Investment Rating - The investment rating for the company is "Buy" and is maintained [6] Core Views - The company achieved a revenue of 6.84 billion HKD in H1 2025, representing a year-on-year increase of 7.1%. The net profit attributable to shareholders was 0.91 billion HKD, up 21.5% year-on-year. Excluding the loss of 0.11 billion HKD from the divested KP, the comparable net profit increased by 6% year-on-year. The interim dividend payout ratio remained stable at 50% compared to the previous year [2][4] - The main brand showed steady growth, with a year-on-year increase of 4.5% to 6.05 billion HKD, while the professional sports segment grew by 32.5% to 0.79 billion HKD. The strong growth in the e-commerce channel, which accounted for over 30% of the main brand's revenue, contributed to this performance [6] - The gross margin slightly decreased, with the main brand's gross margin down by 0.3 percentage points to 43.6%. The operating profit margin (OPM) for the main brand decreased by 0.6 percentage points to 20%. However, the professional sports segment saw a significant improvement in OPM, which increased by 6.1 percentage points to 10% despite a 1.6 percentage point drop in gross margin to 55.2% [6] - Looking ahead, the main brand is expected to maintain steady performance in a competitive environment, while the professional sports brand, Saucony, is anticipated to become a significant growth driver for the group. The projected net profits for 2025-2027 are 1.41 billion HKD, 1.58 billion HKD, and 1.75 billion HKD, respectively, with corresponding price-to-earnings ratios of 12, 10, and 9 times [6]

Core Viewpoint - The company reported a solid performance in the first half of 2025, with revenue and net profit growth exceeding expectations, primarily due to the divestment of loss-making fashion sports brands [1][4]. Financial Performance - Revenue increased by 7.1% year-on-year to 6.84 billion yuan, while net profit rose by 21.5% to 910 million yuan, significantly outpacing revenue growth [1]. - The company plans to distribute an interim dividend of 0.18 HKD per share, maintaining a payout ratio of 50% [1]. Brand Performance - The main brand achieved a revenue of 6.05 billion yuan, a 4.5% increase, maintaining a leading position in marathon apparel with the highest wearing rate in major events [2]. - The professional sports segment saw a robust growth of 32.5% to 790 million yuan, driven by strong offline retail performance and successful marketing of new products [2]. Channel Analysis - Online sales growth outpaced offline, with e-commerce contributing over 30% to the main brand's revenue [3]. - The company is progressing well in its Direct-to-Consumer (DTC) transformation, with plans to convert approximately 500 franchise stores to self-operated ones [3]. Operational Efficiency - Inventory turnover days decreased by 9 days to 91 days, and net cash increased by 94.3% to 1.91 billion yuan, indicating a strong balance sheet [4]. - The company maintains its full-year guidance, confident in achieving over 10% growth in both revenue and net profit [4]. Strategic Focus - The company is optimizing its multi-brand matrix by divesting from fashion sports brands and focusing on core running business, which is expected to enhance competitive positioning [4].

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The company has shown steady revenue growth, with a 7.1% year-on-year increase in revenue to 6.84 billion RMB in the first half of 2025, and a 21.5% increase in net profit to 910 million RMB, driven by the divestiture of loss-making brands [6][8] - The main brand continues to grow steadily, maintaining the top position in marathon apparel, with a revenue of 6.05 billion RMB, a 4.5% increase year-on-year [6] - The company is focusing on optimizing its multi-brand matrix and has initiated a Direct-to-Consumer (DTC) transformation to enhance market responsiveness and efficiency [6] Financial Data and Profit Forecast - Revenue projections for FY2023 to FY2027 are as follows: 143 billion RMB (2023), 136 billion RMB (2024), 143 billion RMB (2025E), 151 billion RMB (2026E), and 161 billion RMB (2027E) [5] - Net profit forecasts are: 10.3 billion RMB (2023), 12.4 billion RMB (2024), 13.7 billion RMB (2025E), 14.9 billion RMB (2026E), and 16.0 billion RMB (2027E) [5] - The company’s gross margin is projected to stabilize around 45% from 2025 to 2027, with a PE ratio of 11 for 2025 [6][5]

Core Viewpoint - The company has experienced another results miss in 1H25, leading to a more conservative outlook on sales growth and margins despite maintaining FY25E guidance [1][2] Sales Growth and Guidance - The management has reiterated a retail sales growth target of 10% for FY25E, with new retail-related sales growth revised up to 20% from 15% [1] - Store opening targets have been adjusted to a more conservative range of 50 to 100 stores, down from 100 stores [1] - The adjustments are attributed to strong online sales but weak offline performance, consistent with trends in the sportswear and apparel sector in China for FY25E [1] Profitability and Margin Outlook - Despite confidence in achieving 10% sales growth, the company has adopted a more cautious stance on profitability due to several factors [2] - The increase in operating expenses, particularly in staff costs and e-commerce-related expenses, is greater than expected [2] - There are concerns regarding product mix and retail discounts due to inventory buildup, as well as lower-than-expected operating leverage amid a weaker macro environment [2] Valuation and Investment Recommendation - The investment recommendation remains a BUY, but the target price has been trimmed to HK$ 4.42, based on a 10x FY25E P/E [3] - Net profit forecasts for FY25E, FY26E, and FY27E have been revised down by 11% each to account for earnings misses and slower sales growth [3] - The stock is currently trading at 8x FY25E P/E, with an attractive dividend yield of 9% for FY25E supporting the BUY recommendation [3]

Core Insights - Midea Group is undergoing significant organizational changes, focusing on integrating its operations in the refrigerator, washing machine, and kitchen sectors, reflecting a shift from wholesale to retail thinking [1][2][3] - The company has experienced multiple rounds of layoffs, with a notable reduction in staff across various departments, indicating a broader trend of optimization within the organization [1][2][6] - The transition to a Direct-to-Consumer (DTC) model is central to Midea's strategy, aiming to enhance retail capabilities and streamline operations [2][3][7] Organizational Changes - Midea's operational centers in cities like Foshan, Ningbo, and Tianjin have seen significant staff reductions and even closures, with some centers merging into others [2][4] - The restructuring involves a shift in focus towards high-margin products, with retail sales accounting for 50% of the performance metrics for regional managers [2][6] - The adjustments are part of a broader strategy to simplify operations and enhance growth, as emphasized by Midea's leadership [6][7] Impact on Distributors and Employees - Regional distributors have expressed concerns over reduced support and increased operational costs, making it harder for them to compete [4][5] - The changes may lead to a consolidation of core retail points, potentially sidelining traditional distributors who cannot adapt to the new retail-focused model [5][7] - Employees face challenges in integrating diverse teams and maintaining professional standards amid the restructuring [5][6] Financial Performance - Midea reported a revenue of 407.15 billion yuan for 2024, with a year-on-year growth of 9.44%, and a net profit of 38.54 billion yuan, up 14.29% [6] - However, when excluding non-recurring gains, Midea's profit growth of 8.39% lags behind competitors like Haier and Gree, indicating concerns about core business profitability [6][7]

Core Viewpoint - Midea Group is undergoing significant organizational changes, focusing on integrating its operations in the refrigerator, washing machine, and kitchen appliance sectors, reflecting a shift from wholesale to retail thinking [2][3][4] Group 1: Organizational Changes - Midea has announced an organizational restructuring aimed at consolidating its operational centers and optimizing its accountability mechanisms [2][3] - This restructuring is part of a broader strategy to transition towards a Direct-to-Consumer (DTC) model, which has been the main theme in Midea's approach to the Chinese market over the past two years [2][3] - The adjustments have led to significant layoffs across various departments, with older employees being the primary targets of these reductions [2][3] Group 2: Impact on Distributors and Employees - Regional distributors have expressed concerns that the DTC transformation is reducing the support they receive, making it increasingly difficult for them to operate profitably [5][6] - The restructuring may lead to a reduction in the number of operational distributors, pushing them to adapt to a retail model or face potential exit from the market [5][6] - Employees are facing challenges in integrating different teams and maintaining professional standards amid the organizational changes [5][6] Group 3: Financial Performance and Concerns - Midea's revenue for 2024 is projected at 407.15 billion yuan, with a year-on-year growth of 9.44%, and a net profit of 38.54 billion yuan, reflecting a 14.29% increase [8] - However, when excluding non-recurring gains, Midea's net profit growth of 8.39% lags behind competitors like Haier and Gree, indicating concerns about the core business's profitability [8][9] - The management is focused on simplifying operations to drive growth, as highlighted by the chairman's emphasis on self-revolution and operational efficiency [6][8]

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 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 - Xtep's FY25E guidance remains intact despite a slight miss in 2Q25, with expectations for sales growth to sustain into 2H25E due to low inventory levels and undemanding valuation, maintaining a BUY rating with a target price of HK$ 7.20 based on 14x FY25E P/E [1][4] Sales Performance - Retail sales growth for Xtep slowed in 2Q25 but remained on track for 1H25, with management maintaining FY25E guidance of positive group-level sales growth and 10%+ net profit growth [2][4] - Xtep's core brand is expected to achieve FY25E guidance, driven by robust growth in the running segment, which saw a 30%+ YoY increase in 1H25E [3][4] Inventory and Discounts - Xtep's inventory to sales ratio was about 4 to 4.5 months in 2Q25, indicating a healthy inventory level, while retail discounts remained stable at 25% to 30% off [5][4] - Management expects inventory and discount conditions to remain stable for FY25E, with the inventory to sales ratio projected to stay around 4 to 4.5 months [5][4] E-commerce and Offline Growth - E-commerce sales growth was around 10% in 2Q25, with offline sales growth lagging, but retail sales growth improved in July 2025, driven by increased summer demand and promotional activities [6][4] - Saucony brand is experiencing a re-acceleration in growth supported by offline SSSG and new store openings, despite a temporary slowdown in e-commerce [6][4] Direct-to-Consumer (DTC) Strategy - The DTC transformation is ongoing, with plans to repurchase 100 to 200 stores in 4Q25E and 300 to 400 stores in FY26E, funded by internal cash flow [7][8] - The company is also set to upgrade its management system for products and members to enhance efficiency under the DTC model [8]

Core Viewpoint - CICC maintains the EPS forecast for Xtep International at 0.50/0.55 HKD for 2025/26, with a target price of 6.90 HKD, indicating a 29% upside potential from the current stock price [1] Group 1: Xtep Brand Performance - In Q2 2025, Xtep's main brand retail revenue grew by a low single-digit percentage year-on-year, driven by professional categories [2] - The running and outdoor categories led overall growth, with running sales in the first half of 2025 increasing by double digits [2] - Retail discounts for the main brand remained stable at 70-75%, with channel inventory turnover at 4-4.5 months by the end of June [2] Group 2: Saucony and Merrell Growth - Saucony brand saw retail revenue growth of over 20% year-on-year in Q2 2025, focusing on high-end urban consumers and running categories [3] - The brand plans to accelerate offline channel expansion in the second half of 2025, targeting a 30-40% year-on-year revenue growth for the full year [3] - Merrell brand experienced over 50% retail revenue growth in Q2 2025, with a focus on online channel development [3] Group 3: Channel Transformation - The company plans to gradually reclaim 100-200 Xtep main brand stores for DTC transformation in Q4 2025, with a capital expenditure of approximately 400 million HKD [4] - The number of stores involved in the DTC transformation is relatively low, and the management expects limited impact on overall revenue for 2025-2026 [4] - Future plans include accelerating the layout of Xtep main brand in shopping centers and outlet channels, which currently account for about 30% [4]