Daiwa has released a research report upgrading XTEP INT'L (01368) from a "Hold" to an "Outperform" rating, with the target price raised from HK$3.7 to HK$4. The firm believes the worst period has passed for the company, and current valuations appear attractive. Daiwa now projects Xtep's full-year net profit to reach RMB 1.162 billion, with an estimate of RMB 1.383 billion by 2027.

In its report, Daiwa noted that Xtep's first-half revenue fully aligned with its expectations, which were already below both the company's guidance and market consensus. Net profit, however, exceeded forecasts, driven by better-than-expected gross margins. While short-term demand, competition, and weather conditions may still pose headwinds, the current forward price-to-earnings ratio of 6.8 times and a dividend yield of 7-8% are believed to have largely priced in most near-term pressures, making the risk-reward profile increasingly compelling.

Furthermore, Daiwa highlighted that the weaker performance expected in 2026 will establish a more favorable comparison base for 2027. As approximately 700 stores complete their direct-to-consumer (DTC) transition over the next two years, alongside improvements in store layout and operational efficiency, Xtep's brand sales are anticipated to return to positive growth.