Core Insights - The company reported Q3 2025 results with revenue and profit below expectations, but a turning point in profit margins was observed, which was better than anticipated [1] - Revenue for the first three quarters of 2025 reached 18.68 billion yuan, a year-on-year increase of 6.7%, while net profit attributable to shareholders was 2.44 billion yuan, a year-on-year decrease of 14.3% [1] - The gross margin was 22.0%, down 5.85 percentage points year-on-year, and the net profit margin was 13.0%, down 3.2 percentage points year-on-year [1] Revenue and Profit Analysis - For Q1, Q2, and Q3 of 2025, revenues were 5.35 billion, 7.31 billion, and 6.02 billion yuan respectively, showing year-on-year growth of 12.3%, 9.0%, and a slight decline of 0.3% [1] - Net profits for the same quarters were 760 million, 910 million, and 760 million yuan, with year-on-year changes of -3.2%, -16.7%, and -20.7% respectively [1] - The decline in profit was attributed to new factories ramping up efficiency, capacity adjustments, and foreign exchange losses in Q3 2025 [1] Sales and Pricing Dynamics - The company sold 168 million pairs of shoes in the first three quarters of 2025, a year-on-year increase of 3.0%, with quarterly sales of 49 million, 65 million, and 53 million pairs respectively [2] - The average selling price (ASP) in RMB for the first three quarters was 111 yuan, reflecting a year-on-year increase of 3.5%, with quarterly ASPs of 108, 112, and 112.6 yuan per pair [2] - The increase in ASP was driven by a higher proportion of high-priced customers and new customer orders with generally higher prices [2] Profit Margin Recovery - The recovery in profit margins in Q3 2025 is a significant signal, with a gross margin of 22.2%, up 1.1 percentage points from the previous quarter, and a net profit margin of 12.7%, up 0.3 percentage points [3] - The company has focused on improving the operations of new factories and implementing cost reduction and efficiency enhancement measures [3] - Three out of four new shoe factories launched in 2024 have achieved interim profitability targets, indicating successful ramp-up of production [3] Expansion and Future Outlook - The company is actively expanding production capacity in anticipation of order recovery, with new factories in Vietnam and Indonesia launched in 2024 and additional factories expected to come online in 2025 [3] - In the first half of 2025, the new factories in Vietnam shipped 3.73 million pairs, the factory in Indonesia shipped 1.99 million pairs, and the new factory in China shipped 670,000 pairs [3] - The company is well-positioned to benefit from the recovery of the sports supply chain orders with ongoing capacity expansion [3] Investment Rating - The company is recognized as a leading manufacturer of sports shoes, with a competitive edge in manufacturing services, and is expected to turn challenges into opportunities amid global tariff policy changes [4] - The profit forecast for 2025-2027 has been slightly adjusted, with expected net profits of 3.45 billion, 4.0 billion, and 4.62 billion yuan respectively, corresponding to PE ratios of 19, 16, and 14 times [4] - The investment rating remains at "Buy" based on the recovery of orders and profit margins [4]

Investment Rating - The investment rating for the company is "Buy" and is maintained [6]. Core Views - The company reported a significant narrowing of profit decline and notable improvement in gross margin in its 2025 mid-year report. For H1 2025, revenue was 2.37 billion yuan, a year-on-year decrease of 15.4%, while net profit attributable to shareholders was 250 million yuan, down 49% year-on-year. In Q2 alone, revenue was 1.42 billion yuan, down 16.7% year-on-year, and net profit was 220 million yuan, down 29% year-on-year, with a reduced decline compared to Q1 [2][4]. Summary by Sections Revenue and Profitability - In H1 2025, the company's revenue was 2.37 billion yuan, reflecting a 15.4% year-on-year decline. The net profit attributable to shareholders was 250 million yuan, down 49% year-on-year. In Q2, revenue was 1.42 billion yuan, a 16.7% year-on-year decline, and net profit was 220 million yuan, down 29% year-on-year, with a reduced decline from Q1's 84% [2][4]. Brand Performance - The main brand faced temporary pressure, while the sub-brand Aikeman showed impressive growth. In H1 2025, revenues for various brands were as follows: Winona (1.95 billion yuan, -18.4%), Winona Baby (110 million yuan, +8.6%), Aikeman (50 million yuan, +93.9%), Jirui (210 million yuan, -11.5%), and Pomei (20 million yuan, -4.7%) [10]. Gross Margin and Expenses - The gross margin improved by 3.4 percentage points to 76% in H1 2025, attributed to stable pricing strategies and reduced promotional expenses. The expense ratios for sales, management, R&D, and finance increased by 8.6, 1.9, 0.8, and 0.4 percentage points respectively, leading to a total expense ratio increase of 11.8 percentage points [10]. Future Outlook - The company is expected to see a recovery in profit margins driven by stable pricing of core products and continued growth in Aikeman. The projected EPS for 2025-2027 is 1.18, 1.55, and 1.67 yuan respectively, supporting the "Buy" rating [10].

Investment Rating - The report maintains a "Buy" rating for the company [2][7][21] Core Insights - The company announced a mid-term high dividend plan, proposing a cash dividend of 1 yuan per share, totaling 1.167 billion yuan, with a payout ratio of 70% for the first half of 2025 [7] - The company's revenue for the first half of 2025 reached 12.66 billion yuan, a year-on-year increase of 10.4%, while the net profit attributable to shareholders was 1.66 billion yuan, a year-on-year decrease of 11.4% [7][9] - The report highlights that the company is facing temporary profit margin pressure due to the efficiency ramp-up of new factories and increased costs from weak consumer demand and geopolitical tensions [7] Financial Data and Profit Forecast - Total revenue projections for 2025 are estimated at 27.011 billion yuan, with a year-on-year growth rate of 12.5% [6] - The net profit attributable to shareholders for 2025 is forecasted at 3.851 billion yuan, reflecting a slight increase of 0.3% year-on-year [6] - The report anticipates a gradual recovery in profit margins as new factories reach operational efficiency, with net profit margins expected to rebound in the coming years [7] Market Position and Strategy - The company is recognized as a leading manufacturer of sports shoes, leveraging its competitive manufacturing services to navigate global tariff policy challenges [7] - The company is actively expanding production capacity in multiple locations, including Vietnam and Indonesia, to meet future demand and diversify its supply chain [7]