Guosen Securities released a research report stating that it maintains the profit forecast for TOPSPORTS (06110), expecting the net income for the fiscal years 2025-2027 to be 1.44/1.79/1.92 billion yuan respectively, with year-on-year changes of -35.1%/+24.5%/+7.6%. The reasonable valuation range is set at 3.8-4 HKD, maintaining an "outperform market" rating. In the third quarter of fiscal year 2025, the total sales amount of the group's retail and wholesale business experienced a mid-single-digit year-on-year decline. As of November 30, 2024, the gross sales area of directly-operated stores decreased by 2.1% compared to the end of the previous quarter and by 4.4% compared to the same period last year.
The bank indicated a bullish outlook on the company's operational resilience and long-term Cash / Money Market returns. Since the beginning of this year, the growth rate of revenue and the number of stores has declined primarily due to weak macro consumer demand and a decrease in offline foot traffic. The company's current primary goal is to maintain healthy inventory, and it is expected that there will be significant improvement in inventory by the end of this fiscal year. The management maintains its guidance this fiscal year, and the pessimistic expectations are relatively sufficient; the next fiscal year is expected to achieve healthy growth based on healthy inventory, while channel adjustments are also expected to stabilize. Additionally, based on the company's strong cash-generating ability, a high dividend payout is laid out, with a mid-term payout ratio reaching 99%, and it's expected to reach 100% for the full year.
On the brand side, the company's main brand Adidas has performed excellently this year, with revenue growth in the Greater China region reporting high single digits in the first three quarters. The company has raised its full-year guidance three times, expecting overall revenue growth of 10%; Nike is in a period of adjustment, and its performance growth has been relatively poor this year. The FY25Q2 results, as of the end of November, will be disclosed on December 19, and if the guidance is positive, it is expected to drive the valuation of TOPSPORTS higher. In the future, with the appointment of the new CEO, Nike is expected to restore its core competitiveness in product innovation, and with new products being launched, Nike's performance in FY2026 is likely to recover, combined with an improved market environment due to China's Consumer stimulus policies, the fundamentals of TOPSPORTS will have good elasticity. Additionally, among the company's non-main brands, the outdoor racing brand maintains a high level of prosperity.
