According to the Futu Securities App, Credit Suisse has issued a research report maintaining a "buy" rating for Xtep International (01368), where revenue is expected to reach RMB 16 billion, RMB 17.9 billion, and RMB 19.8 billion, and net profit attributable to shareholders is expected to be RMB 1.21 billion, RMB 1.41 billion, and RMB 1.65 billion in 2024, 2025, and 2026, respectively. The corresponding EPS are RMB 0.46/share, RMB 0.53/share, and RMB 0.63/share. The bank is bullish on the company's main brand, which holds a leading market position with high-performance cost-effective products, and the financial performance after KP's divestment is expected to improve. The bank is optimistic that the company's business will become more streamlined, with a greater focus on the running market. Additionally, Saucony and Merrell are expected to receive more advantages and resources from the group, accelerate growth, and enhance brand and product strength.

Here are the main opinions of TianFeng International:

Revenue in Q2 2024 increased by 10% YoY, with retail discounts of approximately 25% off.

Retail sales in H1 2024 increased significantly YoY, with channel inventory turnover of approximately 4 months.

The shedding of KP reduces the burden and improves profitability.

The company previously announced that Geside Wei and Paladin have been in continuous losses since 2019, with a loss of approximately US$9 million in the first quarter of 2024. Therefore, the company has decided to strategically sell assets to eliminate KP Global's continued impact on Xtep's profit and cash flow. The bank believes that this sale will alleviate the company's financial burden and improve profitability, as well as help the company focus on the running field, streamline the business matrix, and effectively enhance synergy between brands.

The group will continue to provide a product line designed for Chinese consumers to expand the business scale of Saucony and Merrell brands and explore business opportunities in the global market. Additionally, Saucony will further develop new series to expand the supply of fashion and leisure products, thereby meeting the growing demand for personalized and multi-functional products in different scenarios among Chinese consumers.

Among them, the xtep main brand is aimed at the mass market, MIZUNO focuses on cross-country running and outdoor sports, and Saucony targets high-end customers.

Specifically, Mile, as a leader in the global outdoor footwear and apparel field, is committed to integrating performance, fashion and comfort, and enhancing users' outdoor exploration experience.

Saucony running shoes are well-known for their outstanding performance, and they are favored by professional and mass runners in mainland China. The popularity of Saucony is reflected in the wearing rate of various major marathon events. In major marathon events in mainland China, the wearing rate of Saucony ranks third among all brands among all runners. The significant increase in brand popularity verifies the quality and performance of Saucony on the one hand and consolidates its market position as one of the preferred brands for runners in such fiercely competitive events on the other hand.

The main brand continues to focus on the running field and actively expands the scale of Saucony and MIZUNO businesses.

The xtep main brand has always strategically targeted the running field and actively built China's largest running ecosystem, firmly occupying the market-leading position. As a domestic brand that provides high-performance-price ratio products to the mass market, the main brand of xtep continues to strengthen its R&D capabilities, optimize product performance, and launch running shoes designed specifically for Chinese runners, helping runners achieve new breakthroughs in personal achievements.

The group has the strength to compete with top international brands and is committed to fully leveraging the synergy effect to achieve success. By strategically integrating the equity of Sokoni and Mile brand joint ventures, the Group can not only maximize the synergy effect between the two brands and the Tiit main brand in product innovation, marketing and distribution channels, but also enhance operating efficiency and fully stimulate the growth potential of these brands.

Looking to the future,

The group will continue to provide product series designed specifically for Chinese consumers, expand the business scale of Saucony and Merrell brands, and explore business opportunities in the global market. In addition, Saucony will further develop new series, expand the supply of fashionable and leisure products, so as to meet the growing demand of Chinese consumers for personalized and multi-functional products in different scenarios.