Group 1 - The company reported a revenue of 6.8 billion RMB for H1 2025, representing a year-on-year increase of 7%, with the main brand contributing 6.1 billion RMB, up 5% year-on-year, and the professional sports segment generating 790 million RMB, up 33% year-on-year [1] - Operating profit for the continuing operations was 1.3 billion RMB, a 9% increase year-on-year, while the professional sports segment's operating profit surged by 237% to 80 million RMB [1] - The company recorded a net profit attributable to ordinary shareholders of 900 million RMB for H1 2025, reflecting a year-on-year growth of 21.5% [1] Group 2 - The balance sheet remains robust with a net cash position of 1.9 billion RMB, an increase of 94% year-on-year [1] - The board declared an interim dividend of 0.18 HKD per share, with a payout ratio of 50% [1] - As of June 30, 2025, the company operated 6,360 adult stores and 1,564 youth stores in mainland China, along with 155 stores for the Saucony brand [1] Group 3 - The company is focusing on running to consolidate its market leadership, launching several running shoe models and sponsoring 27 marathons and road races in China [1] - Saucony is undergoing a comprehensive brand repositioning, including flagship store openings and product line upgrades, while also enhancing its brand influence through collaborations and immersive training camps [2] - The company is seizing opportunities in the outdoor sports market and enhancing its basketball brand visibility through various promotional activities and sponsorships [2] Group 4 - The company adjusted its profit forecasts, expecting revenues of 14.6 billion RMB, 15.4 billion RMB, and 16.5 billion RMB for 2025-2027, with net profits of 1.4 billion RMB, 1.52 billion RMB, and 1.7 billion RMB respectively [2] - The corresponding price-to-earnings ratios are projected to be 11.5x, 10.5x, and 9.4x for the same period [2]

Investment Rating - The report maintains a "Buy" rating for the company with a target price not specified [4] Core Insights - The company reported a revenue of 6.8 billion RMB for H1 2025, representing a year-on-year increase of 7%, with the main brand contributing 6.1 billion RMB (+5% YoY) and the professional sports segment achieving 790 million RMB (+33% YoY) [1] - Operating profit for continuing operations reached 1.3 billion RMB, up 9% YoY, while the professional sports segment saw a significant increase in operating profit to 80 million RMB, a 237% growth YoY [1] - The company reported a net profit attributable to ordinary shareholders of 900 million RMB for H1 2025, reflecting a 21.5% increase YoY [1] - The balance sheet remains robust with cash and cash equivalents netting 1.9 billion RMB, a 94% increase YoY [1] - The board declared an interim dividend of 0.18 HKD, with a payout ratio of 50% [1] Summary by Sections Brand Development - The company has launched several running shoe models, including the "160X" championship series and "360X 2.0" carbon plate shoes, contributing to athletes' success in marathons [2] - It has strengthened its event sponsorship matrix by partnering with 27 marathon and road running events in China, including several gold standard events [2] - The company showcased its technological prowess by being the official partner and exclusive sports equipment sponsor for the 13th Versailles Royal Run, featuring humanoid robots wearing its high-performance running shoes [2] Market Expansion - The company is seizing opportunities in the outdoor sports market by expanding its product matrix with high-performance products like the "Flying Stone" hiking shoes and "Mountain Cat" trail running shoes [3] - In the basketball sector, the brand ambassador Jeremy Lin has been actively promoting the brand through various events, including store openings and interactive basketball competitions [3] Financial Forecast - The report adjusts the profit forecast for the company, expecting revenues of 14.6 billion RMB, 15.4 billion RMB, and 16.5 billion RMB for 2025-2027, respectively [4] - The net profit attributable to shareholders is projected to be 1.4 billion RMB, 1.52 billion RMB, and 1.7 billion RMB for the same period [4]

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]

Core Viewpoint - Xtep International reported a 7.1% year-on-year increase in revenue to 6.84 billion yuan for 1H25, with a 21.5% rise in net profit to 910 million yuan, indicating strong performance driven by its running ecosystem and brand strategies [1][2]. Financial Performance - Revenue increased by 7.1% to 6.84 billion yuan, with net profit rising by 21.5% to 910 million yuan, and net profit margin improved by 1.6 percentage points to 13.4% [1]. - Core net profit, excluding K&P brand losses of 106 million yuan, grew by 6.4% year-on-year [1]. - The company declared an interim dividend of 0.18 HKD per share, with a payout ratio of 50% [1]. Brand and Product Strategy - The main brand focused on the mass market, continuously iterating products and accelerating direct-to-consumer (DTC) layout, while the Saucony brand targeted the high-end market [1][2]. - New products such as the 160X champion running shoes and 360X 2.0 carbon plate running shoes contributed to an increase in average selling price (ASP) in the running category [2]. - The main brand's online channel growth outpaced overall performance, with revenue from the main brand increasing by 4.5% to 6.05 billion yuan [1][2]. Operational Efficiency - The company’s gross margin slightly decreased by 0.1 percentage points to 45.0%, influenced by online promotional activities and a significant increase in low-margin apparel sales [2]. - Inventory turnover days increased by 23 days to 91 days, primarily due to preparations for the marathon season and Saucony's inventory needs [2]. - Net cash rose by 94.3% to 1.913 billion yuan, indicating significant improvement in cash levels [2]. Future Outlook - The main brand will launch a DTC model in 2H25, aiming to enhance operational efficiency and support long-term growth, with plans to open 100-200 DTC stores by 2025 and 300 by 2026 [3]. - Saucony plans to accelerate store openings in high-tier cities, with expectations to open 30-50 new stores in 2H25, expanding its apparel and lifestyle product lines [3]. - The company maintains profit forecasts for 2025-2027, with net profit expectations of 1.37 billion, 1.53 billion, and 1.71 billion yuan respectively, and adjusts the target price to 7.08 HKD [3].

Investment Rating - The report maintains a "Buy" rating for the company [6][5]. Core Views - The company reported a revenue increase of 7.1% year-on-year to 6.84 billion HKD and a net profit increase of 21.5% year-on-year to 0.91 billion HKD, with a net profit margin improvement of 1.6 percentage points to 13.4% [1][6]. - The company is focusing on the running ecosystem, iterating products for the mass market, and accelerating its direct-to-consumer (DTC) strategy, which is expected to drive performance growth [1][4]. - The professional sports brand, Saucony, has seen over 30% revenue growth, benefiting from double-digit same-store sales growth and increased online and apparel sales [2][4]. Summary by Sections Financial Performance - The company's gross margin decreased by 0.1 percentage points to 45.0%, with the main brand and professional sports brand gross margins at 43.6% and 55.2%, respectively [3]. - The overall net profit margin increased by 1.6 percentage points to 13.4%, partly due to losses from the K&P brand in the previous period and growth in other income sources [3]. Brand and Product Development - The main brand's revenue grew by 4.5% year-on-year to 6.05 billion HKD, with e-commerce achieving double-digit growth [2]. - New product launches, such as the 160X champion running shoes and 360X 2.0 carbon plate running shoes, have contributed to an increase in average selling price (ASP) for the running category [2]. Future Outlook - The company plans to upgrade its retail strategy in the second half of 2025 by launching the DTC model, aiming to enhance operational efficiency [4]. - Saucony is expected to accelerate its store openings in high-tier cities, with plans to open 30-50 new stores in 2025, which will likely boost store efficiency and operating profit margin [4]. Earnings Forecast and Valuation - The company maintains its net profit forecasts for 2025-2027 at 1.37 billion, 1.53 billion, and 1.71 billion HKD, respectively, with corresponding EPS of 0.49, 0.55, and 0.61 HKD [5][11]. - The target price has been adjusted upward by 7.6% to 7.08 HKD, reflecting a revised PE ratio of 13.3x for 2025 [5][11].