Group 1: Tariff Impact and Cost Management - The increase in U.S. import tariffs will raise the cost for customers selling to the U.S. market, while non-U.S. sales remain unaffected. Historically, tariffs have been borne by brand customers (importers) and ultimately passed on to consumers [2] - The company emphasizes cost control and will closely monitor tariff policy changes, maintaining communication with customers and suppliers to explore cost optimization strategies across various aspects of the supply chain [2] Group 2: Factory Operations and Profitability - The company's first factory in Indonesia has achieved its phase assessment goals and is expected to be profitable by the end of 2025. Indonesia offers advantages in labor supply and costs compared to Vietnam, and the management team is confident in the factory's future profitability [2] - The production ramp-up for new Adidas factories in Vietnam, Indonesia, and China is proceeding as planned, with no significant anomalies reported in order fulfillment [3] Group 3: Average Selling Price and Customer Strategy - Changes in average selling price are influenced by customer and product mix variations. The company employs a diversified brand strategy, continuously introducing new clients while optimizing its customer and product structure, which affects average selling price fluctuations [4] - The company plans to maintain its strategy of adding 1-2 new clients annually, with significant revenue contributions from new clients observed in the first half of the year [5] Group 4: Dividend Policy and Shareholder Returns - The company has a strong focus on shareholder returns, with cash dividends in 2021 accounting for approximately 89% of net profit, and 2022 and 2023 dividends at 43% and 44% of net profit, respectively. The 2024 dividend is projected to be around 70% of net profit, with a mid-year dividend introduced in 2025 [6] - As of September 2025, the company has accumulated approximately 9 billion RMB in undistributed profits, indicating strong cash flow and a commitment to maximizing dividends while balancing capital expenditures and operational needs [6]

Group 1: Tariff Impact and Cost Management - The increase in U.S. import tariffs will raise the cost for customers selling to the U.S. market, while non-U.S. sales remain unaffected [2] - Historically, tariffs have been borne by brand customers (importers), ultimately passed on to consumers; the entire supply chain, including brands, manufacturers, and material suppliers, will discuss cost optimization strategies [2] - The company is closely monitoring tariff policy changes and maintaining communication with customers and suppliers regarding cost control [2] Group 2: Gross Margin and Production Capacity - The company's gross margin has declined compared to the previous year due to new factories ramping up production; however, there was an improvement in Q3 2025 compared to Q2 2025 [2][6] - Three factories achieved profitability in Q3 2025, including the first factory in Indonesia, indicating progress in operational efficiency and cost reduction measures [2][6] - Future production capacity will expand, with four new shoe production factories planned for 2024; three factories have already met internal profitability targets by September 2025 [6] Group 3: Pricing Strategy and Revenue - Average selling price fluctuations are influenced by customer and product mix; changes in brand representation and product categories can significantly impact average prices [5] - The company employs a diversified brand strategy, continuously introducing new clients while optimizing customer and product structures, affecting average selling prices [5] Group 4: Dividend Policy and Financial Health - The company has a strong focus on shareholder returns, with cash dividends in 2021 accounting for approximately 89% of net profit; 2022 and 2023 saw dividend ratios of 43% and 44%, respectively [7][8] - For 2024, the dividend payout ratio is projected to be around 70%, with a mid-year dividend introduced in 2025, maintaining a strong cash flow and high retained earnings of approximately 9 billion RMB as of September 2025 [8]

Investment Rating - The investment rating for the company is "Buy" [1] Core Insights - The company's performance in Q3 2025 showed significant improvement due to enhanced production and sales of refined products, alongside cost optimization [4] - The average Brent crude oil price for the first three quarters of 2025 was $70 per barrel, a 15% year-on-year decline, while the average price for Q3 was $68 per barrel, reflecting a 2% quarter-on-quarter increase [4] - The company’s average production and sales rate for refined products in Q3 was 89%, a 24 percentage point increase quarter-on-quarter [4] - The company’s capital expenditure has been gradually winding down, with cash payments for fixed assets and other long-term assets amounting to 6.3 billion yuan in the first three quarters of 2025, a 63% year-on-year decrease [4] - The company is expected to benefit from its cost control advantages and industry consolidation, maintaining a high earnings elasticity [5] Financial Performance Summary - For the first three quarters of 2025, the company achieved total revenue of 157.47 billion yuan, a year-on-year decrease of 11.46%, and a net profit attributable to shareholders of 5.02 billion yuan, a year-on-year decrease of 1.61% [1] - In Q3 2025, the company reported total revenue of 53.52 billion yuan, a year-on-year decrease of 17.99% but a quarter-on-quarter increase of 14.13% [2] - The net profit attributable to shareholders in Q3 was 1.97 billion yuan, a year-on-year increase of 81.47% and a quarter-on-quarter increase of 97.41% [2] - The company’s projected net profits for 2025-2027 are 7.07 billion, 8.86 billion, and 9.92 billion yuan, with year-on-year growth rates of 0.3%, 25.4%, and 12.0% respectively [5]