Group 1 - The main brand of the company, Xtep, showed steady growth in Q3, with retail sales experiencing low single-digit growth year-on-year, which is a slowdown compared to the same period last year [1] - The discount level for Xtep was between 70% to 75%, remaining stable compared to the previous quarter but slightly deepened year-on-year [1] - The inventory turnover ratio is estimated to be between 4 to 4.5 months, indicating a healthy inventory management [1] Group 2 - Saucony maintained a rapid growth rate in Q3, with sales increasing by over 20% year-on-year, although the growth rate has slowed compared to Q1 and Q3 of the previous year [2] - The sales growth in Q3 is attributed to the overall consumer environment and the company's strategic adjustment in e-commerce product structure and discount control since Q2 [2] - The company expects to achieve over 30% sales growth for the entire year of 2025, with a potential for revenue to double in the next three years [2] Group 3 - The company maintains its earnings forecast, projecting earnings per share of 0.49, 0.56, and 0.62 RMB for 2025-2027 [3] - Based on comparable companies, a 15x PE valuation for 2025 is applied, resulting in a target price of 8.01 HKD [3] - The company maintains a "buy" rating based on its growth prospects [3]

Investment Rating - The report maintains an "Outperform" rating for Xtep International [2][5] Core Views - Xtep International's revenue performance in 2Q25 met expectations, with all brands maintaining their annual performance guidance [3][10] - The main brand achieved low-single-digit growth in retail revenue year-over-year, with online sales outpacing offline sales [3][10] - The company is focusing on direct-to-consumer (DTC) strategies, aiming to recover around 500 stores by 2026 [3][10] Financial Performance Summary - Revenue projections for Xtep International are RMB 14.41 billion, RMB 15.43 billion, and RMB 16.52 billion for 2025, 2026, and 2027, respectively, reflecting year-over-year growth of 6.2%, 7.1%, and 7.0% [5][12] - Net profit attributable to the parent company is expected to be RMB 1.38 billion, RMB 1.51 billion, and RMB 1.66 billion for the same years, with growth rates of 11.3%, 9.7%, and 9.7% [5][12] - The projected P/E ratios for 2025, 2026, and 2027 are 10.0X, 9.1X, and 8.3X, respectively [5][12] Brand Performance Insights - Saucony and Merrell brands are experiencing strong growth, with Saucony achieving over 30% year-over-year revenue growth in 1H25 [4][11] - Saucony aims for a 30%-40% annual revenue growth and plans to double its revenue in the next three years [4][11] - Merrell's revenue in 2Q25 grew over 50% year-over-year, driven primarily by e-commerce [4][11]