20201112-招银国际-特步国际-01368.HK-Core_brand_s_recovery_to_drive_re-rating_7页_1mb

报告摘要

Xtep (1368 HK) Company Update Summary

Core Content

CMB International Securities has upgraded Xtep (1368 HK) to BUY, raising its target price (TP) to HK$3.63 from HK$2.73, based on improved performance and sector re-rating. The upgrade reflects optimism about the core brand's recovery and better-than-expected sales trends, with a projected 13x FY21E P/E multiple, up from 10x. This suggests a more favorable valuation environment for the company.

Key Financial Highlights

Revenue and Net Income

Revenue (RMB mn): FY18A: 6,383 | FY19A: 8,183 | FY20E: 8,309 | FY21E: 9,399 | FY22E: 10,366
YoY Growth (%): FY18A: 24.8 | FY19A: 28.2 | FY20E: 1.5 | FY21E: 13.1 | FY22E: 10.3
Net Income (RMB mn): FY18A: 657 | FY19A: 728 | FY20E: 454 | FY21E: 622 | FY22E: 780
YoY Growth (%): FY18A: 60.6 | FY19A: 2.3 | FY20E: -39.7 | FY21E: 37.2 | FY22E: 25.4
EPS (RMB): FY18A: 0.295 | FY19A: 0.302 | FY20E: 0.182 | FY21E: 0.250 | FY22E: 0.313
Consensus EPS (RMB): FY20E: 0.204 | FY21E: 0.285 | FY22E: 0.341
P/E (x): FY18A: 8.7 | FY19A: 8.6 | FY20E: 14.3 | FY21E: 10.4 | FY22E: 8.3
P/B (x): FY18A: 1.1 | FY19A: 0.9 | FY20E: 0.9 | FY21E: 0.9 | FY22E: 0.8
Yield (%): FY18A: 6.9 | FY19A: 6.8 | FY20E: 4.2 | FY21E: 5.8 | FY22E: 7.2
ROE (%): FY18A: 12.3 | FY19A: 10.5 | FY20E: 6.4 | FY21E: 8.4 | FY22E: 10.1
Net gearing (%): Net cash across all years

Earnings Revision

Revenue: New estimates are slightly higher than old, with minimal changes.
Gross Profit: Slight decrease in FY20E, but increase in FY21E and FY22E.
EBIT: Increase in FY21E and FY22E, with a small rise in FY20E.
Net Profit Attributable: Increase in FY20E and FY21E, with a slight rise in FY22E.
Diluted EPS: Revised upwards by 1.0% for FY20E, 6.2% for FY21E, and 1.9% for FY22E.
Margins: Gross margin improved slightly in FY21E and FY22E, while EBIT margin increased in FY21E and decreased in FY22E. Net profit margin also showed improvement over the years.

Financial Summary

Net Cash from Operating: FY18A: 154 | FY19A: 778 | FY20E: 1,099 | FY21E: 737 | FY22E: 896
Net Cash from Investing: FY18A: -281 | FY19A: -2,045 | FY20E: -208 | FY21E: -141 | FY22E: -155
Net Cash from Financing: FY18A: -511 | FY19A: 1,039 | FY20E: -334 | FY21E: -336 | FY22E: -433
Net Change in Cash: FY18A: -637 | FY19A: -227 | FY20E: +558 | FY21E: +261 | FY22E: +308
Cash at End of Year: FY18A: 3,196 | FY19A: 2,970 | FY20E: 3,527 | FY21E: 3,788 | FY22E: 4,096
Total Net Assets: FY18A: 5,331 | FY19A: 6,960 | FY20E: 7,080 | FY21E: 7,366 | FY22E: 7,714

Main Points

Core Brand Recovery: Xtep's core brand sales growth accelerated in Q3 and Q4 2020, with double-digit growth in Sep and Oct 2020, outperforming MSD in Q3 2020. This is attributed to the earlier winter and better performance of online channels, particularly Tmall, as well as expansion to new platforms like VIPS and PDD.
Valuation Upgrade: The stock's valuation has improved, with a 13x P/E multiple for FY21E, indicating a re-rating due to sector performance and core brand recovery.
Target Price: Raised to HK$3.63, a 24.8% increase from the current price of HK$2.91.
Multi-Brand Store Performance: The first "X-STREET" store in Xiamen performed well, generating ~RMB 5mn in one day. It features Xtep, Palladium, Saucony, and Merrell products.
Saucony Focus: Xtep plans to open 30-50 stores in FY20E, with most under Saucony. However, breakeven may not be achieved until FY22E, with forecasted losses of RMB 36mn in FY20E and RMB 65mn in FY21E.
K-Swiss Turnaround: Due to the second wave of the pandemic in the US and Europe, the breakeven period for K-Swiss and Palladium is expected to be longer than 3.5 years.
Earnings and Margins: Earnings estimates have been revised upward, and operating margins have improved, with better opex control expected.
Shareholding Structure: Mr. Ding Shui Po & Family holds 53.89%, with a free float of 39.48%.
Stock Performance: The stock has shown strong short-term performance, with a 17.5% gain in 1 month and 25.5% in 3 months.
Valuation Comparison: Xtep's P/E is relatively low compared to peers like Anta and Li Ning, suggesting potential upside.

Key Information

Earnings Growth: Net profit attributable margin is expected to increase, with a 37.2% growth in FY21E and 25.4% in FY22E.
Inventory and Receivables: Both are expected to improve in 4Q20E, indicating healthier cash flow.
Discounts: Retail discounts are expected to remain at 30% to 35% off.
Dividend Policy: Xtep has a solid cash position, potentially leading to attractive dividends.
CMBIS Ratings: Xtep is rated BUY, indicating a potential return of over 15% over the next 12 months.
Analyst Certification: The analyst certifies that the report reflects personal views and that there are no conflicts of interest.

Conclusion

Xtep is showing signs of recovery in its core brand, supported by improved sales performance in both offline and online channels. The company's valuation has been re-rated, and the target price has been raised, reflecting improved financial health and better-than-expected earnings. Despite expected losses in the short term, the long-term growth potential and improved operating margins suggest a positive outlook, leading to an upgrade to BUY.

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