Guotai Junan Securities: Maintains "Buy" rating on XTEP INT'L (01368) with a target price of HK$6.45.

Guotai Haitong released a research report stating that XTEP INT'L (01368) has a strong competitive edge in the main brand running shoe market, and Saucony has opened up a second growth curve. The bank maintains its forecast for the net profit attributable to the mother for 2025-2027 to be 1.37/1.49/1.61 billion RMB, corresponding to PEs of 9.1/8.4/7.8X, considering the company as the third largest domestic sports group. The company is given a 2025 PE of 12X, which is lower than the industry average, with a target price of 6.45 Hong Kong dollars (converted at a rate of 1 Hong Kong dollar = 0.92 RMB). The bank maintains a "buy" rating. Guotai Haitong's main points are as follows: Q1 shows single-digit growth in the main brand's pipeline, with impressive growth in Saucony. The Q1 flow of the main brand increased year-on-year at a single-digit level, with discounts at 7-7.5%, staying flat year-on-year, with a inventory-sales ratio of about 4 months, which is healthy. Saucony's Q1 flow increased by over 40% year-on-year. The Q1 sales of functional running shoes of the main brand were excellent, with long-term cultivation of DTC. Looking at different channels for the main brand in 2025 Q1, offline flow increased year-on-year at a single-digit level, while online flow increased by over 20%. In terms of products, sales of functional running shoes in Q1 achieved double-digit growth, fully demonstrating the company's competitiveness in the running shoe market. In the apparel sector, plans to launch new products such as outdoor and sun protection types are expected to boost clothing sales performance. According to the performance meeting, the company's flow has met expectations since April, DTC reform is progressing as planned, channel and product management are ready, and it is expected that store closures will begin in 2025H2, with a total of 400-500 stores planned to be closed by 2026. The bank believes that there may be a slight impact on profits in 2025 in the short term, but in the medium to long term, there is potential to improve operational efficiency, enhance customer experience, and increase brand loyalty. Saucony's Q1 flow is impressive, with optimistic long-term prospects. Saucony's 2025 Q1 flow increased by over 40% year-on-year. According to performance meetings, performance has been outstanding since April, maintaining a 30-40% growth guidance for 2025. It is expected to open 30 new stores, with a focus on high-tier city stores. In the medium to long term, Saucony targets the elite running crowd, with a wide market space. It is expected that revenue will double in 3-5 years, with plans to open 20-30 new stores every year. There is significant growth potential in store efficiency, and operating profit margins are expected to reach over 15%. Risks: Increased industry competition, slower than expected store expansion, etc.