GF SEC released a research report stating that, according to XTEP INT'L's (01368) interim report for 2025, the company will upgrade its retail strategy in the second half of 2025, initiating a DTC transformation to accelerate its response to consumer demand and enhance operational efficiency. The report anticipates the DTC reform will be gradually implemented, with a limited short-term financial impact. It forecasts the company's net profit attributable to shareholders for 2025-2027 to be RMB 1.362 billion, RMB 1.514 billion, and RMB 1.658 billion, respectively. By referencing comparable companies and applying a 2026 PE multiple of 10x, a corresponding fair value of HK$6.02 per share is derived, leading to the maintenance of a "Buy" rating.
The main viewpoints of GF SEC are as follows: XTEP's core brand achieved flat year-on-year gross merchandise value (GMV) in Q4 2025. According to the company's Q4 and Q3 2025 operational updates, the core XTEP brand's GMV across all channels was flat year-on-year, decelerating from the low single-digit growth seen in Q3. This is primarily attributed to warm Q4 weather and a later Lunar New Year holiday impacting winter apparel sales. The retail discount rate remained at 25-30% off, consistent with Q3. Channel inventory turnover was approximately 4.5 months, slightly higher than the 4-4.5 months in Q3 but still at a healthy level. The report expects the e-commerce channel to continue the trend from the first half of 2025, maintaining double-digit growth. Supported by the "XTEP Youth" brand positioning focused on children's sports development, XTEP Children's introduction of growth shoes is anticipated to achieve relatively rapid growth.
Saucony's GMV resumed high growth in Q4 2025. Per the company's Q4 2025 operational update, Saucony's GMV across all channels grew over 30% year-on-year, accelerating from the over 20% growth in Q3. This is mainly due to adjustments made to the e-commerce channel starting in Q2, which began showing positive effects in Q4, resuming a high-growth trajectory. Saucony targets elite runners, focusing on professional products, and continues to open new flagship and concept stores in high-end shopping centers within top-tier cities to expand its customer base and improve store efficiency. The synergistic effect between the core XTEP brand and Saucony in the running category is expected to strengthen continuously, further increasing their market share in running. According to the company's WeChat official account and referenced data from Joyrun, the combined efforts of XTEP and Saucony are prominent, achieving the highest combined wear rate among participants in major domestic marathons in 2025. Under the strategy of professional influence driving mass appeal, the company sold over 25 million pairs of running shoes in 2025.
Risk warnings include potential downside risks from the domestic macroeconomic environment, intensifying industry competition, and risks associated with new brand integration falling short of expectations.
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