Xtep International (1368 HK) Rating Maintain BUY A soft 3Q19 but still on the right track Target price HK$6.34 From HK$6.83 Current price HK$4.44 Upside.+42.7% Soft 3Q19 triggered sell off, still on track to achieve FY19E guidance Company Update Xtep posted a relatively soft 3Q19 operational data, with both SSSG and retail sales slightly decelerated to ~10% and ~20% Yoy (vs. mid-teens/>20% in 2Q19), 23 October 2019 with retail discount widened to 22-25% (vs. 20-25% in 2Q19). Xtep’s share price tumbled 16% after the release. Xtep attributed the mild slow down to warm Hayman Chiu weather, which hurt the retail sales of the newly launched fall winter products.
[email protected] Xtep added that retail performance in the first half of October returned to similar levels as in July/August with similar retail discount in 3Q19, while inventory level (852) 2235 7677 continue to stay at a healthy level of ~4 months. Trading Data Though having faced a mild 3Q19, we believe Xtep is still on track to achieve its 52-Week Range (HK$) 6.74/3.81 FY19E revenue growth guidance of ~20%, driven by low teens growth in shoes 3 Mth Avg Daily Vol (m) 10.19 and ~30% growth in apparel, while keeping a stable GM in our view. No of Shares (m) 2,499.7 Market Cap (HK$m) 11,524.9 JV with Wolverine, K-Swiss and Palladium still in ramp up/ restructure Major Shareholders (%) Group Success (54.1%) stage, negligible contribution in the near term Auditors Ernst & Young Result Due FY19: Mar 2020 The acquisition of E-Land Footwear USA (incl.