XTEP: Distribution Network Is Growing Rapidly.

XTEP group (1368) is mainly engaged in the design, development, manufacture and marketing of sporting goods (including footwear, clothing and accessories), and sells XTEP brand and Colin brand owned by the group, as well as the Disney sports brand with Chinese franchise.

According to Euromonitor International data, the XTEP brand of the group is the largest mainland fashion sporting goods brand in 2007, accounting for 3.4% of the total Chinese sporting goods market in 2007.

In 2007, the fashion sporting goods market accounted for about 17% of China's total sports market.

XTEP group distributes its brand products through a nationwide distribution network, covering all 31 provinces, autonomous regions and municipalities directly under the central government.

In March 31, 2008, the group's distributors network was composed of 28, 31 and 30 XTEP, Disney sports series and Colin brand distributors.

The distributors have direct or third party management 4678, 265 and 50 retail outlets respectively.

The group is the first company in the industry to promote group brands and products with entertainment stars. Meanwhile, the group has also increased its popularity through sponsoring sports activities.

The group is the sole sporting goods partner of the Tenth National Games and the exclusive title winner of the Chinese women's Basketball League A and the National Men's Basketball League.

The group has also been involved in the promotion of the Beijing Olympic Games by being the exclusive sponsor of only one of the four Olympic trains (XTEP Olympic train). Besides, the group is the only Chinese sporting goods company that successfully purchased all the finals of the Beijing Olympic Games during the period of television advertising.

In the three fiscal years as of 2005, 2006 and December 2007, the total revenue of the company was about RMB 297 million 400 thousand yuan (the same below), 483 million 600 thousand yuan and 1 billion 364 million 900 thousand yuan respectively, with a compound annual growth rate of 114.2%, and the annual profits were 8 million 200 thousand yuan, 50 million 100 thousand yuan and 221 million 900 thousand yuan respectively.

The rapid growth of performance mainly benefited from the increase in product demand and price increase.

The R & D team has the advantage. As of April 30, 2008, the group's product design team and R & D team have about 370 employees. The above teams have excellent achievements in mastering and responding to the market and trend trend and the new technology of market sporting goods, and have developed about 6000 sporting goods designs for the group's fairs held in 2008 2 and March, including about 1700 different shoe designs, 2900 different service installations and 1300 different accessories designs.

In the past three fiscal years, group R & D expenditure accounted for 1.1%, 1.3% and 1.2% of total revenue.

Although the company has a wide distribution network, the company relies more on the third party distributors and retailers, and its control capability is very limited.

Over the past three fiscal years, revenue from independent distributors has accounted for 33.7%, 83.4% and 93.3% of the group's total sales.

Therefore, if a distributor fails to comply with the group's retail policy, it will adversely affect the sales of the group.

The Olympic marketing input will also cost a large amount of cost and expenditure generated by the group in the past and expected to continue to build brand activities, which is expected to account for 49% of the total advertising and marketing budget in 2008.

If such brand and marketing activities fail, it may have a negative impact on the group's business, financial position and business performance.

In the case of HK $5.5, the company's expected price earnings ratio in 08 years will be 23.3 times earnings. Compared with the 08 years' 23.8 times expected price earnings ratio of Anta sports (2020), the company's valuation is reasonable, but there is no obvious advantage.

But the company has invested heavily in Olympic marketing. Taking into account the upcoming Olympic Games in Beijing, it will have a positive impact on the company.

It is suggested that speculative subscription be made.

(excerpts) the number of shares issued on the Hongkong public offering stock market 550000000 shares * 55000000 shares (or may adjust) the number of shares of international placement, 495000000 shares * excessive sale, 82500000 shares of the total number of shares issued after the public offering, the total number of shares issued 1632500000 shares, 4.05 to 5.50 Hong Kong dollars, 07 years actual price earnings ratio (basic) 17.1 times -23.3 times, the closing date May 26th (noon 12), the price date May 27th listing date June 3rd sponsor JPMorgan, UBS *, or will be changed due to the exercise of over allotment of shares.