Investment Rating - The report maintains a BUY rating for Xtep, with a target price of HK$7.32, reflecting a potential upside of 46.5% from the current price of HK$5.00 [2][4]. Core Views - Xtep is expected to mildly outperform the sportswear industry in 2H24E due to successful new product launches, robust e-commerce sales growth, and limited operating deleverage from its wholesale business model [2][7]. - The company anticipates retail sales growth of 10%+ for FY24E, with adjustments to the listed company level sales growth projected at high single digits to low teens due to the sale of K&P [2][8]. - The strong performance of Saucony, with retail sales growth exceeding 50% in 1H24, is expected to continue driving net profit margins above expectations [2][8]. Financial Summary - Revenue for FY24E is projected at RMB 15,322 million, with a year-on-year growth of 6.8% [3][12]. - Operating profit is estimated at RMB 1,920 million, with a net profit of RMB 1,266 million, reflecting a net profit margin of 8.3% [3][12]. - The earnings per share (EPS) for FY24E is projected at RMB 0.463, with a year-on-year growth of 18.6% [3][12]. Sales and Growth Drivers - Successful new product launches, particularly the 360X running shoes, have significantly contributed to sales momentum, with over 800,000 pairs sold since launch [2][7]. - E-commerce sales have shown robust growth, particularly on platforms like Douyin, with online sales increasing by more than 25% in 2Q24 [2][7]. - The company has improved its inventory to sales ratio, reducing it to four months, which is the lowest level since 2Q22, leading to improved retail discounts [2][7]. Margin Outlook - Gross profit margin is expected to remain stable at around 42.3% for FY24E, while operating profit margin is projected to improve due to reduced losses from the sale of K&P and a decrease in advertising and promotion expenses [2][8]. - The report anticipates a net profit margin of 8.3% for FY24E, with potential for further improvement in subsequent years [3][12].
特步国际：Cautiously optimistic after a resilient 2Q24