long-term sales and profitability of the Saucony brand [1] Profit Forecast Adjustments - Following the better-than-expected net profit in the first half of the year, Goldman Sachs has slightly adjusted its net profit forecasts for 2025 to 2027 by 0% to 1.5%, reflecting minor downward adjustments in sales forecasts for the Xtep brand due to macroeconomic factors and direct sales transformation [1] - Increased sales and management expenses for both brands in the second half of the year are expected to be offset by higher-than-expected other income and revenue [1]

Group 1 - Goldman Sachs has set a new target price of HKD 7.1 for Xtep International (01368), up from the previous HKD 7, based on a projected price-to-earnings ratio of 13 times for 2025 [1] - The firm maintains a "Buy" rating for Xtep International, citing attractive risk-reward dynamics [1] - Xtep International's net profit for the first half of the year exceeded Goldman Sachs' forecast by 12%, driven by higher-than-expected other income and revenue, while core business revenue met expectations [1] Group 2 - The company reiterated its guidance, expecting a net profit growth of over 10% year-on-year for 2025, supported by positive sales growth and a cautiously optimistic outlook for the consumption environment in the second half of 2025 [1] - Goldman Sachs remains encouraged by the robust growth in the running market for Xtep's core business, despite uncertainties in non-functional products and the macro environment [1] - The firm holds a constructive view on the long-term sales and profitability of the Saucony brand [1] Group 3 - Following the positive earnings report, Goldman Sachs has slightly adjusted its net profit forecasts for Xtep International for 2025 to 2027 by 0% to 1.5%, reflecting minor downward adjustments in brand sales forecasts due to macroeconomic factors and direct sales transformation [1] - Increased sales and management expenses for both brands in the second half of the year are expected, but these are offset by higher-than-expected other income and revenue [1]

Investment Rating - The report maintains a "Buy" rating for the company [3][8] Core Views - The company's mid-year performance showed robust revenue growth, with a 21.5% increase in profit, slightly exceeding market expectations due to effective management cost control and increased government subsidies [7] - The overall gross margin saw a slight decline, but long-term prospects for improvement are anticipated as the company continues to expand its children's business and enhance the income share from the Saucony brand [7] - The Saucony brand demonstrated strong growth, with a projected doubling of revenue over the next three years, supported by the opening of new stores and a focus on high-end running products [7] - The company is expected to strengthen its outdoor brand, Merrell, in response to the growing outdoor industry, which could become a potential growth driver in the medium term [7] Financial Forecasts - The company forecasts earnings per share (EPS) of 0.49, 0.56, and 0.63 RMB for 2025, 2026, and 2027 respectively, with a target price of 8.54 HKD based on a 16x PE valuation for 2025 [2][8] - Revenue projections for the years 2023 to 2027 are as follows: 14,346 million RMB (2023), 13,577 million RMB (2024), 14,452 million RMB (2025), 15,795 million RMB (2026), and 17,244 million RMB (2027), reflecting a compound annual growth rate [2][12] - The company's net profit attributable to the parent company is expected to grow from 1,030 million RMB in 2023 to 1,745 million RMB in 2027, with corresponding growth rates of 11.8% (2023), 20.2% (2024), 10.6% (2025), 13.7% (2026), and 12.0% (2027) [2][12]

Core Insights - Goldman Sachs reported that Xtep International's net profit for the first half exceeded their forecast by 12%, primarily due to higher-than-expected other income and revenue, while core business revenue met expectations [1] - The company reaffirmed its guidance, expecting net profit to grow by over 10% year-on-year by 2025, based on positive sales growth and a cautiously optimistic outlook for the consumer environment in the second half of 2025 [1] - Goldman Sachs maintained its view after listening to Xtep International's earnings briefing, expressing encouragement regarding the robust growth in the running market and a constructive outlook on the long-term sales and profitability of the Saucony brand [1] - The target price for Xtep was slightly raised from HKD 7 to HKD 7.1, based on a projected price-to-earnings ratio of 13 times for 2025, with an attractive risk-reward profile leading to a "Buy" rating [1]

Group 1 - Hong Kong sportswear stocks experienced an afternoon rally on August 19, with Xtep International (01368.HK) rising over 3% after its earnings report [1] - Li Ning (02331.HK) saw an increase of over 2% [1] - Other stocks such as Anta Sports (02020.HK) and Tmall (06110.HK) also followed the upward trend [1]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The company achieved a revenue of 6.84 billion RMB in the first half of 2025, representing a year-on-year growth of 7.1%, while the net profit attributable to shareholders increased by 21.5% to 910 million RMB [5] - The main brand and the subsidiary brand, Saucony, are experiencing synergistic growth, with a continued focus on the running segment [11] - The company has successfully divested its KP business, which had previously incurred losses, leading to a more favorable profit outlook [5] Financial Performance - The company's earnings per share (EPS) for the first half of 2025 was 0.35 RMB, with a proposed cash dividend of 0.18 HKD per share, resulting in a payout ratio of 50% [5] - Gross margin slightly decreased by 0.1 percentage points to 45.0%, while operating profit margin improved by 0.4 percentage points to 19.1% [6] - The retail revenue for the main brand and Saucony grew in the mid-single digits and over 30% respectively [6] Revenue Breakdown - In the first half of 2025, the revenue composition was 60.8% from footwear, 37.3% from apparel, and 1.9% from accessories, with respective year-on-year growth rates of 6.3%, 9.5%, and a decline of 7.8% [7] - The main brand's revenue accounted for 88.5% of total revenue, with a year-on-year growth of 4.5%, while professional sports revenue (Saucony and Maile) accounted for 11.5% with a growth of 32.5% [7] Retail and Market Strategy - The company continues to strengthen its position in the running market, with the main brand maintaining the highest wearing rate in key marathon events [11] - The company has launched new products and expanded its retail presence, with a focus on enhancing consumer experience and increasing the number of retail outlets [11] Future Earnings Forecast - The report maintains earnings forecasts for 2025 to 2027, projecting EPS of 0.49 RMB, 0.55 RMB, and 0.60 RMB respectively, with corresponding price-to-earnings (P/E) ratios of 11, 10, and 9 times [12][13]