Core Viewpoint - Xtep International (01368) reported a near 3% increase in stock price, with a current price of HKD 5.85 and a trading volume of HKD 35.46 million. The company announced its operational status for the second quarter of 2025, showing growth in retail sales for its main brand and a significant increase for the Saucony brand [1]. Group 1: Sales Performance - The main brand of Xtep achieved low single-digit year-on-year growth in retail sales across both online and offline channels [1]. - Saucony's retail sales saw over 20% year-on-year growth, with a more than 30% increase in the first half of 2025 [1]. - For the six months ending June 30, 2025, the main brand's retail sales recorded mid single-digit year-on-year growth, while the channel inventory turnover was approximately four to four and a half months [1]. Group 2: Market Trends and Strategies - According to CICC's report, the main brand's retail revenue in Q2 2025 grew at a low single-digit rate, with running and outdoor categories leading overall growth, particularly with double-digit sales growth in the running category for the first half of 2025 [1]. - The children's product category outperformed the adult category during this period [1]. - Sales performance was stronger in April and May compared to June, attributed to the May Day holiday and extended 618 sales period [1]. Group 3: Pricing and Inventory Management - Despite the impact of the May Day holiday and 618 e-commerce promotions, the retail discount for the main brand remained stable at 70-75% [1]. - Anticipating numerous marathon events in the second half of the year, the company proactively managed inventory, resulting in a channel inventory turnover of four to four and a half months by the end of June [1]. - Sales performance for the main brand improved in July compared to June, with online sales outperforming overall sales [1].

Group 1 - The core viewpoint of the articles highlights the performance and growth of the brands Xtep and Saucony, with Xtep showing modest growth and Saucony experiencing significant increases in retail sales [1][2][3] - In Q2 2025, Xtep's main brand retail sales (including online and offline channels) saw a low single-digit year-on-year growth, with retail discount levels ranging from 70% to 75% [1] - In H1 2025, Xtep's main brand retail sales experienced a mid-single-digit year-on-year growth, while channel inventory turnover was between 4 to 4.5 months [1] Group 2 - Saucony's retail sales (including online and offline channels) grew by over 20% year-on-year in Q2 2025 and over 30% in H1 2025 [1] - Xtep has been actively sponsoring events to deepen its presence in the basketball sector and solidify its leading position in running, including becoming the official supporter of the 2025 World Athletics Relays and the designated equipment sponsor for the 7th Asian University 3x3 Basketball Championship [1] - Xtep's performance in marathons has been notable, with its champion running shoes winning the top three positions in the 2025 Hangzhou Women's Half Marathon, further establishing Xtep as China's leading running brand [2] Group 3 - Saucony is expanding its reach into the professional runner segment, as evidenced by its annual conference featuring elite athletes and industry professionals to promote its new TRIUMPH 23 running shoes [2] - The TRIUMPH series has evolved over 23 years, focusing on cushioning performance and catering to both casual and long-distance runners [3] - The company maintains its profit forecast, expecting revenues of 14.7 billion RMB, 15.8 billion RMB, and 17 billion RMB for 2025-2027, with corresponding net profits and EPS figures [3]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price not specified [6][4]. Core Insights - In Q2 2025, the main brand of the company experienced low single-digit growth in retail sales year-on-year, while the Saucony brand saw over 20% growth in retail sales [1]. - For the first half of 2025, the main brand's retail sales grew in the mid-single digits year-on-year, and Saucony's retail sales exceeded 30% growth [1]. - The company is actively expanding its presence in the basketball sector while solidifying its leading position in the running category through sponsorships and successful athlete endorsements [2]. - The Saucony brand is focusing on professional runners and has launched new products, including the TRIUMPH 23 running shoes, which emphasize both performance and lifestyle [3]. 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, respectively [4]. - Projected net profits for the same period are 1.36 billion RMB, 1.52 billion RMB, and 1.69 billion RMB, with corresponding EPS of 0.49 RMB, 0.55 RMB, and 0.61 RMB [4]. - The price-to-earnings ratios are expected to be 11x, 10x, and 9x for the years 2025 to 2027 [4].

Group 1: Xtep International Performance - Xtep's main brand retail revenue in 2Q25 achieved low single-digit year-on-year growth, with overall revenue growth in 1H25 also in single digits [1] - Offline sales remained stable with slight growth, while online sales outpaced offline; children's products grew faster than adult products, and footwear outperformed apparel [1] - Functional products accounted for over 60% of the main brand's offerings, with running and outdoor categories leading the growth [1] Group 2: Market Trends and Strategies - The sales performance in April and May was better than in June, attributed to the May Day holiday and the earlier start of the 618 shopping festival compared to the previous year [1] - The company maintained a discount rate of 70-75%, with expectations for the annual discount to remain at current levels due to healthy inventory [1] - The DTC (Direct-to-Consumer) strategy is set to launch in 2H25, with plans to recover approximately 500 stores, representing about 8% of the total store count [1] Group 3: Competitor Analysis - Saucony's revenue in 1H25 grew over 30%, with 1Q growth exceeding 40% and 2Q growth over 20%, maintaining a target of 30%-40% growth for the year [2] - Saucony focuses on high-end positioning and brand upgrades, tightening online discounts and reducing low-priced product offerings [2] - The brand aims to enhance its presence in high-tier cities with new store openings and plans to increase investment in trail running products [2] Group 4: Financial Projections - Xtep is projected to achieve revenues of 144.14 billion, 154.32 billion, and 165.17 billion RMB for 2025-2027, with year-on-year growth rates of 6.2%, 7.1%, and 7.0% respectively [3] - The expected net profit for Xtep for 2025-2027 is 13.8 billion, 15.1 billion, and 16.6 billion RMB, with growth rates of 11.3%, 9.7%, and 9.7% respectively [3] - The company maintains a valuation of 11.5X PE for 2025, with a target price of 6.1 HKD, indicating a potential upside of 15.0% [3]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The main brand shows steady growth, while the performance of Saucony is promising, with a significant increase in retail sales [5][6] - In Q2 2025, the main brand's retail sales grew at a low single-digit percentage year-on-year, with retail discounts deepening slightly [5] - Saucony's retail sales increased by over 20% year-on-year in Q2 2025, and over 30% year-on-year for the first half of 2025 [5] Financial Performance Summary - The company expects to achieve revenues of RMB 144.1 billion, 155.2 billion, and 167.3 billion for 2025, 2026, and 2027 respectively, with corresponding net profits of RMB 13.7 billion, 15.3 billion, and 16.7 billion [5][7] - The projected P/E ratios for 2025, 2026, and 2027 are 10, 9, and 8 times respectively [5][7] - The report indicates a slight increase in channel inventory turnover days to 4-4.5 months as of H1 2025 [5] Market Data - As of July 18, 2025, the current stock price is HKD 5.47, with a market capitalization of approximately HKD 15,220.24 million [2][8] - The stock has shown a 28% increase over the past 12 months, compared to a 39.6% increase in the Hang Seng Index [2]

Investment Rating - The report maintains an "Outperform" rating for Xtep International [2][5] Core Views - Xtep International's revenue performance in 2Q25 met expectations, with all brands maintaining their annual performance guidance [3][10] - The main brand achieved low-single-digit growth in retail revenue year-over-year, with online sales outpacing offline sales [3][10] - The company is focusing on direct-to-consumer (DTC) strategies, aiming to recover around 500 stores by 2026 [3][10] Financial Performance Summary - Revenue projections for Xtep International are RMB 14.41 billion, RMB 15.43 billion, and RMB 16.52 billion for 2025, 2026, and 2027, respectively, reflecting year-over-year growth of 6.2%, 7.1%, and 7.0% [5][12] - Net profit attributable to the parent company is expected to be RMB 1.38 billion, RMB 1.51 billion, and RMB 1.66 billion for the same years, with growth rates of 11.3%, 9.7%, and 9.7% [5][12] - The projected P/E ratios for 2025, 2026, and 2027 are 10.0X, 9.1X, and 8.3X, respectively [5][12] Brand Performance Insights - Saucony and Merrell brands are experiencing strong growth, with Saucony achieving over 30% year-over-year revenue growth in 1H25 [4][11] - Saucony aims for a 30%-40% annual revenue growth and plans to double its revenue in the next three years [4][11] - Merrell's revenue in 2Q25 grew over 50% year-over-year, driven primarily by e-commerce [4][11]

Core Insights - Xtep International reported operational data for Q2 and the first half of 2025, meeting expectations with low single-digit year-on-year growth in Q2 and mid single-digit growth in the first half [1] - The children's segment outpaced the adult segment, with footwear performing better than apparel, driven by functional running and outdoor products [1] - Saucony achieved over 20% growth in Q2 and over 30% growth in the first half, with a clear brand positioning focused on elite runners and high-performance products [1][2] Brand Performance - The new brands Saucony and Maile maintained rapid growth, with Saucony projecting 30-40% growth for the full year [2] - Saucony is strategically reducing low-priced products online and tightening discounts while expanding its presence in core cities with new store formats [2] - Maile's sales trends are strong, with over 50% growth in both Q2 and the first half, primarily driven by e-commerce [2] Inventory and Financial Health - The inventory level remains healthy, with a sell-through ratio of approximately 4 to 4.5 months at the end of Q2, and discount rates stable at 30-35% [2] - The company expects gross margins to meet expectations, with marketing and R&D expenses within budget, indicating stable operating profit margins [2] Channel Performance - Online sales growth outpaced offline, with direct-to-consumer (DTC) initiatives progressing well, involving around 500 stores transitioning from franchise to self-operated [3] - The DTC transformation is expected to enhance market responsiveness and long-term competitiveness, with plans to open larger stores and introduce new store formats [3] Product Category Insights - Core running products performed well, achieving double-digit growth, while leisure products showed some volatility [3][4] - The company has optimized its multi-brand matrix by divesting from fashion sports brands and focusing on core running business, which is expected to strengthen its market position [4] Future Outlook - The company maintains a "buy" rating and profit forecasts, expecting net profits of 1.37 billion, 1.50 billion, and 1.63 billion for 2025-2027, corresponding to PE ratios of 10, 9, and 8 [4] - The focus on the running segment post-divestment is anticipated to enhance brand synergy and future growth prospects [4]

Investment Rating - The investment rating for the company is "Buy" and is maintained [6]. Core Insights - The main brand of the company continues to show steady growth, with retail performance remaining stable. In Q2 2025, the main brand's revenue saw a low single-digit year-on-year growth, with discounts ranging from 7% to 75%. The inventory turnover ratio is healthy at 4 to 4.5 months [8]. - The performance of the subsidiary brand, Saucony, has experienced a short-term slowdown, but is expected to return to high growth. In Q2 2025, Saucony's revenue grew over 20%, and for H1 2025, it grew over 30%. The slowdown is attributed to the company's strategic decision to lower prices on certain products, impacting short-term revenue. Future plans include accelerating store openings in high-tier cities and orderly adjustments in e-commerce operations, which are expected to drive Saucony back to rapid growth [8]. - Overall, the main brand is benefiting from the running trend, maintaining robust growth, while Saucony is undergoing a temporary adjustment without altering its long-term growth potential. The company is projected to achieve net profits of 1.41 billion, 1.60 billion, and 1.82 billion yuan for the years 2025 to 2027, corresponding to P/E ratios of 10, 8, and 7 times, respectively [8][10]. Summary by Sections - **Retail Performance**: The main brand's revenue in Q2 2025 showed low single-digit growth year-on-year, with a healthy inventory turnover ratio of 4 to 4.5 months [4][8]. - **Saucony's Performance**: Saucony's revenue growth in Q2 2025 exceeded 20%, with H1 2025 growth over 30%. The brand is expected to regain high growth through strategic adjustments [4][8]. - **Financial Projections**: The company is expected to achieve net profits of 1.41 billion, 1.60 billion, and 1.82 billion yuan from 2025 to 2027, with corresponding P/E ratios of 10, 8, and 7 times [10].

Investment Rating - The report maintains a "Buy" rating for the company [2][25] Core Insights - The main brand of the company shows steady growth, while the outdoor brand is experiencing strong momentum. The children's segment is growing faster than the adult segment, with footwear outperforming apparel. The newly introduced brand, Saucony, has seen over 20% growth in Q2 2025 and over 30% growth in the first half of the year [6][5] - The company is focusing on optimizing its multi-brand matrix and has initiated a Direct-to-Consumer (DTC) transformation, which is expected to enhance market responsiveness and efficiency [6][5] - The financial forecast indicates a projected net profit of 1.37 billion RMB for FY2025, with a corresponding PE ratio of 10 [6][16] Financial Data and Profit Forecast - Revenue projections for FY2023 to FY2027 are as follows: - FY2023: 14.346 billion RMB - FY2024: 13.577 billion RMB - FY2025E: 14.636 billion RMB - FY2026E: 15.759 billion RMB - FY2027E: 16.911 billion RMB - Net profit projections for the same period are: - FY2023: 1.034 billion RMB - FY2024: 1.303 billion RMB - FY2025E: 1.368 billion RMB - FY2026E: 1.496 billion RMB - FY2027E: 1.633 billion RMB - The gross margin is expected to improve from 42% in FY2023 to 45% in FY2027 [6][16] Retail Performance - The retail performance for 2023 shows a year-on-year growth of approximately 20% in Q1, high double digits in Q2, and over 30% in Q4, with a consistent discount level of 7-7.5 [15][6] - The inventory turnover ratio is healthy, with a stock-to-sales ratio of about 4 to 4.5 months at the end of Q2 2025 [6][15] Brand Strategy - The company is focusing on its core running products, which have shown double-digit growth, while casual products have experienced some fluctuations. The newly launched products have received positive market feedback [6][5] - The DTC transformation is expected to enhance the company's ability to adapt to market changes and consumer demands, with plans to open larger stores and new store formats [6][5]

Core Viewpoint - The company shows steady growth in its main brand and significant growth in the Saucony brand, with a positive long-term outlook driven by strategic initiatives and product expansion [1][2] Group 1: Main Brand Performance - In Q2 2025, the main brand's total revenue showed low single-digit year-on-year growth, maintaining a stable performance overall [1] - The e-commerce segment is expected to lead in growth, while the children's segment is anticipated to outperform the adult segment [1] - The running category continues to be a strong growth driver, with expectations of double-digit year-on-year growth in the first half of the year [1] Group 2: Saucony Brand Performance - Saucony's revenue grew over 20% year-on-year in Q2 2025, although the growth rate slowed compared to Q1 2025 [2] - The company is optimizing its channels and upgrading products, focusing on elite runners and professional product areas, which is expected to drive 30%-40% revenue growth for the year [2] - The expansion of new stores in lower-tier cities is expected to enhance store efficiency and contribute to revenue growth [2] Group 3: Financial Forecast and Valuation - The company maintains its net profit forecasts for 2025-2027 at 1.37 billion, 1.53 billion, and 1.71 billion yuan respectively [2] - The target price is set at 6.58 HKD, with a revised PE ratio of 12.2x for 2025, reflecting ongoing uncertainties in consumer recovery [2]