研究报告全文：16Mar2023CMBInternationalGlobalMarketsEquityResearchSectorUpdateChinaSportswearSectorWeexpectprudentguidancebutdecentmarginsEventhoughwearetrimmingourFY22EnetprofitforecastswebelieveChinaSportswearSectorthesectorhasalreadybottomedoutin1Q23Esupportedby1decentYTDretailsalesgrowth2turnaroundininventorylevelandretailWalterWOOdiscountsWhileweexpectamoreconservativeFY23Eguidancebythe85237618776brandswedoseedecentupsidesurprisesfromGPmarginwalterwoocmbicomhkimprovementshelpedbybetterretaildiscountsandcheaperinputcostsetcThereforeforbrandswithahigherDTCmixwebelievebrandslikeRaphaelTSEAnta2020HKandTopsports6110HKaregoingtooutperform85239000856raphaeltsecmbicomhkFactoringinthedragsin4Q22EchoingAdidass50YoYdeclineintheGreaterChinasalesin4Q22wearenotsurprisedtoseepressureforAnta2020HKsharepriceHK2020HKHSIrebasedvarioussportswearbrandsontheiroriginalFY22Eretailsalestargetmainly130duetothesharpdropinofflineSSSandtheassociatingoperating120deleverageduringlateOcttoearlyDec2022Apartfromthatwealso110expectthelistcolevelsalesandnetprofittobeadverselyaffectedasa100resultof1adjustmentsintradefairorders2buybackofinventoriesor390one-offsupportfordistributorstoclearinventoriesAsawholeoursales8070netprofitgrowthforecastforAntaLiNingandXtepare9-613602and262inFY22EMar-22Jun-22Sep-22Dec-22Mar-23RetailsalesgrowthYTDin2023improvedmeaningfullyvs4Q22butSourceBloombergCMBIGMestimatesaconservativeguidanceforFY23EisstilllikelyBasedonourchannelchecksandestimationsweareforecastingmid-teensmid-teenslow-Xtep1368HKsharepriceteensmid-teensretailsalesgrowthforAntaFILALiNingXtepin1Q23EHK1368HKHSIrebased16hugeimprovementfromthe-veHSD-velow-teens-veHSD-veHSDin15144Q22Thisisevidencedby1flattishsalesgrowthforPouShenginJan-13Feb2023vs20dropin4Q22and2robustretailsalesgrowthduring1211CNYabouthigh-teensmid-teensflattishgrowthfordomesticbrandsNike109AdidasetcSincecontributionfromCNYishugewebelievethenumbers8in1Q23EareprettymuchlockedinTherearecertainlymanypositive76catalystsforFY23Esuchas1absenceofCOVID-19outbreaksandsocialMar-22Jun-22Sep-22Dec-22Mar-23distancingmeasures2relaunchesofvarioussportingeventsMarathonsSourceBloombergCMBIGMestimatesfootballandbasketballcompetitionsetcand3reasonablydecenttradefairorderssalesgrowth10flattishfordomesticforeignbrandsButtoTopSports6110HKsharepriceerronthesideofcautionwewouldnotbesurprisedtoseethesportswearHK6110HKHSIrebasedbrandtostaycautiousandgiveoutaratherconservativeFY23Eguidance9asfollowsLiNingmid-teensretailsalesgrowthvsoriginaltargetofhigh-8teenstolow20sinFY22EAntahigh-teenretailsalesgrowthvsoriginal7targetof20inFY22Eand18-25CAGRduringFY20-25EFILA610retailsalesgrowthvsoriginaltargetof15inFY22EXtephigh-5teenslistedcolevelsalesgrowthvs23CAGRduringFY21-25E43OurpeckingordernowisAnta2020HKTopsports6110HKXtepMar-22Jun-22Sep-22Dec-22Mar-231368HKLiNing2331HKSourceBloombergCMBIGMestimatesValuationTableLiNing2331HKsharepriceHK2331HKHSIrebasedCompanyTickerRatingMktcapTPPriceUpdownPExPBxROE90HKmnLCLCsideFY1FY2FY2FY080Xtep1368HKBUY219901044834252081682113570Anta2020HKBUY2838451232510460183342636125560LiNing2331HKBUY17041973376465133412825126150361D1361HKNR7774na338na92780710340Topsports6110HKNR42478na453na1751403021330PouSheng3813HKNR3782na084na240570432Mar-22Jun-22Sep-22Dec-22Mar-23na98Dongxiang3818HKNR1972na026na02140SourceBloombergCMBIGMestimatesSourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk16Mar2023HowevermorepositivescouldbederivedfromGPmarginimprovementsbackedbybetterretaildiscountsandlowerinputcostsetcBasedonourchannelcheckswebelieveretaildiscountsimprovedalotin1Q23Efromthetoughin4Q22whichisnowcloserto3Q22levelbutnotyetreturnedtothatin1Q19drivenbyreduceddiscountsfornewproductsandabetternewoldproductmixForexampleweforecastXtepsretaildiscountstobeataround25-30offin1Q23Evs30offin4Q22and25offin1Q19and3Q22Thisisalsobackedbyturnaroundininventorytosalesratiowhichshouldhavebeenshortenedbyroughly05to10monthsin1Q23Evs4Q22WeseegreaterYoYimprovementsforAntaFILAthanXtepandLiNingMoreoverasthepricesofoilandsyntheticfiberhavecontinuedtodeclinesince2H22EplustheincreasesinASPMSDtoHSDfordomesticbrandswebelievetheGPmargininFY23EcouldbepositivelyaidedLastlywebelieveFILAAntaandTopsportscanbenefitmorefromthisturnaroundthankstotheirhigherthanaverageDTCsalesmixatabout10066and82inFY22Evs50and41forLiNingandXtepDomesticbrandsarestilloutperformingin1Q23Ebutforeignbrandsmaycatchupsince2Q23EForeignbrandsretailsalesgrowthwerestillslowervsdomesticbrandsin1Q23EwhereNikesretailsaleshadreturnedtopositivegrowthwhileAdidasisstillunderpressureespwithdragssuchas1YEEZYseriessalessuspensionand2activeinventoryclearancesbyAdidasinbothchannelsandfactoriesGoingforwarddrivenbylowbaseTier1citieswerehurtmorein1Q22andnormalizationofnewproductlaunchesandmarketingcampaignforeignbrandsretailsalesgrowthmaycatchuptodomesticbrandslevelsince2Q23EPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE216Mar2023OperatingnumbersFigure1Salesgrowthtrendbydomesticandoverseasbrand1000YoYgrowth80060040020000-200-400DomesticbrandsOverseasbrandsSourceCompanydataCMBIGMestimatesFigure2Salesgrowthtrendbydomesticbrands100YoYgrowth806040200-20-40XtepsretailsalesLiNinggroupsretailsalesAntabrandsretailsalesSourceCompanydataCMBIGMestimatesFigure3Salesgrowthtrendbyoverseasbrands170YoYgrowth130905010-30-70FILAsretailsalesNikeChinasalesAdidasChinasalesPouShengsalesSourceCompanydataCMBIGMestimatesNikesyearendisatMayeg4Q18calendaryear2Q19fiscalyearSep-Nov2018PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE316Mar2023Figure4XtepandPouShengsinventorytosalesratio8x77766666555555555555554444444432XtepPouShengSourceCompanydataCMBIGMestimatesFigure5Xtepsretailsalesdiscounts350300275250250250200150100XtepSourceCompanydataCMBIGMestimatesFigure6SalesmixbychannelwholesalevsDTCbybrandsFY22E10080415066608210040595020341800AntaFILAothersTopsportsLiNingXtepWholesaleDTCDirectretailE-commerceSourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE416Mar2023OperatingnumbersFigure7HistoricalsalesgrowthtrendbybrandOperatingnumbers1Q202Q203Q204Q201Q212Q213Q214Q211Q222Q223Q224Q22E1Q23E2Q23E3Q23E4Q23ENikeChinasales-4010801904209010-240-80-200-1306000200100100AdidasChinasales-58000-50701560-160-150-240-350-350-270-500-200150100400AntabrandsSSSG-ve20-veLow-veMid-veHigh-Antabrandsretailsales-veLSDveLSDveLSD40-4535-40-veMSDveMSD-veHSD16010021025025teensteensteens-ve20-veMid--veLow--veMid-Corebrand-veLSD-veMSD-veMSD35-4035-40veHSDveMSDveLSD25teensteensteens-ve20-veLow--veLow-veMid--veHigh-KidsveMSD45-50Over20veMSD20-25veLSDveHSD25teensteensteensteensOnlineveMSDOver40Over50Over25Over60Over4525-3030-35Over30veHSDveHSDveMSDveLow-veLow--veLow-FILAbrandsretailsales-veMSD20-2525-3075-8030-35veMSDveHSDveMSD-veHSD14016080150teensteensteens-ve20--veMid-ClassicCorebrandveMSDveMSDveMSD80Over20FlatFlat-veMSD-veDD-veLSD25teensveMid-veMid-veMid--veLow-Kids-veLSDOver30Over30Over20100Over40veHSDveLSDteensteensteensteensveMid-veLow-FusionveMSDOver70Over50Over50150Over80Over20-veMSDveLSDveHSDteensteensOnline160Over80Over9070-80Over40Over4020-2525-30Over20veMSDOver65Over40115-veLow-Otherbrands-veHSD25-3050-5555-6070-7535-4030-3540-4520-2540-45120teensveMid--veLow-DescenteOver6090Over801501005040-4540-45Over20Over35teensteens-veHigh--veHigh--veHigh-KolonveLSD20-2530-40Over75403040-45Over20Over55teensteensteensveLow-veLowveHighveLowveLow-veLow-LiNinggroupsSSSGna-veMSDveLSDnaveHSDteens80202020teens-veHigh-veLowveLowveMidveMid-veHigh-Directretailna-veMSDveHSDnaveMSDteens90302020teens-veLow-veLowveMidveHigh-veLow--veHigh-Wholesalesna-veMSDveMSDnaveHSDteens7020teensteensteensveLow-veMidveHighveLowveHighveMidveHighveMidveLow-E-CommercenaveLSDteens20303080302030teens-veHigh-veMid-veHighveLowveLowveLowveHighveMid-LiNinggroupsretailsales-veMSDveMSD-veHSD-9013013050280teensteens8090403020teens-veMid-veLow-veLowveHighveMidveHighveMidveLowDirectretailFlatveMSD-veHSD30teens908030203020-veHigh-veLow-veLowveLowveHighveHighveLowveLow-Wholesales-veHSD-veLSD-veHSDteensteens8090302020teensveLow-veHighveLowveMidveHighveMidveLowveMidveMidE-Commerce100veMSDteens2040309050403020XtepsSSSG-ve20-Mid50-veMid-veMid-Xtepsretailsales-veLSDveMSDveHSD30-3520-2530-3520-25-veHSD18070802302560teensteens361DegreesSSSG-ve20--veLow-veHigh-veLow-veHigh-veHigh-veLow-veMid-361Degreesretailsales-veHSDveLSD15-20Flat25teensteensteensteensteensteensteensPouShengsSSSG-325-178PouShengssales-25103-0310478-150-251-267-250-241-85-2047018070200-ve20--veHigh--veHigh-veHigh-Topsportsretailsales-veLSD25teens20teensveMid-veMidto-veLow-veLowveLow-veHigh--veLow-veMid-DongXiangsSSSG-veMSDveMSDveHSDtoHighHigh--veMSDtoMid-toMidSDtoMidSDteenstoMidSDteensSDteensteensveLow-veMidto-veMidto-veMid-ve25-veLow-veLow--veMid-DongXiangsretailsalesveMSD60-70toMid-High--veMSDHigh-veLSD20toto30MidSDteensteensteensteensteens30-ve30--veLow-DirectretailFlatveMSD70-7535teens-veLow-ve30-ve30-ve20-E-Commerce35-40teens353530SourceCompanydataCMBIGMestimatesNikesyearendisatMayeg4Q18calendaryear2Q19fiscalyearSep-Nov2018PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE516Mar2023PeersValuationFigure8Peersvaluationtable3yrs12mUpROEYieldPriceMktCapYearPExPBxPEGTPDown-xCompanyTickerRatingLCLCsideHKmnEndFY1EFY2EFY1EFY2EFY1EFY1EFY1EHsharesSportswearAntaSports2020HKBUY123251046018283845Dec-2133426373612552613LiNing2331HKBUY7337646513170419Dec-2134128260512612109XtepIntl1368HKBUY10448342521990Dec-2120816823211351427361Degrees1361HKNRna376na7774Dec-21927808071030639Topsports6110HKNRna685na42478Feb-2217514033302133043PouSheng3813HKNRna071na3782Dec-21240570404320805ChinaDX3818HKNRna034na1972Mar-22na9802021400034Avg22915229251141524Med22214023211351427InternationalSportswearNikeIncNKEUSNRna11900na1448126May-223783011251173734911AdidasADSGYNRna14204na212174Dec-22na3364943980010PumaPUMGYNRna5076na63534Dec-2220815728251491217UnderArmourUAAUSNRna833na27209Mar-231531331816na0900LululemonLULUUSNRna29510na295526Jan-22297260110864111400SkechersSKXUSNRna4308na52501Dec-2214711816141090700VfCorpVFCUSNRna2074na63262Apr-221009225221191086ColumbiaCOLMUSNRna8638na42152Dec-2216314524211591414WolverineWWWUSNRna1679na10401Dec-221128224194020127MizunoCorp8022JPNRna325000na5096Mar-221211060707813818AsicsCorp7936JPNRna349500na39146Dec-2226522736321251712Avg19417842371220718Med15814525221220912SourceBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE6MN16Mar2023CMBInternationalGlobalMarketsEquityResearchCompanyUpdateAntaSports2020HKSettobenefitmorefromahigherDTCmixTargetPriceHK12325PreviousTPHK12894DecentretailsalesgrowthYTDdespitethehighbaselastyearWithUpDownside178retailsalesgrowthatmid-teenslevelinJan2023webelievethemomentumCurrentPriceHK10460hassustainedintotheCNYin2023evenwiththehighbaseduetoWinterChinaConsumerDiscretionaryOlympicsThetrendisalsodecentinMar2023thankstothelowbaseHencewearenowforecastingmid-teensmid-teensretailsalesgrowthforWalterWOObothAntaFILAin1Q23EcomparedtoHSDdroplow-teensdeclinein85237618776walterwoocmbicomhk4Q22ThesetupisgoodbutwearecautiousonFY23EguidanceJustRaphaelTSEbecauseof1absenceofpandemicupto1530ofAntaFILAstores85239000856wereclosedduringthepeakofCOVID-192HSDtocloseto10raphaeltsecmbicomhkincreasesinASPand3theneedstoclearexcessiveinventoriesontopofStockDatathemid-teenslevel1Q-3Q23EtradefairsalesgrowthweareconfidentonMktCapHKmn2827682retailsalesgrowthinFY23EHoweverinourviewthemanagementcouldAvg3mthstoHKmn1085stillbecautiousandgiveoutaconservativeguidancelike151052wHighLowHK124006900retailsalesgrowthforAntaFILAinFY23ETotalIssuedSharesmn27033SourceFactSetButwedopreferAntaoverLiNinginFY23EduetoitshigherDTCsalesmixandtier1citiesexposurewhichcouldleadtobetterGPShareholdingStructureMrDingShizhongFamily545marginimprovementsDuringthisfirstphaseofChinare-openingevenBlackRockFund16thoughtheofflinefoottraffichasnotfullyrecoveredbutretaildiscounthasSourceHKExalreadynarrowedquicklyespwhentheintentionforpricewarislowThereforeinthiscasebrandswithahigherDTCmixorlowerwholesaleSharePerformanceAbsoluteRelativemixsuchasAntaandFILAcouldbenefitmorethanLiNingandXtep1-mth-2044TheoutdoorsportsisstillinhugedemandDuringthelatest3-83-mth7667WomenfestivalinChinaover78subcategoriesunderthesportswear6-mth13499SourceFactSetsegmentreported100YoYincreaseinsalesgrowthincludingproductsliketrailrunningshoeshikingshoescyclingjacketssunprotectionjackets12-mthPricePerformanceetcontheJDcomplatformduring3to8Mar2023MaintainBUYwithTPofHK12325basedon31xFY23EPEabout1sdabovethe5yearsaverageof26xsupportedby20NPCAGRduringFY21-25EItiscurrentlytradingat26xFY23EPEEarningsSummaryYE31DecFY20AFY21AFY22EFY23EFY24ESourceFactSetRevenueRMBmn3551249328538916279471772YoYgrowth4738992165143OperatingprofitRMBmn882611372106001301415649NetprofitRMBmn55690821907812399277120399EPSReportedRMB186277260330400YoYgrowth3249262271213PEx474314334263217PBx9981715950Yield0715101318ROE234292234254257NetgearingNetcashNetcashNetcashNetcashNetcashSourceCompanydataBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE7MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk16Mar2023EarningsrevisionFigure9EarningsrevisionNewOldDiffRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue53891627947177253891630127140000-0305Grossprofit33051388414495633051391004433800-0714EBIT10600130141564910600136301586000-45-13Netprofitatt7242920311161724296281130800-44-13DilutedEPSRMB25973300400225973452405500-44-13Grossmargin6136196266136216210ppt-02ppt05pptEBITmargin1972072181972162220ppt-09ppt-04pptNetprofitattmargin1341471561341531580ppt-06ppt-03pptSourceCompanydataCMBIGMestimatesFigure10CMBIGMestimatesvsconsensusCMBIGMConsensusDiffRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue5389162794717725336362625733841003-22Grossprofit3305138841449563243238672456621904-15EBIT106001301415649108731374216589-25-53-57Netprofitatt72429203111617306946111605-09-27-38DilutedEPSRMB259733004002270934944283-42-56-66Grossmargin61361962660861862206ppt01ppt04pptEBITmargin197207218204219226-07ppt-12ppt-08pptNetprofitattmargin134147156137151158-03ppt-05ppt-03pptSourceBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE816Mar2023ValuationFigure11Forward12MPEvaluationbandSourceBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE916Mar2023AssumptionsFigure12MajorassumptionsMajorassumptionsFY20AFY21AFY22EFY23EFY24ESalesbysegmentgrowthShoes113507150180125Apparels1332155157158Accessories1836580120120Total4738992165143SalesbybrandgrowthAnta-109675120150130AntaKids-370500220160150FILA18125100130110DescenteOthers354511300310260E-commerce138202190230190Total4738992165143SalesnetworkAnta68516422665266826702AntaKids30712981255126212671FILA20062054195420542154DescenteOthers457459505630840Total1238511916116621198712367GPmarginsAnta447522548551553FILA693705680690700Others659710690690720Total582616613619626OpexbreakdownAPExpensessales100124125112110Labourcostssales125135143148150RDexpensessales5959626160Rentalexpensessales104116121126124Sellingdistributioncostssales303360378374371Adminexpensessales6059646160OPmarginAnta283206193201212FILA258247200210220Others84184190220230Total258223196206217Effectivetaxrate312269270260260NPattmargin145157134147156NPattgrowth-34496-62271213SourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1016Mar2023FinancialSummaryINCOMESTATEMENT2019A2020A2021A2022E2023E2024EYE31DecRMBmnRevenue339283551249328538916279471772Costofgoodssold152691486118924208402395326816Grossprofit186592065130404330513884144956Operatingexpenses110341288820681238522733430957Sellingexpense97211076617753204452345826560Adminexpense52312511812213323512635RDexpense7898711116127415251762Others000000Operatingprofit8752882611372106001301415649Otherincome112710631649140115071651ShareoflossesprofitsofassociatesJV63360181108314431EBITDA10101931611944113421358316201Depreciation389414443474329317Otheramortisation96176129268240234Interestincome168271392417511613Interestexpense278407443423423423Otherincomeexpense000000Pre-taxprofit8008808911240107021341616270Incometax238425203021288934884230Minorityinterest280407499570725879Netprofit5624556982197812992812040BALANCESHEET2019A2020A2021A2022E2023E2024EYE31DecRMBmnCurrentassets233213271739902454205396263514Cashequivalents82211532317592240053019037620Accountreceivables6309661469147554880110060Inventories440554867644610972198082Prepayment000000STbankdeposits438650246989698969896989Othercurrentassets0270763763763763Non-currentassets178981915022766228862338524125PPE214821842853313435584102InvestmentinJVsassos1055196589027913594499879Intangibles6781579153112811060844Othernon-currentassets452157299355933693189299Totalassets412185186762668683067734787639Currentliabilities124121171515943169061868220426Short-termborrowings135919681748174817481748Accountpayables296323763146346539824458Taxpayable122515071816181618161816Othercurrentliabilities68655864923398781113512404Non-currentliabilities77461432815062150621506215062Long-termborrowings66441245611425114251142511425Othernon-currentliabilities110218723637363736373637Totalliabilities201572604331005319683374435488Sharecapital261261261261261261Retainedearnings144031818522663252693140338379Otherreserves541855675999749879048597Totalshareholdersequity200822401328923330283956847237Minorityinterest97918112740331040354914Totalequityandliabilities191022220226183297183553342323PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1116Mar2023CASHFLOW2019A2020A2021A2022E2023E2024EYE31DecRMBmnOperatingProfitbeforetaxation8008808911240107021341616270Depreciationamortization1350490572742569551Taxpaid213321812677288934884230Changeinworkingcapital117834612821858582377Others918452030083151098Netcashfromoperations7485745811861107281002412207InvestingCapitalexpenditure5126491360754754861Acquisitionofsubsidiariesinvestments5518494000Others1200211903215000Netcashfrominvesting1306519234669754754861FinancingDividendpaid141714042456313726633492Netborrowings77333343196000Proceedsfromshareissues709210000Sharerepurchases000000Others235659552295423423423Netcashfromfinancing467012294947356030863915NetchangeincashCashatthebeginningoftheyear9284822115323175922400530190Exchangedifference15333824000Others91067642245641361847431Cashattheendoftheyear82211532317592240053019037620GROWTH2019A2020A2021A2022E2023E2024EYE31DecRevenue4084738992165143Grossprofit47110747287175157Operatingprofit5650928868228203EBITDA7027828250198193Netprofit3281047649271213PROFITABILITY2019A2020A2021A2022E2023E2024EYE31DecGrossprofitmargin550582616613619626Operatingmargin258249231197207218EBITDAmargin298262242210216226ReturnonequityROE314253311252274277GEARINGLIQUIDITYACTIVITIES2019A2020A2021A2022E2023E2024EYE31DecNetdebttoequityx020204050607Currentratiox192825272931Receivableturnoverdays679680512512512512Inventoryturnoverdays105313471474107011001100Payableturnoverdays708584607607607607VALUATION2019A2020A2021A2022E2023E2024EYE31DecPE480474314334263217PEdiluted480474314334263217PB6877111756352PCFPS190256280238255209Divyield120811101217EV278045027686422713872264973925878942513588EVSales827855494135EVEBITDA275297227234191155SourceCompanydataCMBIGMestimatesNoteThecalculationofnetcashincludesfinancialassetsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE12MN16Mar2023CMBInternationalGlobalMarketsEquityResearchCompanyUpdateXtep1368HK4Q22dragsandback-loadedFY23EgrowthTargetPriceHK1044PreviousTPHK1152TheworstshouldbeoverbutwestillhavetofactorinthenegativesinUpDownside252FY22EGiven1tradefairordersadjustmentsin2H22E2lowerthanCurrentPriceHK834expectedGPmarginforinventoryclearanceespfore-commerceduringChinaConsumerDiscretionarydouble11anddouble12festivaland3one-offsubsidiesgiventodistributorswearecuttingFY22E23E24Enetprofitestby454WalterWOOYTDretailsalesgrowthcontinuedtobestrongpartlydrivenby85237618776walterwoocmbicomhkinventoryclearanceandXtepKidsAfterthedecentretailsalesgrowthduringpre-CNYabout20highlightedbymanagementwebelievetheRaphaelTSEgrowthremainedquickinFeb-Mar2023Henceweareforecastinghigh-85239000856teensgrowthfor1Q23Epartlyduetoitseffortstode-stockasinventoryraphaeltsecmbicomhkclearanceremainsthetoppriorityMoreoverbasedonourchannelcheckStockDataitschildrenswearsalesgrowthisstillrapidandbeingakeydriverMktCapHKmn219746Salesgrowthin1H23Ecouldstillbeslowerthanthatin2H23EWhileAvg3mthstoHKmn9352wHighLowHK1478685managementisguidingmid-teenslistedco-levelsalesgrowthitcouldbeTotalIssuedSharesmn26348slowerin1H23EbecauseofitshigherwholesalerevenuemixSourceFactSetWestillthinkXtepsriskrewardisattractiveWestillthinktherisksShareholdingStructurerewardforXtepishighasitsFY25EtargetremainshighlyintactsupportedMrDingShuiPoFamily490byitssmallerscaleplusitsrobuste-commerceandXtepKidsretailsalesJPMorganChase46growthComparingtoAntaLiNings2021NPCAGRduringFY21-SourceHKEx25EwebelieveXteps26NPCAGRismoreattractiveespwhenitisSharePerformanceonlytradingat17xFY23EPEvsAntaLiNings26x28xAbsoluteRelativeMaintainBUYwithTPofHK1044basedon21xFY23EPEabout11-mth-92-323-mth-138-145sdhigherthanthe5yearsaverageof15xsupportedby26NPCAGR6-mth-204-229duringFY21-25EItiscurrentlytradingat17xFY23EPESourceFactSet12-mthPricePerformanceEarningsSummaryYE31DecFY20AFY21AFY22EFY23EFY24ERevenueRMBmn817210013126571491217326YoYgrowth01225264178162OperatingprofitRMBmn9181396143517822199SourceFactSetNetprofitRMBmn5050889491351176514950EPSReportedRMB021036041047060YoYgrowth316721143167265PEx340191208168132PBx2422232220Yield1731243645ROE72119113135159NetgearingNetcashNetcashNetcashNetcash11SourceCompanydataBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE13MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk16Mar2023EarningsrevisionFigure13EarningsrevisionNewOldDiffRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue126571491217326125231439516447113653Grossprofit517061567203522660937032-111024EBIT143517822199149018782287-37-51-38Netprofitatt9261170148196412371545-40-54-41DilutedEPSRMB035804440562037204700586-40-54-41Grossmargin408413416417423428-09ppt-1ppt-12pptEBITmargin113119127119130139-06ppt-11ppt-12pptNetprofitattmargin737885778694-04ppt-07ppt-08pptSourceCompanydataCMBIGMestimatesFigure14CMBIGMestimatesvsconsensusCMBIGMConsensusDiffRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue126571491217326127401486717817-0603-28Grossprofit517061567203521161857480-08-05-37EBIT14351782219914171787223813-03-17Netprofitatt9261170148194311931494-18-19-08DilutedEPSRMB035804440562036004560573-08-26-19Grossmargin408413416409416420-01ppt-03ppt-04pptEBITmargin11311912711112012602ppt-01ppt01pptNetprofitattmargin737885748084-01ppt-02ppt02pptSourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1416Mar2023AssumptionsFigure15MajorassumptionsMajorassumptionsFY20AFY21AFY22EFY23EFY24ESalesbysegmentRMBmnShoes50475928719783889844Apparels29643887524862987242Accessories161198211226240Total817210013126571491217326SalesbysegmentgrowthShoes85175214165174Apparels-114312350200150Accessories-129225707060Total-01225264178162SalesbysegmentRMBmnMassmarket71018841109871287014805Athleisure999971126614151683Professionalsports72201403627838Total817210013126571491217326SalesbysegmentgrowthYoYMassmarket-79245243171150Athleisure1144-28304118189Professionalsports609918031006554337Total-01225264178162SalesnetworkXtep49714722462847664909Xtepkids8001179152116731790Overseastores250250300300300Total60216151644867396999GPmargins391417408413416OpexbreakdownAPsales112102108113115Staffcostssales121111104103102RDsales2725262525DAsales2017151514Provisionswritebackssales07-02080300Rentalsales0101030404Sellingdistributioncostssales188189198198195Adminexpensessales129119121115113Total317308318313308OPmargins112139113119127Effectivetaxrate337309320310300Netprofitattmargins6391737885Netprofitattgrowth-29577120263266SourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1516Mar2023ValuationFigure16Forward12MPEvaluationband200HK180160140120100806040200007x79x151x223x295xLastpriceSourceBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1616Mar2023FinancialSummaryINCOMESTATEMENT2019A2020A2021A2022E2023E2024EYE31DecRMBmnRevenue8183817210013126571491217326Costofgoodssold4632497358357487875610123Grossprofit355031984178517061567203Operatingexpenses262525883081402646735333Sellingexpense171815371891250029533381Adminexpense711827937119713471519RDexpense195223252329373433Others000000Operatingprofit12349181396143517822199Otherincome308307299291298329ShareoflossesprofitsofassociatesJV2174644258EBITDA13229961480156719492381Depreciation816471107127130Otheramortisation71413264052Interestincome29421443935Interestexpense14014485919191Otherincomeexpense000000Pre-taxprofit11217621287134317042134Incometax390257397430528639Minorityinterest481913511Netprofit73150588991311761495BALANCESHEET2019A2020A2021A2022E2023E2024EYE31DecRMBmnCurrentassets9266902710432115171253713634Cashequivalents297034723930327828532401Accountreceivables291032363528446052546105Inventories10469751497192122472598Prepayment8188991443182321482496STbankdeposits151743733333333Othercurrentassets581111Non-currentassets305735444183445047795195PPE6627961119145518512327InvestmentinJVsassos197218365320295287Intangibles810709671642599545Othernon-currentassets138818202028203220352037Totalassets123231257214615159661731718830Currentliabilities367133344053500257546564Short-termborrowings1086642405405405405Accountpayables142014792352301835304081Taxpayable11586123123123123Othercurrentliabilities105011271173145516971955Non-currentliabilities169119392580256725722582Long-termborrowings126915161375137513751375Othernon-currentliabilities4234231205119211971207Totalliabilities536252736633756883269146Sharecapital222223232323Retainedearnings440846715020518156496241Otherreserves253026052940319433193419Totalshareholdersequity696072997982839889909684Minorityinterest0001382Totalequityandliabilities696072997982841189999681PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1716Mar2023CASHFLOW2019A2020A2021A2022E2023E2024EYE31DecRMBmnOperatingProfitbeforetaxation11217621287152418172272Depreciationamortization887884132167182Taxpaid334325329430528639Changeinworkingcapital36320447788693740Others133125107165068Netcashfromoperations7783207014238131144InvestingCapitalexpenditure97207414443522606Acquisitionofsubsidiariesinvestments169443000Others25478489000Netcashfrominvesting2045573329443522606FinancingDividendpaid436279356540633840Netborrowings38677312000Proceedsfromshareissues1190370000Sharerepurchases360000Others9855764000Netcashfromfinancing103938096540633840NetchangeincashCashatthebeginningoftheyear319629703472393032782853Exchangedifference11111000Others227513469652425452Cashattheendoftheyear297034723930327828532401GROWTH2019A2020A2021A2022E2023E2024EYE31DecRevenue28201225264178162Grossprofit25599306237191170Operatingprofit18225652128242234EBITDA19724648659244222Netprofit9231076127288271PROFITABILITY2019A2020A2021A2022E2023E2024EYE31DecGrossprofitmargin434391417408413416Operatingmargin151112139113119127EBITDAmargin162122148124131137ReturnonequityROE11971116112135160GEARINGLIQUIDITYACTIVITIES2019A2020A2021A2022E2023E2024EYE31DecNetdebttoequityx030202010000Currentratiox252726232221Receivableturnoverdays129814451286128612861286Inventoryturnoverdays824715937937937937Payableturnoverdays111910851471147114711471VALUATION2019A2020A2021A2022E2023E2024EYE31DecPE247340191208168132PEdiluted247340191208168132PB150924232120PCFPS130200272627285204Divyield241731243645EV186496194903198163203433206768209607EVSales232420161412EVEBITDA14119613413010688SourceCompanydataCMBIGMestimatesNoteThecalculationofnetcashincludesfinancialassetsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE18MN16Mar2023CMBInternationalGlobalMarketsEquityResearchCompanyUpdateLiNing2331HKTurningaroundbutstilldraggedbyGPmarginTargetPriceHK7337PreviousTPHK7308Retailsalestrendshouldbesimilartopeersin4Q22andshouldhaveUpDownside135turnedaroundin1Q23EWeestimatethatitsretailsalestofallbyHSDinCurrentPriceHK64654Q22inlinewithbothAntaandXtepandtoincreasebylow-teensinChinaConsumerDiscretionary1Q23Ewhichisalreadyadecentlevelespwhenweconsiderthehighbaselastyearhigh-20sincreasein1Q22WalterWOOFactoringinthedragsin4Q22Factoringin1themissinretailsalesin85237618776walterwoocmbicomhk4Q222widenedretaildiscountsin4Q22Evs3Q22and3adjustmentsin1Q-3Q23EtradefairsalesorderswearenowrevisingdowntheFY22ERaphaelTSE23E24Enetprofitby149885239000856raphaeltsecmbicomhkNochangeinFY25EguidancebutthetargetinFY23EshouldnotbeaggressiveWithnochangeinindustrypotentialandcompanysStockDatacompetitivenesswebelieveLiNingwouldreiterateitslong-termtargetMktCapHKmn1691597double-digitretailsalesCAGRduringFY21-25EHoweverwithpotentiallyAvg3mthstoHKmn70352wHighLowHK81004060slowerASPgrowthweareonlyexpectingitsmanagementtoprovide15TotalIssuedSharesmn26165retailsalesgrowthguidanceinFY23ESourceFactSetWepreferLiNinglessmainlybecauseofitsGPmarginpressureinShareholdingStructure1H23EWedoagreethatLiNingsinventorylevelisindustryleadingandVivaChinaHoldings104remainedextremelyhealthyCMBIestataround45to50monthsevenFidelityManagement44in4Q22Butitsretaildiscountscouldstillbehighin1Q23EcomparedtoResearchCoSourceHKExthatin1Q22whichmaylimititsGPmarginexpansionin1H23EMaintainBUYwithTPofHK7337basedon32xFY23PEupfromSharePerformanceAbsoluteRelative29xatparwith5yearsaverageof32xsupportedby21NPCAGRduring1-mth-89-30FY21-25EItiscurrentlytradingat28xFY23EPE3-mth41326-mth-26-56SourceFactSet12-mthPricePerformanceEarningsSummaryYE31DecFY20AFY21AFY22EFY23EFY24ERevenueRMBmn1445722572256172983334056YoYgrowth42561135165142OperatingprofitRMBmn21965136516963457344SourceFactSetNetprofitRMBmn1698540109401344981560504EPSReportedRMB068158183209250YoYgrowth1251336161140194PEx804340341282232PBx15667595143Yield0409091013ROE195190170194202NetgearingNetcashNetcashNetcashNetcashNetcashSourceCompanydataBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE19MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk16Mar2023EarningsrevisionFigure17EarningsrevisionNewOldDiffRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue256172983334056269103135035802-48-48-49Grossprofit128451515317363136731601918359-61-54-54EBIT516963457344577667177766-105-55-54Netprofitatt408050176086475255146585-141-90-76DilutedEPSRMB158190231183209250-141-90-76Grossmargin501508510508511513-07ppt-03ppt-03pptEBITmargin202213216215214217-13ppt-02ppt-01pptNetprofitattmargin159168179177176184-17ppt-08ppt-05pptSourceCompanydataCMBIGMestimatesFigure18CMBIGMestimatesvsconsensusCMBIGMConsensusDiffRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue256172983334056264853168738056-33-59-105Grossprofit128451515317363133491638019886-38-75-127EBIT516963457344540968838536-44-78-140Netprofitatt408050176086446155826907-86-101-119DilutedEPSRMB158190231172214264-82-110-126Grossmargin501508510504517523-03ppt-09ppt-13pptEBITmargin202213216204217224-02ppt-05ppt-09pptNetprofitattmargin159168179168176181-09ppt-08ppt-03pptSourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE20