Core Insights - The main brand of Xtep Group has shown steady growth in the running sector, with a 7.1% increase in revenue to RMB 6.838 billion in H1 2025, and a 4.5% increase in main brand revenue to RMB 6.053 billion [1] - The Saucony brand has outperformed expectations, driving a 32.5% year-on-year growth in the professional sports division's revenue in H1 2025, with retail growth exceeding 30% [1][2] - Xtep Group is focusing on optimizing retail channels and transitioning to a direct-to-consumer (DTC) model to enhance customer experience and operational efficiency [2] Financial Performance - The company expects revenues of RMB 14.6 billion, RMB 15.4 billion, and RMB 16.5 billion for the years 2025 to 2027, with corresponding net profits of RMB 1.4 billion, RMB 1.5 billion, and RMB 1.7 billion [3] - Earnings per share (EPS) are projected to be RMB 0.50, RMB 0.54, and RMB 0.61 for the same period, with price-to-earnings (PE) ratios of 10x, 9x, and 8x respectively [3] Strategic Focus - Xtep Group is strategically concentrating on the running sector, increasing R&D investment, and building an industry-leading running ecosystem [2] - The company has introduced innovative products like the "160X" series running shoes and the new "Qingyun" cushioning flagship series to meet diverse consumer needs [2] - Xtep became the first Chinese sports goods company to receive an MSCI ESG "AA" rating in August 2025, highlighting its commitment to sustainable development [2] Supply Chain Management - The second phase of self-manufacturing facilities in Shishi, Fujian, is underway, with 30,000 square meters already operational since January 2025 [3] - The logistics park in Jinjiang is progressing steadily, with the first phase expected to be operational in the first half of 2026 [3]

Core Viewpoint - The company reported a revenue of 6.84 billion RMB and a net profit of 910 million RMB for the first half of 2025, showing a year-on-year growth of 7.1% and 21.5% respectively, with a focus on the performance of its main brand and professional sports segment [1][2] Financial Performance - The company's gross margin slightly decreased by 0.1 percentage points to 45.0%, while the operating profit margin increased by 0.4 percentage points to 19.1% [1][3] - The net profit margin rose by 1.6 percentage points to 13.4%, although it would have decreased by 0.1 percentage points if excluding the impact of the KP business [1][3] - Earnings per share (EPS) for the first half of 2025 was 0.35 RMB, with a proposed cash dividend of 0.18 HKD per share, resulting in a payout ratio of 50.0% [1] Revenue Breakdown - Revenue from the main brand and professional sports segment grew by mid-single digits and over 30% respectively, with footwear, apparel, and accessories contributing 60.8%, 37.3%, and 1.9% to total revenue [2] - The main brand's revenue from youth products outperformed adult products, and online sales accounted for over 30% of the main brand's revenue [2] Store and Inventory Management - As of June 2025, the number of adult stores was 6,360, a net decrease of 22 stores since the beginning of the year, while youth stores totaled 1,564, a decrease of 20 stores [2] - Inventory increased by 41.3% to 2.25 billion RMB compared to the beginning of the year, primarily due to preparations for upcoming marathon events [4] Cash Flow and Receivables - Operating net cash flow for the first half of 2025 was 770 million RMB, a decrease of 6.4% year-on-year [4] - Accounts receivable increased by 5.4% to 4.84 billion RMB, with a turnover period of 118 days, an increase of 18 days year-on-year [4] Strategic Focus - The company continues to strengthen its position in the running segment, with the main brand maintaining the highest wearing rate in key marathon events [4] - New product launches include advanced running shoes aimed at enhancing performance, and the company is expanding its retail channel management to improve consumer experience [5]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The company achieved a revenue of 6.84 billion RMB in the first half of 2025, representing a year-on-year growth of 7.1%, while the net profit attributable to shareholders increased by 21.5% to 910 million RMB [5] - The main brand and the subsidiary brand, Saucony, are experiencing synergistic growth, with a continued focus on the running segment [11] - The company has successfully divested its KP business, which had previously incurred losses, leading to a more favorable profit outlook [5] Financial Performance - The company's earnings per share (EPS) for the first half of 2025 was 0.35 RMB, with a proposed cash dividend of 0.18 HKD per share, resulting in a payout ratio of 50% [5] - Gross margin slightly decreased by 0.1 percentage points to 45.0%, while operating profit margin improved by 0.4 percentage points to 19.1% [6] - The retail revenue for the main brand and Saucony grew in the mid-single digits and over 30% respectively [6] Revenue Breakdown - In the first half of 2025, the revenue composition was 60.8% from footwear, 37.3% from apparel, and 1.9% from accessories, with respective year-on-year growth rates of 6.3%, 9.5%, and a decline of 7.8% [7] - The main brand's revenue accounted for 88.5% of total revenue, with a year-on-year growth of 4.5%, while professional sports revenue (Saucony and Maile) accounted for 11.5% with a growth of 32.5% [7] Retail and Market Strategy - The company continues to strengthen its position in the running market, with the main brand maintaining the highest wearing rate in key marathon events [11] - The company has launched new products and expanded its retail presence, with a focus on enhancing consumer experience and increasing the number of retail outlets [11] Future Earnings Forecast - The report maintains earnings forecasts for 2025 to 2027, projecting EPS of 0.49 RMB, 0.55 RMB, and 0.60 RMB respectively, with corresponding price-to-earnings (P/E) ratios of 11, 10, and 9 times [12][13]

Financial Performance - Group revenue reached RMB 6838 million, a 71% year-over-year increase[3] - Operating profit increased by 91% to RMB 1305 million, with an operating profit margin of 191%[3] - Profit attributable to ordinary equity holders of the company increased by 215% to RMB 914 million[3] - Basic earnings per share increased by 165% to RMB 346 cents[6] Segment Performance - Mass market revenue increased by 45% to RMB 6053 million[3, 11] - Professional sports revenue increased significantly by 325% to RMB 785 million[3, 11] Balance Sheet Highlights - Net cash and cash equivalents increased significantly by 943% to RMB 1913 million[7] - Shareholders' equity increased by 135% to RMB 9876 million[7] Brand Performance & Strategy - Xtep is the No 1 running brand in China, with leading overall wear rate in major marathons[18, 19] - Core Xtep brand revenue increased, with footwear accounting for 584% of revenue[75] - Saucony & Merrell brands experienced revenue growth, with overall revenue increasing by 325%[83] Sustainability - The company recycled approximately 3000 kg of clothes and reduced carbon emissions by over 10000 kg[52, 53]