On September 29th, Peak Sporting Goods Co., Ltd. successfully listed on the Hong Kong Stock Exchange. In an interview with NetEase following the close of trading, CEO and Executive Director Xu Zhihua emphasized that the main purpose of Peak's listing was not to raise funds but to secure a higher platform to support the company's consistent international strategy.
Xu Zhihua highlighted during his exclusive talk with NetEase that this listing would enable Peak to achieve a more prominent position on the global stage and mark the beginning of the company's capital internationalization. He further noted that the next phase of the company's plan would focus on advancing talent and R&D internationalization. As part of its internationalization strategy, Peak intends to recruit international talent to explore overseas markets and establish R&D centers for sports shoes and sportswear in the U.S. and Italy.
"Traditionally, the Chinese and international markets were treated separately, with China's resources being used solely for the Chinese market. Peak's approach, however, is to leverage global resources to serve the Chinese market," Xu Zhihua explained. "Our internationalization strategy began in 2005, aiming ultimately to achieve the internationalization of our brand, capital, talent, R&D, and market."
Xu Zhihua elaborated further on the reasoning behind the company's internationalization strategy. He recalled that in 2004, the 47 sports brands in Fujian province were all investing heavily in CCTV advertising. This homogeneity led to intense competition, forcing Peak to seek differentiation. "Our differentiation lies in two aspects," Xu explained. "Firstly, we focus on specialization, using athletes as brand endorsers to create a professional brand image driving the leisure market. Secondly, we promote brand internationalization by sponsoring international basketball events and using endorsements from international stars."
Xu Zhihua emphasized that utilizing international resources to enhance the brand not only provides cost advantages but also strengthens the brand's global presence. Through partnerships with international events like the NBA, Peak has made significant progress toward achieving international recognition.
Despite focusing on internationalization, Xu Zhihua stressed that the market remains firmly rooted in China. "Although we've been exploring international markets and international sales account for about 10% of our total, we don't want to give the impression that we neglect the domestic market. The Chinese market is growing rapidly and holds immense potential. We'll continue to dedicate our resources to the domestic market for the foreseeable future."
He acknowledged the challenges of entering global markets, stating that while market internationalization is the ultimate goal, it requires substantial investment and effort. "Only by strengthening our position in the Chinese market can we build the necessary strength to compete internationally."
Xu Zhihua expressed disappointment with how Hong Kong investors viewed the company's listing. He felt that the short-term stock price performance didn't reflect the true value of the company. "Hong Kong investors underestimate the development potential of the sports goods market in mainland China," he remarked. He pointed out that the consumption of sports brands in the Chinese market is just beginning, and as lifestyles change, the demand for sporting goods will surge, creating vast opportunities for the industry.
He noted that sports goods are a mature industry in Western countries but remain a sunrise industry in mainland China. The current market is transitioning from fragmentation to consolidation, and the top 7-8 brands are poised for significant growth. "I believe that within a few years, China will see a billion-dollar sports brand emerge."
Xu Zhihua also mentioned that as an emerging industry, the average P/E ratio of Hong Kong's sports goods sector is lower than the overall market level, which he considered abnormal. He believed that Hong Kong investors fail to recognize the untapped potential of the mainland market, and the company would work to improve communication with investors.
Surprisingly, Xu Zhihua saw the financial crisis as an opportunity for Chinese sports brands. Post-crisis, consumer habits shifted toward affordability, and Chinese brands' price-performance advantage became more pronounced. Market sales data confirmed this trend, showing a rise in Chinese brand sales and a decline in foreign brands.
Xu Zhihua reiterated that Peak's commitment to specialization would remain unchanged. The company plans to expand into tennis, football, and running after its listing. "In expanding our business, we will continue to follow the path of specialization and internationalization. We will invite top athletes in these fields to endorse our brand and drive the popular leisure market through a professional brand image."
Regarding the family-controlled nature of the company, Xu Zhihua mentioned that before the introduction of Sequoia Capital, Peak had already adopted a strategy of "family management socialization." While family members sit on the board, other departments are managed by professional managers. He argued that this structure allows for rapid decision-making and resource concentration, which is advantageous in China's fast-changing market.
However, he also noted that as the company grows, it is gradually increasing the authority given to professional managers. This shift reflects the evolving needs of the business as it matures and expands globally.
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