报告名称：Xtep International(01368.HK)Evolving from fashion to a performance sports brand
报告类型：港股研究
报告日期：2016-03-16
研究机构：招商证券香港
股票名称：特步国际
股票代码：01368
页数：9
简介：FY15 earnings up 30% YoY on revenue and margin improvement
Maintain BUY on attractive valuation (9x FY16E P/E and 6%dividend yield) and potential re-rating justified by Xtep’s successfulevolution from fashion to performance sports brand
FY15 earnings up 30% YoY, in line with expectations
Earnings grew 30% YoY to RMB623mn driven by revenue growth andGPM expansion while FY15 DPS was HK21cents (60% payout ratio, inline with FY14). Revenue grew 11% YoY as all product segments sawrevenue growth from demand increase, destocking of old apparelinventory and significant increase from e-commerce revenue. GPMexpanded 1.5ppt YoY to 42% due to higher contribution fromperformance sports products (higher quality and ASP). SG&A expensesremained at 28% of revenue despite a 25% YoY increase in A&Pexpenses (15% of revenue vs FY14’s 13%) as it was offset by a declineof receivables provision from RMB128mn in FY14 to RMB32mn in FY15.
Performance products to continue as growth driver
As one of the leading sports brand in China, shown by its ranking as topselling sports footwear brand by volume on Tmall and with the highestcustomer satisfaction. Going forward, Xtep will continue to evolve from afashion to a performance sports brand (in FY15, performance productsaccounted for c.55% of sales vs c.30% in the past) which will in turnimprove demand and GPM. We also expect SG&A expense growth tonormalize going forward as A&P spending stabilizes to 13-14% ofrevenue, in line with its historical ratio. Meanwhile, e-commerce revenueaccounted for low double digits of FY15 revenue (FY14: single digit) andwe expect the revenue contribution to continue increasing.
Re-rating on successful brand evolution
We lift our FY16E/17E earnings by 6% on a lower effective tax rate butmaintain our HK$4.88 TP with EPS increase offset by lower HK$ to RMBexchange rate estimate (HK$1.20 to HK$1.15 per RMB). We maintain ourFY16E target P/E at 13x (2SD above Xtep’s 8x mean forward P/E) asXtep deserves re-rating given: i) China’s sportswear sector growth and ii)Xtep’s successful evolution from a fashion to a performance sports brand.Our target 13x P/E is reasonable as it is in line with sector average andour FY16E/17E EPS are in line with consensus.

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