Summary of Xtep International Holdings Conference Call Company Overview - **Company**: Xtep International Holdings (1368.HK) - **Industry**: Consumer & Leisure Key Points Financial Performance and Guidance - The company is on track to meet its full-year guidance for FY25, with positive growth expected for the Xtep brand and over 30% growth for Saucony, alongside more than 10% year-over-year net profit growth [1][2] - Saucony has experienced easing impacts from product adjustments in the e-commerce channel and solid growth in offline sales [2] Brand Strategy and Outlook - Management anticipates relatively stable operations for the Xtep brand in 2026, considering the current macroeconomic and competitive environment [2] - Continuous investments in R&D and product innovation are planned, while maintaining stable pricing [2] - The company aims to double Saucony's revenue size by 2027, implying a compound annual growth rate (CAGR) of over 20% from 2024 to 2027 [2] Margin and Inventory Management - A slight year-over-year operating profit margin (OPM) expansion is expected in 2025, reflecting brand investments weighted towards the second half of the year [2] - Healthy inventory levels at both brands suggest less discounting pressure compared to the industry [2] Industry Trends and Competitive Landscape - The company has observed intensifying discounting within the industry in Q4, but both Xtep and Saucony are in a healthier position due to clean inventory levels [2] - Competition in the running segment is acknowledged, but Xtep maintains good brand recognition and competitive pricing [2] - Management believes that significant technological breakthroughs are necessary to meaningfully boost demand in the running segment [2] Risks and Valuation - The price target for Xtep is set at HK$6.80, representing a 27.1% upside from the current price of HK$5.35 [7] - Key downside risks include slower industry growth due to weakening consumption and potential execution challenges in discount control and inventory management [7] Financial Projections - Market capitalization is reported at HK$14.8 billion (approximately $1.9 billion) [7] - Revenue projections for the upcoming years are as follows: - 2024: Rmb 13,577.2 million - 2025: Rmb 14,396.1 million - 2026: Rmb 15,728.0 million - 2027: Rmb 16,690.1 million [7] Conclusion - The overall tone from management is constructive regarding future growth, particularly for the Saucony brand, while maintaining a cautious outlook for the Xtep brand in the near term [1][2]

Investment Rating - The report indicates that mutual funds ended 1Q25 approximately 175 basis points overweight in the Financials sector, although this is a decrease of about 45 basis points quarter-over-quarter [2]. Core Insights - The reduction in overweight positioning may reflect the impact of tariffs on the broader economic outlook affecting financials and a pushback in capital markets activity [2]. - The Insurance subsector remains an overweight that grew over 1Q25, while Capital Markets exposure was reduced during the same period [2]. - Exposure to Insurance increased quarter-over-quarter by 7 basis points, while exposure to Capital Markets decreased by 14 basis points [2]. - The report suggests that while this positioning may not directly reflect the Australian market, it serves as a useful proxy for investor sentiment towards the insurance and diversified financials sector, particularly in the US market [2]. Summary by Sections - **Mutual Fund Positioning**: Mutual funds had the most overweight exposure to Insurance, which grew over 1Q25, while Capital Markets exposure was reduced [4][8]. - **Sector Analysis**: The report notes that investors remain favorably positioned towards insurers, which appears to be more General Insurance (GI) weighted, relevant to companies like SUN, IAG, QBE, SDF, and AUB within the coverage [2]. - **Market Trends**: The data reflects positioning as of the end of March 2025, with the possibility of changes since then [2].