Investment Rating - The report maintains a "Buy" rating for the company, with a current price of 15.99 HKD and a target value of 20.53 HKD [4]. Core Insights - The company is experiencing a resilient growth in its manufacturing business, while its retail segment is currently under pressure. The company continues to provide high dividends, with a total dividend of 1.3 HKD per share for the year, resulting in a payout ratio of 70% [8]. - For FY25, the company reported a revenue of 8.03 billion USD, a decrease of 1.8% year-on-year, and a net profit of 381 million USD, down 2.9% year-on-year [8]. - The manufacturing segment's revenue reached 5.65 billion USD, showing a slight increase of 0.5% year-on-year, despite a 1.2% decline in shipment volume. The average selling price (ASP) increased by 3.7% due to an optimized product mix [8]. - The retail business faced challenges, with revenue declining by 7.0% to 2.38 billion USD. However, online sales showed resilience, with Douyin sales increasing by over 70% [8]. Financial Projections - Revenue and profit forecasts for FY26 to FY28 are as follows: - Revenue: 8.35 billion USD (2026E), 8.68 billion USD (2027E), 8.97 billion USD (2028E) [2]. - Net profit: 388 million USD (2026E), 422 million USD (2027E), 449 million USD (2028E) [2]. - Earnings per share (EPS) is projected to be 0.24 USD (2026E), 0.26 USD (2027E), and 0.28 USD (2028E) [2]. - The report indicates a steady EBITDA forecast, with values of 857 million USD (2026E), 873 million USD (2027E), and 904 million USD (2028E) [2]. Business Segment Performance - Manufacturing business: - Revenue growth of 0.5% year-on-year, with a capacity utilization rate maintained at 93% [8]. - The gross margin for the manufacturing segment decreased by 1.7 percentage points due to fluctuating orders and rising labor costs [8]. - Retail business: - Revenue decline of 7.0% year-on-year, with a gross margin of 33.5%, down 0.7 percentage points [8]. - The number of direct-operated stores decreased by 4.0% to 3,310, with same-store sales declining between 10% to 20% [8]. Valuation Metrics - The report provides valuation metrics including: - Price-to-earnings (P/E) ratio projected to decrease from 9.1 (2024A) to 7.3 (2028E) [2]. - Return on equity (ROE) expected to slightly decline from 8.8% (2024A) to 9.0% (2028E) [2]. - EV/EBITDA ratio projected to decrease from 3.5 (2024A) to 3.3 (2028E) [2].

Investment Rating - The report assigns a "Buy" rating to the company with a current price of HKD 15.97 and a fair value of HKD 19.99 [4]. Core Insights - The company is the world's largest sports shoe manufacturer, driven by both manufacturing and retail operations, with a potential performance turnaround expected [1][9]. - The manufacturing business is expected to see revenue and profitability improvements due to various factors, including a recovery in order placements from brand clients and a favorable market environment in 2026 [9]. - The retail business is actively pursuing multi-channel and refined operations, which are anticipated to lead to a performance rebound [9]. Summary by Sections Company Overview - The company is the largest sports shoe manufacturer globally, with a market share based on annual production [14]. - It has a significant workforce of 285,500 employees, with 265,500 in manufacturing and 20,700 in retail [14]. - The company achieved a revenue of USD 8.182 billion in FY2024, reflecting a year-on-year growth of 3.7% [2][14]. Manufacturing Business - The manufacturing segment contributed 68.7% of total revenue and 85.2% of profit in FY2024, with revenues of USD 5.621 billion, up 11.1% year-on-year [17]. - The average selling price (ASP) for shoes was USD 20.25, down 5.1% year-on-year due to a higher concentration of high-end products in previous years [17]. - The company has a diversified production base across several countries, with significant output from Indonesia, Vietnam, and China [15][17]. Retail Business - The retail segment, operated through the subsidiary BaoSheng International, generated USD 2.561 billion in FY2024, a decrease of 9.5% year-on-year [24]. - The company is optimizing its store network, reducing the number of direct-operated stores to 3,448 while improving average store size [24]. - The retail business is expected to benefit from improved discount rates and effective inventory management [9]. Financial Projections - The company forecasts earnings per share (EPS) of USD 0.23, USD 0.26, and USD 0.28 for FY2025, FY2026, and FY2027, respectively [9]. - The report estimates a fair value of HKD 19.99 per share based on a sum-of-the-parts valuation method [9]. Market Performance - The company's stock price has shown significant volatility, with a historical increase of 2044.24% since its listing in 1992, although it has faced challenges in recent years due to external market conditions [46]. - The company’s price-to-earnings (P/E) ratio has fluctuated between 7 and 18 times, indicating a relatively low valuation compared to historical levels [46].