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Goldman Sachs adjusted its stance on Xtep International (1368:HK) (OTC: XTEPY), increasing the price target to HK$6.70 from the previous HK$6.60, while reiterating a Buy rating on the stock.
The revision follows Xtep's disclosure of its first half of 2024 financial results, which demonstrated robust sales and a net income that surpassed Goldman Sachs' estimates by 5%. The performance was largely attributed to the core Xtep brand.
Xtep International reported a strong operating cash flow along with its first-half results for the year. The company's management, during an analyst briefing, expressed a cautious outlook for top-line growth in the second half of 2024, citing potential risks to consumer demand. However, despite this conservative view on revenue growth, the company's profit projections remain unchanged.
The management strategy includes maintaining a tight grip on the sell-in and inventory levels to avoid excess. Additionally, the company is focused on stringent control of selling, general, and administrative expenses (SG&A), particularly in the latter half of the year. These measures are expected to contribute to maintaining profitability.
Furthermore, Xtep International is progressing with its plan to spin off its K&P brand, an event that is anticipated to further enhance earnings once finalized.
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