Xtep (1368.HK) National policy supporting industry development, multi-brand strategy opening up 1st-tier market October 11, 2019 385

PSR Recommendation: ACCUMULATE Status: Initiation
Target Price: HKDHKD5.15

Investment Summary
Xtep is placed as a brand management company with a clear brand image focusing on
professional running that distinguishes it from the industry. Transforming from a fashion
sportswear company to a Chinese runners’ favorite brand, Xtep continued to rank first among
all domestic brands and fourth among all global sports brands in international class marathons
held in Beijing, Shanghai, Guangzhou and Xiamen, with the market share ranging from 10%
to 20% in 2018. The plan, named “Outline for Building a Leading Sports Nation”, was
released recently by the State Council, aimed at helping accelerate China’s overall sports
development. According to the outline, by 2035, 45 percent of the population is expected to
get involved in medium intensity exercise three times a week, up from 33.9 percent in 2018.
The country is also developing a robust sports industry bolstered by sports-related
consumption, production of sports goods and sports leisure and tourism into a strong pillar of
economic growth by 2050, according to the plan. According to Frost & Sullivan, China
became the world’s second largest sports footwear and apparel retail market after the U.S. in
terms of total retail sales value in 2018, and it is also among the fastest growing major
markets in the world. The total retail sales value of China’s sports footwear and apparel retail
market increased at a CAGR of 12.8% from 2014 to 2018, and is expected to grow at a
CAGR of 10.2% until 2023.

About the author

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Tracy Ku
Investment Analyst

Graduated from Chinese University of Hong Kong, majoring in Economics for Bachelor Degree, and Journalism for Master Degree. Worked in financial news industry for more than four years.
Currently cover retailing, property sectors and IPOs. Good at analysis for the companies with economic policies and industry prospects.

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