【行业研究报告】特步国际-Excellent YTD performance among all brands

23Mar2023
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
Xtep(1368HK)
ExcellentYTDperformanceamongallbrands
FY22resultsandFY23EguidancewereroughlyinlinebuttheYTDperformance
wasimpressiveandsolid.WestilllikeXtepduetoitsattractivePEGof0.7x.
FY22resultsinline.Xtep’ssalesgrewby29%YoYtoRMB12.9bnwhile
netprofitroseby1%YoYtoRMB922mn.Thenewbrands(K&P,S&M)
netprofitroseby1%YoYtoRMB922mn.Thenewbrands(K&P,S&M)
registeredalossofRMB222mn,missingmanagementest.ofnomorethan
RMB150mn,mainlybecauseofpandemicin4Q22.
RobustretailsalesgrowthregisteredinYTD2023.Management
highlightedaboutmid-teens/20%+retailsalesgrowthforXtepinJan-Feb/
Mar2023.ThesefiguresareveryencouragingandfarbetterthanAntaand
LiNing’s.Onceagain,offlineoutperformedtheonline(exceptthestillfast-
growinglivesteaminge-commercewithbettermargins).
Inventoryalreadybecomehealthierandshouldnormalizeby3Q-
4Q23E.Inventorytosalesratioalsoimprovedsignificantly,fromover5months
in4Q22tobelow5monthsin1Q23E.Sincetheinventoryfrom3Q-4Q22wasstill
excessive,de-stockingprocessshouldlastinto2H23Eandhopefullybedone
beforedouble-11.Theneedofdeepretaildiscountsisnowgone.
AfairbutstillindustryleadingFY23Eguidance.Xtepbrandisnow
targetinga20%+retailsalesgrowth,amid-teenlistedcosalesgrowthand
anevenfasternetprofitgrowthinFY23E.Xtepkidisabouttogrowby20%
-30%.Infact,wearefairlyconfidentfortheCompanytoachievethisgoal,
considering:1)excellentYTDperformanceandthelowbases,2)strong
momentumfromrunningsegment,helpedbythereturnofmarathonsin
China,aswellasmanyheadlinesabout“recordbreaking”madebythe
athleteswearingXtepshoes,3)storerevamps,4)expansionintohighertier
cities,etc..Ontheotherhand,managementisalsotargetinga41-42%GP
marginandasimilartoFY22ElevelNPmarginforXtepcorebrand.
Newbrandsarefastgrowingandhopefullywillnarrowdownthe
losses.TheJV(Saucony&Merrell)hadaveryrapidsalesgrowthof99%
inFY22,anditwillstillgrowfast,by60%-70%inFY23E,thankstore-
openingofsportsevents,e-commercebusinessandaround30-50new
stores.BreakevenislikelyinFY23E.K-Swiss&Palladiumsalesgrewby
44%inFY22butgeneratedagreaterthanexpectedloss.InFY23E,the
Companyisaimingfora20%-30%salesgrowth,mainlyduetoexpansion
inChina(about30-40netnewstores)andasluggishoverseasgrowth,while
thenetlossshouldbelessthanRMB150mn.
MaintainBUYbutraisedTPtoHK$10.54,basedon21xFY23EP/E,
about1s.d.abovethe5yearsaverageof15x.WecutFY23E/24Enetprofit
by5%/5%,tofactorinfastersalesgrowthbutalowerGPmargin.Itis
tradingat17xFY23EP/E,notdemandingatall.