We are impressed by Xtep’s 4Q20 performance with a faster than peers growth and healthier inventory level. Therefore, we find its risk reward attractive and expect a further re-rating. Maintain BUY and raise TP to HK$5.09, based on 14x FY22E P/E (rolled over from 13x FY21E). It is trading at 14x/ 11x FY21E/22E P/E.
- 4Q20 retail sales growth beat, driven by greater brand upgrades. Xtep reported a HSD core brand retail sales growth in 4Q20, beating CMBI’s est. of 5% YoY, which accelerated from MSD in 3Q20 and even faster than Anta’s LSD growth. Apart from earlier and colder winter, Xtep had carried out series of upgrades on marketing, products, e-commerce and offline stores. For example: 1) its style of marketing approach during double 11 was much younger than before, 2) it had launched more Chinese culture products (e.g. Tiancheng series/天乘系列) and crossovers (e.g. Xtep x Shaolin / 特步x少林), 3) opened more flagship stores (e.g. “X-STREET” in Xiamen and Xtep’s 9th generation format store in Shenzhen).
