Guotai Haitong: Maintain "buy" rating on XTEP INT'L (01368) with a target price of 8.74 Hong Kong dollars.

Guotai Haitong released a research report stating that it maintains XTEP INT'L (01368) 2025-2027 net profit forecast at 1.37/1.49/1.61 billion RMB, considering the company as the third largest domestic sports group, Skechers opening the second growth curve, giving a 2026 target price of 8.74 Hong Kong dollars (converted at 1 Hong Kong dollar = 0.92 RMB), and maintaining a "buy" rating. The report states that the company's Q3 weather disruptions affected the main brand's revenue performance, while functional products performed well. The main brand's Q3 revenue grew in low single digits, with discounts ranging from 7-75%, and inventory levels at 4-4.5 months. The analysis by month shows that revenue trends were good in July and August, but warmer weather in September may affect sales of autumn and winter products. In terms of distribution channels, the growth rate of e-commerce may outperform offline growth. In terms of product analysis, the company has a competitive advantage in the field of functional products such as running, with revenue growth potentially faster than lifestyle products. The report indicates that Skechers continued to see high growth in Q3 offline sales, with e-commerce actively adjusting and good prospects for future growth. Skechers' Q3 revenue grew by more than 20% year-on-year. Looking at sales channels, offline revenue growth may be faster than online revenue growth, mainly due to the company's active adjustments in e-commerce (such as tightening low-priced products and discounts, optimizing supply chain operations, etc.). Guotai Haitong maintains its annual forecast for XTEP. For the whole year 2025, the bank maintains the forecast of positive revenue growth for the main brand and revenue growth of 30% or more for Skechers, as well as an overall profit growth of around 10% for the group. Regarding inventory, the bank believes that current inventory levels are healthy and are expected to decrease to below 2 billion RMB by the end of 2025. In terms of dividends, the bank expects a payout ratio of not less than 50% for the full year.