Xtep (1368 HK) Summary
Core Content
Xtep reported a strong 1Q23 with retail sales growth of approximately 20%, surpassing the estimated 18% for the industry. The company's performance was particularly notable in the Xtep Kids and professional running shoes segments, with growth rates of 30%+ and 40%+ respectively. Offline sales outperformed online, although both channels showed positive growth. The sales growth accelerated in March-April 2023, reaching 35%+. This performance was attributed to strong replenishment and quick response orders, successful marketing through marathon sponsorships, robust demand for running in lower-tier cities, and increased demand for value-for-money products during economic recovery.
The company revised its FY23E retail sales growth guidance upwards to 25%+ from 20%, due to the strong Q1 results and positive outlook for Q2. However, the overall FY23E guidance remained relatively conservative, with sales growth expected in the mid-teens, and net profit growth expected to be faster. The company noted that the performance during the 5-1 Golden Week and opex spending would still be significant factors influencing the full-year results.
Key Information
- Target Price: HK$11.76 (up from HK$10.54)
- Current Price: HK$9.90
- Up/Downside: 18.9%
- P/E Ratio (FY23E): 19x
- P/B Ratio (FY23E): 2.6x
- Yield (FY23E): 3.1%
- ROE (FY23E): 13.9%
- Net gearing (FY23E): 4.7%
- Market Cap: HK$24,583.1 million
- Shareholding Structure:
- Mr. Ding Shui Po & Family: 49.0%
- JP Morgan Chase: 4.6%
Financial Highlights
| Metric |
FY21A |
FY22A |
FY23E |
FY24E |
FY25E |
| Revenue (RMB mn) |
10,013 |
12,930 |
15,187 |
17,629 |
20,093 |
| YoY growth (%) |
22.5 |
29.1 |
17.5 |
16.1 |
14.0 |
| Operating profit (RMB mn) |
1,396 |
1,464 |
1,824 |
2,192 |
2,609 |
| Net profit (RMB mn) |
889.4 |
912.3 |
1,202.1 |
1,491.1 |
1,825.6 |
| EPS (Reported) (RMB) |
0.36 |
0.36 |
0.47 |
0.60 |
0.74 |
| YoY growth (%) |
72.1 |
0.6 |
32.6 |
26.5 |
23.4 |
| P/E (x) |
22.7 |
24.5 |
19.4 |
15.7 |
12.8 |
| P/B (x) |
2.6 |
2.8 |
2.6 |
2.4 |
2.2 |
| Yield (%) |
2.7 |
2.0 |
3.1 |
3.8 |
4.7 |
| ROE (%) |
11.9 |
11.3 |
13.9 |
16.0 |
18.2 |
| Net gearing (%) |
Net cash |
Net cash |
Net cash |
4.7 |
9.2 |
Earnings Revision
| Metric |
New |
Old |
Diff (%) |
| Revenue (RMB mn) |
15,187 |
15,113 |
0.5% |
| Gross profit (RMB mn) |
6,253 |
6,224 |
0.5% |
| EBIT (RMB mn) |
1,824 |
1,807 |
0.9% |
| Net profit att. (RMB mn) |
1,192 |
1,181 |
1.0% |
| Diluted EPS (RMB) |
0.453 |
0.448 |
1.0% |
| Gross margin |
41.2% |
41.2% |
Oppt |
| EBIT margin |
12.0% |
12.0% |
0.1ppt |
| Net profit att. margin |
7.9% |
7.8% |
-0.2ppt |
Performance Comparison
| Brand |
FY23E Sales Growth |
FY24E Sales Growth |
FY25E Sales Growth |
| Nike China |
24.0% |
22.0% |
27.0% |
| Adidas China |
16.0% |
14.0% |
11.0% |
| Anta |
+ve Low-teens |
+ve Mid-teens |
+ve Mid-teens |
| Li Ning |
+ve Mid-teens |
+ve Mid-teens |
+ve High-teens |
| 361 Degrees |
+ve LSD |
+ve LSD |
+ve LSD |
| Pou Sheng |
-ve LSD |
-ve MSD |
+ve MSD |
| Dong Xiang |
-ve LSD |
+ve MSD |
+ve Mid to High SD |
Assumptions
| Segment |
FY21A (RMB mn) |
FY22A (RMB mn) |
FY23E (RMB mn) |
FY24E (RMB mn) |
FY25E (RMB mn) |
| Shoes |
5,928 |
7,760 |
9,263 |
10,842 |
12,443 |
| Apparels |
3,887 |
4,897 |
5,631 |
6,476 |
7,318 |
| Accessories |
198 |
273 |
292 |
310 |
332 |
| Total |
10,013 |
12,930 |
15,187 |
17,629 |
20,093 |
| Segment Growth (YoY) |
FY21A (%) |
FY22A (%) |
FY23E (%) |
FY24E (%) |
FY25E (%) |
| Shoes |
17.5 |
30.9 |
19.4 |
17.0 |
14.8 |
| Apparels |
31.2 |
26.0 |
15.0 |
15.0 |
13.0 |
| Accessories |
22.5 |
38.3 |
7.0 |
6.0 |
7.0 |
| Total |
22.5 |
29.1 |
17.5 |
16.1 |
14.0 |
| Sales Network |
FY21A (RMB mn) |
FY22A (RMB mn) |
FY23E (RMB mn) |
FY24E (RMB mn) |
FY25E (RMB mn) |
| Xtep |
4,722 |
4,493 |
4,628 |
4,767 |
4,910 |
| Xtep Kids |
1,179 |
1,520 |
1,672 |
1,789 |
1,878 |
| Oversea Stores |
250 |
300 |
300 |
300 |
300 |
| Total |
6,151 |
6,313 |
6,600 |
6,856 |
7,088 |
| Opex Breakdown (%) |
FY21A |
FY22A |
FY23E |
FY24E |
FY25E |
| A&P / sales |
10.2 |
11.9 |
11.3 |
11.5 |
11.5 |
| Staff costs / sales |
11.1 |
11.3 |
11.4 |
11.2 |
11.1 |
| R&D / sales |
2.5 |
2.3 |
2.5 |
2.5 |
2.5 |
| D&A / sales |
1.7 |
1.9 |
1.6 |
1.5 |
1.4 |
| Provisions / sales |
-0.2 |
0.4 |
0.3 |
0.2 |
0.2 |
| Rental / sales |
0.1 |
0.1 |
0.4 |
0.4 |
0.4 |
| Selling & distribution costs / sales |
18.9 |
20.8 |
20.1 |
20.0 |
19.9 |
| Admin expenses / sales |
11.9 |
11.2 |
11.2 |
11.1 |
11.1 |
Main Points
- Xtep's 1Q23 retail sales growth was a record, with a 20% increase, outperforming the industry estimate of 18%.
- The growth in the Kids and professional running shoes segments was particularly strong, at 30%+ and 40%+ respectively.
- Offline sales outperformed online, but both channels showed positive growth.
- The company raised its FY23E retail sales growth guidance to 25%+ from 20% due to the strong Q1 results and positive Q2 outlook.
- Despite the revised guidance, the full-year FY23E forecast remained conservative, with sales growth in the mid-teens.
- The company's P/E ratio is currently 19x, which is not demanding compared to the 5-year average of 15x.
- The company maintains a BUY rating with a target price of HK$11.76, reflecting its attractive outlook and valuation.
