CICC: Maintains XTEP INT'L (01368) "Outperform" rating, target price raised to 6.9 Hong Kong dollars.

CICC released a research report stating that it maintains a "outperform industry" rating for XTEP INT'L(01368), considering the completion of the divestment of the Gainway and Paladin brands to reduce the company's losses. It has raised the 2024 EPS forecast by 4% to 0.46 yuan, keeping the 2025 EPS forecast at 0.52 yuan, and introducing the 2026 EPS forecast at 0.59 yuan. The valuation has been switched to 2025, with a slight increase in the target price by 3% to 6.9 Hong Kong dollars. The company announced its 4Q24 operating performance: the revenue of the main Xtep brand in 4Q24 increased by a high single-digit percentage year-on-year, with retail discounts ranging from 70% to 75%; the Saucony brand's retail revenue increased by about 50% year-on-year. CICC's main points are as follows: The growth rate of the main brand's revenue in 4Q24 has improved compared to the previous quarter. In 4Q24, the retail revenue of the main Xtep brand increased by a high single-digit percentage year-on-year, showing improvement compared to the third quarter, driven by the National Day golden week and Double Eleven holidays. Online sales maintained rapid growth, with revenue growth exceeding 20%, while offline sales growth was affected by continuous pressure on foot traffic and increased by a low single-digit percentage year-on-year. Retail discounts improved slightly year-on-year, with stable trends in average spending and conversion rates; channel inventory turnover remained at around 4 months. Overall, the retail revenue of the main Xtep brand achieved high single-digit year-on-year growth for the whole year, with running shoes as the growth engine, achieving sales of functional running shoes exceeding 4 million pairs, with a growth rate of around 30%. The Xtep brand continued to consolidate its competitive advantage in the running domain. The Saucony brand continued to perform well, with full-year revenue in 2024 exceeding expectations. In 4Q24, Saucony's retail revenue increased by about 50% year-on-year, exceeding 60% growth for the full year, which was better than previously expected by management. By the end of 2024, the Saucony brand had over 150 stores in China, mainly in top-tier cities, with an average area of over 100 square meters and an average monthly store efficiency of over 300,000, demonstrating high efficiency within the industry. Continuing to cultivate the product and channel development of the two major running brands in 2025. Looking ahead to 2025, management stated that it will continue to update and iterate on the Xtep brand's 160 series products, while also launching new products (such as more cost-effective running shoes) to expand the running matrix. They will also consider launching new types of running stores. Additionally, the company will increase its investment in the Saucony brand by expanding new categories and products, such as clothing and commuter wear, on the basis of existing running shoes. In terms of channels, they will open larger and higher-end flagship stores in top-tier cities through self-operation, renovate old stores, and expand areas to further enhance consumers' shopping experience. Risk Intensifying industry competition and lower-than-expected retail environment.