According to reports, Guosheng Securities has published a research report stating that XTEP International (01368), a leading sportswear company in China, holds a significant advantage in the professional running sector, with the profitability of Saucony gradually expanding. The firm estimates that the company's net profit attributable to shareholders will reach 1.365 billion, 1.504 billion, and 1.631 billion yuan for 2025-2027, respectively, resulting in a PE ratio of 11 times for 2025, and has maintained a “Buy” rating.
Key points from Guosheng Securities are as follows:
Event: XTEP International announced its Q3 2025 operational situation, revealing that the main brand's revenue experienced low single-digit year-on-year growth, while Saucony's revenue increased by over 20%, indicating overall stable performance. The main brand, XTEP, showcased steady revenue growth, particularly in the running category, with healthy inventory levels.
1) Revenue Performance: The running category has driven growth, with continuous optimization in channel structure. For Q3 2025, XTEP brand terminal revenue showed low single-digit year-on-year growth, consistent with Q2 performance, amid a constantly fluctuating consumer environment. The firm assesses that since September, the overall weather has remained relatively warm, exerting some pressure on winter apparel sales. By channel, it expects strong performance from e-commerce, which has consistently surpassed offline sales throughout the year; currently, XTEP's main brand is focusing on enhancing operational efficiency in offline channels, closing underperforming stores while opening new high-quality image stores. From the product perspective, XTEP is heavily focused on the running segment, driving product updates and iterations. The firm believes that the market recognition of its champion running shoe family has increased and expects that Q3 2025 sales of XTEP running shoes may outperform the overall brand growth rate, with running shoe category growth potentially reaching double digits.
2) Operational Performance: XTEP's channel inventory remains at healthy levels, with terminal discounts slightly deepening year-on-year. According to company disclosures, the overall terminal discount for Q3 2025 remained between 70% and 75%, flat compared to Q2 2025, while slightly deepening from the 75% discount of Q3 2024. Regarding inventory, as of the end of Q3 2025, XTEP brand channel inventory turnover days are approximately 4 to 4.5 months, stable compared to 4 to 4.5 months at the end of Q2 2025 and slightly increased from 4 months at the end of Q3 2024, yet still within a healthy and manageable range. Saucony continues to enhance its brand image and optimize channels, expecting sustainable growth. In Q3 2025, Saucony's revenue grew above 20%, although the firm anticipates that the growth slowdown may be attributed to product architecture adjustments in the e-commerce channel aimed at optimizing brand image, while the offline channel is expected to maintain robust growth momentum. The firm estimates that Saucony's influence within elite runners is currently significant and anticipates that the brand will gradually enrich its clothing and lifestyle product range while continuing to delve into professional running, expanding its business scale.
Looking ahead to 2025, the firm predicts that the company's net profit attributable to shareholders will grow by approximately 10%. It is expected that the consumer environment is in a phase of volatile recovery, with Saucony sustaining rapid growth, and XTEP's main brand will adopt a cautiously optimistic operational strategy. Along with the advancement of DTC operations, it is estimated that the company's revenue will grow by around 7% in 2025, with net profit attributable to shareholders increasing by approximately 10%.
Risk Warning: The expansion of stores and rectification efforts may fall short of expectations, the recovery of the consumer environment may be weaker than anticipated, and fluctuations in the RMB exchange rate may impact performance.