UBS Group released a research report stating that it reaffirms TOPSPORTS (06110) as a "Buy," reducing the earnings per share forecast for 2025 to 2027 by 24% to 40% to reflect sales pressure and higher sales discounts, with the Target Price lowered from HKD 6.6 to HKD 3.6.
In the third quarter of the 2025 fiscal year, TOPSPORTS reported a year-on-year sales decline in the middle single digits, with retail channels performing slightly better than wholesale and exceeding the bank's expectations; online sales increased by double digits. However, TOPSPORTS management maintains its guidance, indicating that revenue and net profit for the 2025 fiscal year are expected to drop by high single digits and 35% to 45%, respectively.
UBS Group stated that although TOPSPORTS will prioritize clearing inventory in the short term, it believes the valuation is attractive, anticipating that the dividend yield will be supported by potential improvements in gross margin after this year's large-scale promotions and inventory adjustments, instilling confidence in the group's dividend-paying ability. Additionally, the bank expects the group's revenue and net profit for the 2025 fiscal year to decline by 7% and 38%, closely aligning with the company's guidance, while revenue and net profit for the 2026 fiscal year are expected to rise by 3% and 20%, respectively.