Goldman Sachs has issued a research report, adjusting its price target for XTEP INT'L (01368) from HK$5.7 to HK$5.6 while reaffirming its "Buy" rating.
The firm views the company's valuation as highly attractive, equating to approximately 8 times the forecasted price-to-earnings ratio for 2026, or about 3 times on a cash-adjusted basis.
It also believes that investments in 2026 will pave the way for long-term health and sustainable development.
The company reported subdued operational data for the second quarter of 2026.
Retail sales for the core XTEP brand recorded a mid-single-digit percentage decline year-over-year, compared to a low single-digit percentage growth in the first quarter.
Sales for the Saucony brand saw low single-digit percentage growth year-over-year, a slowdown from the over 20% growth recorded in the prior quarter.
Management attributed the deceleration to a weak macroeconomic environment and a disciplined discounting strategy aimed at enhancing brand value.
Despite near-term challenges, management reiterated its outlook for the group to achieve mid-single-digit percentage revenue growth and a high single-digit percentage net profit margin for 2026.
The report notes that while the strategic transformation of the two major brands remains on track, the pace of execution has been slightly slower than anticipated amid the weak macroeconomic backdrop.
In response to soft demand in the first half of 2026, Goldman Sachs has lowered its sales forecasts for XTEP for the years 2026 to 2028 by 2% to 3% to reflect a more gradual brand transformation trajectory.
Concurrently, net profit forecasts for the same period were reduced by 1% to 3%, although gross margin is expected to remain supported by the disciplined maintenance of discount levels.
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