20231218-招银国际-滔搏-06110.HK-Turnaround_continues_after_a_resilient_3Q24_9页_1mb

Topsports (6110 HK) – Turnaround Continues, Outperforming Expectations

Despite macroeconomic uncertainties and headwinds from peers, Topsports maintained a resilient performance in its 3Q24, achieving low-teens retail sales growth (marginally below CMBI estimate). Key strengths include improved brand performance across categories, balanced sales growth, healthy inventory levels (inventory-to-sales ratio < 4 months), and a positive net promoter score.

Key Highlights & Outlook:

• Earnings & Growth: CMBI projects 8% YoY retail sales growth in Q4-24E, lifting full-year estimates to 9% and 12%. POS indicates continued monitoring amid late CNY 2024 season timing.
• Margin/Pricing Power: GP margin remains stable at 42.5-42.8% (FY25E), supported by improved retail discount control and boosted direct sales contribution.
• Item/mp4 Stock:</mark>
  • Target Price: HK$9.23 (51% upside, unchanged from previous TP). Trading at 18x FY25E PE, highly attractive vs. 4-year avg. PE of 13x.
  • Valuation outperforming sector peers (Avg. PE 11.7x), driven by high sales velocity, long-term NP growth forecasts, and recovery from recent de-stocking cycles.
• Recommendation: Maintain BUY rating; recommendation unchanged.

Performance Snapshot:

Risk Factors & Market Position:

• Concerns: Rising inventory levels at peer outfit Pou Sheng (impact of broader sportswear segmentation).
• Strengths: Leading transitions to digital sales (+ teens level YoY), solid brand equity, and operational efficiencies reducing staff & G&A costs (-26% for S&D). Strategy focus on CNY peak season, boosting promotions / Seasonal items.

Investment Thesis Summary:

Topsports has shown operational efficiency improvements in discount management and profitability gains. Strong balance sheet positions it favorably for resilience in an uncertain market. Sustainability strong in terms of valuation relative to industry norms; key risks are competition margins and overall retail confidence.

Key Data Points:

Conclusion:

BUY rating reflected in 51% upside opportunity. Sound operational performance, normalized stores, and favorable market positioning underpin strong price appreciation potential relative to sector average PE.