Guosen: Maintain XTEP INT'L (01368) rating as "outperform the market". Main brand revenue in the fourth quarter remained flat.

Guosen released a research report stating that they are optimistic about the future main brand focus of XTEP INT'L (01368) in the mass market, which is expected to achieve steady growth. Saucony and Mile focused on "double elite groups" and outdoor activities respectively, maintaining fast growth and continuously increasing profits over the next 3-5 years. The bank maintains profit forecasts, expecting net profits of 14.0/14.9/16.0 billion yuan for 2025-2027, with year-on-year growth of 13.2%/5.9%/7.7%. The bank maintains a reasonable valuation range of 6.1-6.6 Hong Kong dollars, corresponding to 11-12x PE in 2026, and maintains an "outperform the market" rating. Guosen's main points are as follows: Events Company announcement: On January 23, the company announced the operating conditions for the fourth quarter and full year of 2025. In the fourth quarter, the retail sales revenue of the main brand, Step, remained flat year-on-year, with retail discounts of 7.0-7.5%; the Saucony brand's retail sales revenue increased by more than 30% year-on-year. For the full year of 2025, the retail sales revenue of Step's main brand increased by low single digits year-on-year, with a channel inventory to sales ratio of about 4.5 months at the end of the year; Saucony's brand's retail sales revenue increased by more than 30% year-on-year. Guoxin Guangxi's point of view In the fourth quarter, Step's main brand's revenue remained flat year-on-year, the running category performed well, discounts remained stable, and inventory increased slightly; Saucony's revenue grew by 30%, while Mile's revenue grew by double digits. Investment advice: Positive about the main brand leveraging the sales advantages of the running category for steady growth, and the rapid growth and profit improvement of professional sports brands. The company focuses on the running field and leverages the professional advantages of the running category. In the fourth quarter, despite the negative factors of temperature and delayed Spring Festival, the main brand's revenue remained flat year-on-year, with the running shoe category and core series "Two Thousand Kilometers" and "Champion Family" performing well; professional sports brand Saucony's growth rate reached over 30% on a month-on-month basis, achieving the 30% growth rate for the year as previously guided by management. Risk warning: The recovery of consumer demand is lower than expected; brand image is damaged; intensification of malicious brand competition; systematic risks in the market.