Orient: The "concentration" of sports brand technology is underestimated. Focus on brands with superior cost performance under differentiation.

Orient released a research report stating that the current capital market's confidence in the technology industry leading the country's economic development continues to strengthen. The extreme differentiation in the trends of new and old industrial markets also implies a deepening of this narrative logic. The sustained growth and stability brought about by the enduring technological innovation of local sports brands are currently being overlooked or underestimated by the capital market due to performance fluctuations caused by their traditional industry positioning and the short-term consumption environment. It is recommended to pay attention to brands that have a significant cost-performance advantage in the context of K-shaped differentiation. Orient's main points are as follows: Taking a different perspective on traditional industries: Looking at the sports apparel sector from a technological dimension The current capital market's confidence in the technology industry leading the country's economic development continues to strengthen, and the extreme differentiation in the trends of new and old industrial markets also implies a deepening of this narrative logic. However, the bank believes that the technology industry and traditional industries are not binary opposites. Traditional industries will continue to play an important role in the country's economy, especially traditional industries empowered by technology still have enormous vitality and development opportunities in the future. The sports apparel industry, as a representative of traditional industries, has a more urgent need for technological innovation due to the natural attributes of the industry and products. Leading sports enterprises have always been at the forefront of technological innovation and have received positive feedback. At present, the bank believes that research on traditional industries should also moderately step out of the existing framework. The bank has chosen the sports apparel sector and is attempting to conduct a different analysis and evaluation from the perspective of technological content. How to evaluate the technological "intensity" of sports apparel companies? Technological strength has become one of the most important core competitive advantages for sports enterprises. In order to better screen out potential target companies, the bank has designed an evaluation system to measure the technological content of sports enterprises from six dimensions based on the characteristics of the sports apparel industry. This evaluation system attempts to qualitatively assess the overall technological level of an enterprise - technological "intensity" - from the perspective of technological attributes, using the dimensions of "R&D investment intensity, patents and technological barriers, digitization and AI capabilities, product technologization and premium, intelligent manufacturing capabilities, and ESG governance level". The qualitative analysis results will also be cross-verified and analyzed with the company's financial situation in recent years. The practice of evaluating the technological "intensity" of the top three domestic sports brands shows that the overall technological content of domestic sports leaders is not fully recognized by the market Through the six-dimensional evaluation system constructed by the bank, they conducted a comprehensive assessment of the technological strength of the Chinese leading sports shoe and clothing companies Anta, Li Ning, and Xtep. All three companies have performed excellently in areas such as technological R&D investment and product transformation, and the positive impact of technological empowerment on business operations can be clearly seen after cross-verifying with recent financial indicators. These three companies are industry leaders in China, with overall excellent product performance. However, compared with overseas giants, there is still room for further improvement in brand premium, which the bank believes is a common issue for domestic sports enterprises. The overall evaluation of the three companies shows some differences in the dimensions of technological intensity, with Anta leading the industry in terms of comprehensive technological "intensity" and performing more prominently overall. Investment recommendations In terms of investment opportunities, the bank still recommends Anta Sports, which has the highest level of technological intensity, multiple brands, and the strongest international operations. Following that is Li Ning, which is relatively ahead in brand premium, has strong technology transformation capabilities, and is expected to show higher performance elasticity in the future amidst consumption recovery, and Xtep International, which focuses on the running track, has a significantly higher research and development expense ratio than peers, and its second growth curve is gaining momentum. The bank also recommends paying attention to brands with significant cost-performance advantages in the context of K-shaped differentiation. Risk reminder A slower-than-expected recovery in domestic consumption may have an adverse impact on the short-term operations of relevant brands. The changing trends in sports apparel consumption pose certain challenges to the operations of related brand enterprises. The subjectivity and limitations of the constructed six-dimensional technological attribute evaluation system are also present.