Group 1: Xtep International Performance - Xtep's main brand retail revenue in 2Q25 achieved low single-digit year-on-year growth, with overall revenue growth in 1H25 also in single digits [1] - Offline sales remained stable with slight growth, while online sales outpaced offline; children's products grew faster than adult products, and footwear outperformed apparel [1] - Functional products accounted for over 60% of the main brand's offerings, with running and outdoor categories leading the growth [1] Group 2: Market Trends and Strategies - The sales performance in April and May was better than in June, attributed to the May Day holiday and the earlier start of the 618 shopping festival compared to the previous year [1] - The company maintained a discount rate of 70-75%, with expectations for the annual discount to remain at current levels due to healthy inventory [1] - The DTC (Direct-to-Consumer) strategy is set to launch in 2H25, with plans to recover approximately 500 stores, representing about 8% of the total store count [1] Group 3: Competitor Analysis - Saucony's revenue in 1H25 grew over 30%, with 1Q growth exceeding 40% and 2Q growth over 20%, maintaining a target of 30%-40% growth for the year [2] - Saucony focuses on high-end positioning and brand upgrades, tightening online discounts and reducing low-priced product offerings [2] - The brand aims to enhance its presence in high-tier cities with new store openings and plans to increase investment in trail running products [2] Group 4: Financial Projections - Xtep is projected to achieve revenues of 144.14 billion, 154.32 billion, and 165.17 billion RMB for 2025-2027, with year-on-year growth rates of 6.2%, 7.1%, and 7.0% respectively [3] - The expected net profit for Xtep for 2025-2027 is 13.8 billion, 15.1 billion, and 16.6 billion RMB, with growth rates of 11.3%, 9.7%, and 9.7% respectively [3] - The company maintains a valuation of 11.5X PE for 2025, with a target price of 6.1 HKD, indicating a potential upside of 15.0% [3]

Investment Rating - The investment rating for the company is "Outperform the Market" (maintained) [2][4][8] Core Views - The company's main brand saw low single-digit growth in retail sales for the second quarter, while the Saucony brand experienced over 30% growth [3][4] - The overall performance for the first half of the year aligns with the annual guidance, with stable discounts and inventory levels [4][5] - The management maintains the annual guidance, aiming for over 10% profit growth [6][8] Summary by Sections Sales Performance - In the second quarter, the main brand's retail sales growth was low single-digit year-on-year, with discounts ranging from 7.0 to 7.5 [3][5] - The Saucony brand's retail sales grew over 20% year-on-year, with a focus on reducing low-priced products in e-commerce to synchronize online and offline offerings [6][8] Financial Forecasts - The company expects net profits for 2025, 2026, and 2027 to be 1.4 billion, 1.5 billion, and 1.6 billion respectively, with year-on-year growth rates of 13.2%, 5.9%, and 7.7% [4][9] - Revenue projections for 2025 are set at 14.3 billion, with a growth rate of 5.4% [9] Market Positioning - The company is focusing on the running category to leverage its professional advantages, with expectations for steady growth in the main brand and rapid growth in professional sports brands like Saucony and Maile [4][8] - The management anticipates that the main brand will achieve stable growth in the mass market, while Saucony and Maile will target specific elite groups and outdoor markets for faster growth [4][8]