Xtep International (01368.HK) Revenue growth in FY2022 better than market expectations with Professional sports brands maintain rapid growth Improvement of inventory turnover & discount level in 1Q2023 June 14, 2023 189

PSR Recommendation: ACCUMULATE Status: Maintained
Target Price: HKD9.61

Xtep International principally engages in the design, development, manufacturing, sales,
marketing and brand management of sports products covering footwear, apparel and
accessories for adults and children. With a diverse brand portfolio encompassing the core
Xtep brand, K-Swiss, Palladium, Saucony and Merrell to strategically target the mass market,
athleisure and professional sports segments, has an extensive global distribution network and
more than 8,000 stores in Asia-Pacific, North America and EMEA.
Revenue growth in FY2022 better than market expectations and ahead of peers
In FY2022, Xtep’s revenue rose 29.1% to RMB12,930.4 million (FY2021: RMB10,013.2 million),
slightly better than market expectations, and ahead of peers. Profit attributable to ordinary
equity holders of reached RMB921.7 million (FY2021:RMB908.3 million), a slight increase of
1.5%. Net profit margin amounted to 7.1% (FY2021: 9.1%). Basic EPS was RMB36.6 cents
(FY2021:RMB36.4 cents). The total dividend for FY2022 is HK20.1 cents (FY2021: HK25.0
cents), equivalent to a dividend payout ratio of 50.0% (FY2021: 60.0%).
During the year, overall gross profit margin decreased by 0.8 percentage points to 40.9%
(FY2021: 41.7%). The decrease in the overall gross profit margin was mainly contributed by
the change in product mix, margin contributions from different brands and products sold.
Selling and distribution expenses amounted to RMB2,690.2 million (FY2021: RMB1,891.5
million), representing 20.8% (FY2021: 18.9%) of the total revenue. The increase mainly from
the increase in advertising and promotional costs and staff costs. Due to increase in
advertising campaigns, the advertising and promotional costs for the year amounted to
RMB1,537.3 million (FY2021: RMB1,019.7 million), representing 11.9% (FY2021: 10.2%) of the
total revenue. Although the operating profit for the year rose moderately by 4.9% to
RMB1,464.3 million (FY2021: RMB1,396.2 million), due to the decrease in operating profit
margin from mass market and athleisure during the year, caused the operating profit margin
decreased by 2.6 percentage points.
As of 31 December 2022, the turnover days for inventories and trade payables increased by
13 days and 1 day to 90 days and 121 days respectively, while the turnover days for trade
receivables decreased by 9 days to 98 days, resulting in an increase in overall working capital
turnover days by 3 days to 67 days

About the author

Profile photo of Eric Li

Eric Li

李浩然先生(Eric Li) 高級分析師 現任現為輝立証券持牌高級分析師,曾任職股票基金、家族辦公室及證券公司等,擁有多年的證券研究部門從業及投資經驗,並先後於香港最暢銷的財經媒體撰寫投資專欄。畢業於香港理工大學電子計算系。 Eric is currently a licensed research analyst at Phillip Securities. Prior to joining Phillip Securities, he has years of equity research and investment experiences in asset management company, family office and securities company. Meanwhile, he has written investment columns in Hong Kong`s best-selling financial media for years. He holds Bachelor of Arts in Computing from The Hong Kong Polytechnic University.

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