Yamato: initiates "buy" rating on XTEP INT'L (01368), target price raised to 7 Hong Kong dollars.

Yamato has released a research report stating that XTEP INT'L (01368) profit growth last year is estimated to be similar to the earlier guidance of 20%, and it has reduced its earnings forecast for this year by 3% to reflect the performance in the second half of last year. The report confirms a "buy" rating, mainly due to the strong outlook for Saucony and improved profitability after divesting K-Swiss and Palladium. The valuation basis has been extended to this year, with the forecasted PE ratio maintained at 12 times unchanged, and the target price has been raised from HK$6.7 to HK$7. The report states that XTEP INT'L achieved high single-digit retail sales growth of its main brand in the last quarter of last year, in line with expectations, with its Saucony brand maintaining a year-on-year growth of about 50%. The report mentions that even before disclosing the full-year performance for last year in March, the company did not provide specific guidance for this year. However, considering the stimulus measures introduced by the mainland government, current sales momentum, and strong growth expectations for Saucony, management seems optimistic about the outlook for this year.