Core Viewpoint - Xtep International reported a 7.1% year-on-year revenue growth and a 21.5% increase in net profit attributable to shareholders for H1 2025, slightly exceeding expectations [1][2] Financial Performance - The company achieved a revenue of 6.838 billion RMB in H1 2025, with the main brand (Xtep) contributing 6.053 billion RMB, a 4.5% increase year-on-year, accounting for 88.5% of total revenue [1] - The professional sports segment (including Saucony and Merrell) saw a significant revenue increase of 32.5% to 785 million RMB, representing 11.5% of total revenue, driven by strong offline retail performance [1] - Gross margin decreased by 0.3 percentage points to 43.6%, with the main brand's gross margin also down by 0.3 percentage points [1] - Net profit attributable to shareholders rose to 914 million RMB, with a net profit margin increase of 1.6 percentage points to 13.4% [1] Dividend and Earnings Forecast - The company declared a dividend of 0.18 HKD per share, with a payout ratio of 50% [1] - Earnings per share (EPS) estimates for 2025-2027 have been revised to 0.55, 0.62, and 0.68 RMB, respectively, with a target price adjustment to 7.16 HKD [1][2] Operational Efficiency - As of H1 2025, the main brand had 7,924 stores, a net decrease of 42 stores since the beginning of the year, while Saucony increased its store count by 10 to 155 [2] - The company is focusing on enhancing its high-end brand image and expanding its product matrix with new series [2] Strategic Focus Post-Divestiture - Following the divestiture of KSWISS and Palladium, the company aims to concentrate resources on the main brand and Saucony, which is expected to lead to faster growth [2]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 7.16 [1][7]. Core Insights - The company reported a revenue of RMB 6.838 billion for the first half of 2025, representing a year-on-year growth of 7.1%, and a net profit attributable to shareholders of RMB 914 million, which is a 21.5% increase compared to the previous year [2][3]. - The professional sports segment, including brands like Saucony, showed significant growth with a 32.5% increase in revenue to RMB 785 million, driven by strong offline retail performance [2][3]. - The company has adjusted its earnings per share (EPS) estimates for 2025-2027 to RMB 0.55, 0.62, and 0.68 respectively, reflecting a positive outlook based on the recent performance [3]. Financial Performance Summary - Revenue for 2025 is projected to be RMB 14.52 billion, with a growth rate of 6.9% [5]. - The net profit for 2025 is estimated at RMB 1.402 billion, indicating a growth rate of 13.2% [5]. - The gross margin is expected to stabilize at 43.2% for 2025, while the net profit margin is projected to be 9.7% [5][11]. - The company plans to maintain a dividend payout ratio of 50% in the coming years, with a projected dividend yield of 4.48% for 2025 [5][11]. Operational Efficiency - The company has optimized its channels, with a total of 7,924 stores for the main brand as of the first half of 2025, reflecting a net decrease of 42 stores since the beginning of the year [3]. - The company is focusing on enhancing its brand image and expanding its product matrix, particularly in the elite sports lifestyle segment [3]. - Following the divestiture of KSWISS and Palladium, the company aims to concentrate resources on its main brand and Saucony, which is expected to lead to faster growth in the future [3].

Investment Rating - The investment rating for the company is "Outperform the Market" [5][32][34] Core Views - The company reported a 7.1% year-on-year revenue growth to 6.84 billion RMB and a 21.5% increase in net profit to 910 million RMB for the first half of 2025, driven by improved profitability in ongoing operations and reduced losses from the divestment of KP [1][9] - The main brand showed steady growth with a 4.5% increase in revenue to 6.05 billion RMB, while the professional sports brands (Saucony and Merrell) experienced a significant 32.5% revenue growth to 790 million RMB [2][22] - The company is focusing on Direct-to-Consumer (DTC) strategies, planning to open 100-200 DTC stores in 2025 and a total of 300-400 by 2026, with a capital expenditure of approximately 400 million RMB [3][31] Summary by Sections Financial Performance - Revenue for the first half of 2025 reached 6.84 billion RMB, with a net profit of 910 million RMB, reflecting a 22% increase in net profit [1][9] - The gross margin remained stable, with a slight decrease of 0.1 percentage points year-on-year [1][14] - The company plans to distribute an interim dividend of 0.18 HKD per share, maintaining a payout ratio of 50% [1][16] Brand Performance - The main brand's revenue grew by 4.5% to 6.05 billion RMB, with e-commerce channel revenue increasing by double digits [2][21] - The professional sports segment saw a revenue increase of 32.5% to 790 million RMB, with a significant improvement in operating profit margin [2][22] Market Strategy - The company is enhancing channel management and implementing a DTC strategy to adapt to market changes, which may have a short-term impact on revenue and profit margins but is expected to benefit long-term growth [3][31] - The focus on the running category is anticipated to drive steady growth for the main brand, while professional sports brands are expected to maintain rapid growth and improve profitability [32][34] Financial Projections - The company forecasts net profits of 1.4 billion RMB, 1.49 billion RMB, and 1.6 billion RMB for 2025, 2026, and 2027, respectively, with year-on-year growth rates of 13.2%, 5.9%, and 7.7% [32][33] - The reasonable valuation range is set at 6.1 to 6.6 HKD, corresponding to a PE ratio of 11-12x for 2025 [32][34]

Core Insights - Xtep International Holdings Limited reported a solid performance for the six months ending June 30, 2025, with revenue from continuing operations increasing by 7.1% to RMB 6.838 billion [2] - The main brand revenue rose by 4.5% to RMB 6.053 billion, while the professional sports segment saw a significant growth of 32.5% to RMB 785 million [2] - The gross profit margin for continuing operations reached 45.0%, and operating profit grew by 9.1% to RMB 1.305 billion [2] - After accounting for a loss of RMB 106 million from discontinued operations (K·SWISS and Paladin) in the first half of 2024, the profit attributable to ordinary shareholders for the first half of 2025 was RMB 914 million, an increase of 21.5% [2] - The basic earnings per share were RMB 0.346, with an annualized shareholder return rate of 19.7%, up by 3.3 percentage points year-on-year [2] - The company maintained healthy cash flow, with operating cash inflow of RMB 774 million, and declared an interim dividend of HKD 0.18 per share, a 15.4% increase [2] - The dividend payout ratio was 50.0%, and the company has maintained a payout ratio of no less than 50% for 17 consecutive years since its listing, reflecting a long-term commitment to shareholder returns [2] Strategic Focus - The Chairman and CEO of Xtep, Ding Shuibo, emphasized the company's focus on running as a strategy that solidifies its position as a leading running brand in China [3] - The company's outstanding market share in major marathon events highlights its market leadership and the effectiveness of its "Professional Influences the Masses" strategy [3] - With ongoing government support for the sports industry and rising sports participation rates, Xtep aims to strengthen its leadership in the running sector and leverage synergies between its main brand and subsidiaries, Saucony and Merrell, to enhance market share [3]

Investment Rating - The investment rating for the company is "Buy" [1] Core Insights - The company's main brand retail revenue showed low single-digit growth year-on-year in Q2 2025, while the Saucony brand achieved over 20% year-on-year growth [2][3] - The retail discount for Q2 2025 remained healthy at 70-75%, consistent with Q1 2025 [3] - The company is focusing on a direct-to-consumer (DTC) strategy, which may have short-term negative impacts on sales but is expected to enhance brand loyalty and retention in the long term [4] Summary by Sections Event Overview - In Q2 2025, the main brand's retail revenue experienced low single-digit growth year-on-year, with discounts ranging from 70% to 75%. The Saucony brand saw retail sales growth exceeding 20% year-on-year [2] Analysis and Judgments - The main brand's retail revenue growth slowed from mid-single digits in Q1 2025 to low single digits in Q2 2025. The retail discount remained stable compared to previous quarters, indicating a healthy pricing strategy [3] - Saucony and another brand, Myle, benefited from their superior performance in professional running and outdoor segments, with Saucony's retail growth slowing to about 20% in Q2 2025, down from approximately 40% in Q1 2025 due to adjustments in e-commerce strategy [3] Investment Recommendations - The company is expected to continue expanding its product matrix and open around 30 new Saucony stores throughout the year. The sale of the KP brand is anticipated to reduce financial drag and allow a focus on three main brands [4] - Revenue forecasts for 2025, 2026, and 2027 are projected at 142.86 billion, 155.58 billion, and 172.51 billion respectively, with corresponding net profits of 13.74 billion, 15.11 billion, and 16.64 billion. The estimated EPS for these years is 0.50, 0.54, and 0.60 respectively, with PE ratios of 10, 9, and 8 [4][6]

Core Viewpoint - The company reported a revenue of 13.58 billion RMB for 2024, reflecting a year-on-year growth of 6.5%, and a net profit attributable to shareholders of 1.24 billion RMB, which is a 20.2% increase compared to the previous year [2] Financial Performance - The company achieved a net profit margin of 9.1%, an increase of 1.0 percentage points year-on-year, after divesting the KP business [2] - The earnings per share (EPS) for 2024 was 0.49 RMB, with a total dividend payout ratio of 138.2% [2] - The main brand's revenue showed a high single-digit growth in Q1, approximately 10% in Q2, mid-single-digit growth in Q3, and high single-digit growth in Q4, leading to an overall high single-digit growth for the year [2] Revenue Breakdown - In 2024, the revenue from the main brand and professional sports segments grew by 3.2% and 57.2%, respectively [3] - Revenue contributions by category were 59.3% from footwear, 38.5% from apparel, and 2.2% from accessories, with footwear revenue increasing by 15.9% and apparel decreasing by 5.7% [3] - E-commerce revenue for the main brand grew by approximately 20%, accounting for over 30% of the main brand's total revenue [3] Profitability Metrics - The gross profit margin improved by 1.4 percentage points to 43.2% in 2024, with the professional sports segment's gross margin rising significantly due to acquisitions [4][5] - The operating profit margin for the company was 14.5%, an increase of 0.4 percentage points year-on-year, with the professional sports segment achieving a profit margin of 6.3%, up by 5.2 percentage points [5] Inventory and Cash Flow - Inventory at the end of 2024 decreased by 11.0% to 1.6 billion RMB, with inventory turnover days reduced by 22 days to 68 days [6] - Operating net cash flow for 2024 was 1.23 billion RMB, a decrease of 2.1% year-on-year [6]