20231024-招银国际-滔搏-06110.HK-Turnaround_is_on_track_despite_bumpy_sales_11页_1mb

Summary of Topsports (6110 HK) Report

• Company Update: Topsports is undergoing a turnaround despite macroeconomic uncertainties. The company is trading at a 12x FY25E P/E ratio, which is attractive compared to the 4-year average of 13x and the 21% 3-year NP CAGR.

• 1H24 Performance: Sales grew by 7% YoY to RMB 14 billion, missing CMBI estimates by 5%, primarily due to one-off drags from Adidas (suspension of Yeezy sales and closures). Net profit increased by 17% YoY to RMB 1.34 billion, in line with CMBI estimates, driven by stronger-than-expected operating leverage from digitalization, improved store efficiency, and store revamps.

• Outlook: Sales growth is expected to accelerate in 2H24 and FY25, supported by Adidas turnaround, popular products, celebrity endorsements, and stabilized selling areas. The company anticipates margin improvements from better inventory control, higher sales per store, and efficiency gains.

• Valuation and Rating: Maintain BUY rating with revised target price to HK$9.23 (up 50% from current HK$6.16), based on 18x FY25E P/E. Earnings and financial metrics have been revised upward for FY24-26 due to weaker-than-expected sales but stronger operating leverage.