Investment Rating - The report maintains a "Buy" rating for the company, indicating a strong performance relative to the market [5][22]. Core Insights - The company's FY26 Q1 operational performance met expectations, with a slight decline in sales but a stable inventory situation. The overall consumer demand is slowly recovering, and the company is innovating its sales strategies to mitigate the impact of declining foot traffic [5]. - The company is expanding its outdoor segment by partnering with international brands, aiming to enhance its market presence and profitability [5]. - The focus remains on high-quality growth in the sports apparel retail sector, with ongoing collaborations with major brands like NIKE and Adidas [5]. Financial Data and Profit Forecast - Revenue projections for FY2024 to FY2028 are as follows: - FY2024: 289.3 billion RMB - FY2025: 270.1 billion RMB (down 7% YoY) - FY2026E: 259.4 billion RMB (down 4% YoY) - FY2027E: 273.4 billion RMB (up 5% YoY) - FY2028E: 290.7 billion RMB (up 6% YoY) [2][14] - Net profit forecasts for the same period are: - FY2024: 22.1 billion RMB (up 21% YoY) - FY2025: 12.9 billion RMB (down 42% YoY) - FY2026E: 12.9 billion RMB (flat YoY) - FY2027E: 14.2 billion RMB (up 10% YoY) - FY2028E: 15.5 billion RMB (up 9% YoY) [2][14]. - The company's gross margin is projected to be 41.8% in FY2024, decreasing to 38.4% in FY2025, with a gradual recovery expected thereafter [2][10]. Market Data - As of June 27, 2025, the closing price of the company's stock was 3.12 HKD, with a market capitalization of 19.348 billion HKD [3][5]. - The stock has experienced a 52-week high of 4.37 HKD and a low of 2.11 HKD, indicating volatility in its market performance [3].

Core Viewpoint - The company reported a mid-single-digit year-on-year decline in total sales for the first quarter of fiscal year 2026, with retail performing better than wholesale and direct online channels outperforming offline channels [1][2] Sales Performance - For the first quarter of fiscal year 2026, total sales in retail and wholesale business decreased by mid-single digits year-on-year, continuing the trend from FY25 Q3-Q4 [2] - Direct store sales area decreased by 1.3% compared to the previous quarter and by 12.3% year-on-year, with the decline in store numbers being managed through the closure of inefficient and loss-making stores [2] Inventory Management - As of the end of May, total inventory decreased year-on-year, aligning with sales trends, and the inventory-to-sales ratio remained stable [2] - The company is cautiously managing new orders and brand partner controls, indicating potential for optimization in inventory age structure while maintaining overall control [1][2] Discount Strategy - The increase in direct online sales proportion has led to a deeper discount in the first quarter, although the extent of discounting has moderated compared to the previous quarter [1][2] Investment Outlook - The company is expected to gradually improve profitability due to its operational resilience and long-term cash returns, despite uncertainties in the current consumer environment and high industry discount levels [3] - The main brand client, Adidas, has maintained strong growth globally and in Greater China, with optimistic guidance for FY2025, anticipating high single-digit growth in currency-neutral revenue [3] - The company has also increased its focus on the outdoor segment, becoming the exclusive agent for brands like Norda, Norrona, and soar in the Chinese market, indicating potential for future growth [3] Profit Forecast - The company maintains its profit forecast, expecting net profits of 1.3 billion, 1.46 billion, and 1.63 billion yuan for fiscal years 2026, 2027, and 2028, representing year-on-year growth of 0.7%, 12.6%, and 11.5% respectively [3] - The reasonable valuation range is maintained at 3.8 to 4.0 HKD, corresponding to a PE ratio of 17 to 18 times for fiscal year 2026, with an "outperform the market" rating [3]

Market Overview - The market experienced a strong performance yesterday but faced a quick decline today, with the Hang Seng Index closing down 0.61% [1] - UBS warned that the current short squeeze in the US stock market may be nearing its end, with their tracked short squeeze index rising 43% recently [1] - Apollo Global's chief economist predicts a slowdown in US GDP growth to 1.2% by 2025, with inflation remaining around 3% and unemployment potentially rising to 4.4% or higher [1] Economic Indicators - Concerns were raised by Jerome Powell regarding the reliability of economic data collected by US government agencies, suggesting potential overestimations due to budget cuts [1] - The Hong Kong Monetary Authority bought HKD 94.2 billion (approximately RMB 86.13 billion) to support the currency, indicating liquidity tightening in the market [2] Sector Performance - The securities sector failed to maintain its upward momentum, with leading firms like Guotai Junan International seeing a drop of over 4% [3] - The Hong Kong government announced a new policy to promote digital assets, aiming to position the city as a global innovation hub in this field [3] - Consumer sectors are gaining attention, with the "Hong Kong Happy Shopping Festival" set to offer over HKD 1.9 billion in discounts, attracting significant participation from brands [5] Company Developments - Rongchang Bio announced a deal with VorBio for USD 125 million in cash and warrants, but the market reacted negatively, viewing the price as too low [4] - Li Ning's major shareholder has been increasing their stake, which is expected to support the company's operational stability [8] - Li Ning's revenue from running products is projected to grow by 25% in 2024, with core categories like running, basketball, and training accounting for 64% of retail revenue [9] Stock Movements - Stocks in the aviation sector are expected to rise due to increased ticket bookings for the summer travel season, with domestic bookings up about 5% year-on-year [7] - The military sector saw gains following comments from Trump regarding potential conflicts, with companies like China Shipbuilding Defense and AVIC rising over 6% and 1.68% respectively [6] - The weakening US dollar has led to a rise in commodity stocks, with companies like Minmetals Resources and China Hongqiao seeing increases of over 4% [5]

Investment Rating - The investment rating for the company is "Outperform the Market" (maintained) [1][5][17] Core Views - The company reported a mid-single-digit year-on-year decline in total sales for the first quarter of the 2026 fiscal year, with retail performing better than wholesale, and direct online sales showing positive growth compared to offline channels [2][3][4] - Inventory management is on track, with total inventory decreasing year-on-year, and the inventory-to-sales ratio remaining stable [3][4] - The company is expected to gradually improve profitability due to its operational capabilities, with a focus on long-term cash returns and high dividend levels [3][8] Summary by Sections Sales Performance - For the first quarter of the 2026 fiscal year, total sales decreased by a mid-single-digit percentage year-on-year, continuing the trend from the previous fiscal year [2][4] - Direct online sales accounted for 40% of total direct sales, showing positive growth, while offline channels are still affected by weak foot traffic [4] Inventory and Discounts - As of the end of May, total inventory decreased year-on-year, and the inventory-to-sales ratio remained stable [3][4] - The increase in direct online sales has led to a deeper discount in the first quarter, although the extent of the discount has moderated compared to the previous quarter [3][4] Financial Forecasts - The company maintains its profit forecasts, expecting net profits of 1.3 billion, 1.46 billion, and 1.63 billion yuan for the fiscal years 2026, 2027, and 2028, respectively, representing year-on-year growth of 0.7%, 12.6%, and 11.5% [3][8][9] - The reasonable valuation range is maintained at 3.8 to 4.0 HKD, corresponding to a price-to-earnings ratio of 17 to 18 times for the fiscal year 2026 [3][8]

Company Overview - CICC maintains the EPS forecast for Tmall (06110) at 0.21/0.26 HKD for FY26/27, with the current stock price corresponding to 12/10 times FY26/27 P/E, maintaining an outperform rating [1] - The target price is raised by 10% to 3.40 HKD, corresponding to 15/12 times FY26/27 P/E, indicating a 19% upside potential from the current stock price [1] Recent Performance - In Q1 FY26 (March to May), Tmall's total sales in retail and wholesale declined in the mid-single digits year-on-year, consistent with the company's expectations [2][3] - The retail channel's sales decline was less severe than that of the wholesale channel, primarily due to a double-digit drop in same-store traffic [3] - The total sales area of direct-operated stores decreased by 1.3% compared to the end of February, and by 12.3% year-on-year, although the average sales area per store continued to grow year-on-year [3] - Online sales grew year-on-year, with online direct sales accounting for approximately 40% of total direct sales [3] Inventory and Discounts - By the end of May, the total inventory decreased year-on-year, with the inventory-to-sales ratio remaining stable, aligning with management's expectations for inventory optimization [3] - The retail business experienced deeper discounts year-on-year due to inventory optimization and an increase in online business share, although the extent of discounting eased compared to the previous quarter [3] Category Performance - The professional sports category outperformed the overall market, while the mass sports category performed at an average level, and the sports leisure category faced relatively greater growth pressure [3] Future Outlook - In Q2 FY26, offline sales continue to be pressured by weak customer traffic, and online channel competition remains intense, particularly during the 618 shopping festival [4] - Management expects improvements in some brand orders in FY26 as product optimization and new elements are gradually introduced [4] - The company maintains its guidance for FY26, expecting net profit to remain flat year-on-year, with an improvement in net profit margin [4]

Investment Rating - The report maintains a full-year performance guidance with expectations for flat profit and cautious gross margin, while net profit margin is expected to improve year-on-year due to optimized expense ratios [3][10]. Core Viewpoints - The overall sales revenue for retail and wholesale operations in 1Q FY25 declined by a mid-single-digit percentage year-over-year, aligning with the company's progress plan amid a stable consumer environment [2][8]. - Direct-to-consumer online sales accounted for 40% of total direct sales in 1Q FY25, up from 30-40% for the full year last year, indicating a strategic shift towards online channels [2][10]. - The company is focusing on improving online efficiency and optimizing inventory management, with a cautious approach to discounting and inventory control [2][10][12]. Summary by Sections Sales Performance - Total sales revenue (pre-tax) for retail and wholesale operations in 1Q FY25 saw a mid-single-digit percentage decline year-over-year, attributed to a high base from the previous year [2][8]. - Offline foot traffic remained weak, with same-store foot traffic declining by double digits, while direct-to-consumer online sales grew significantly [2][8]. Promotional Activities - The promotional atmosphere during the 618 shopping festival was strong, with the company effectively managing multiple small peaks, resulting in profits meeting expectations [3][9]. - Consumer behavior showed rational decision-making, with increased acceptance of new products and a willingness to pay for quality [3][9]. Operational Strategy - The company continues to optimize its channel area, with a 1.3% quarter-on-quarter decrease in gross sales area of directly operated stores, a slower pace than the previous quarter [4][11]. - Collaborative brands are expected to see improved order volumes, with proactive adjustments in product offerings and a focus on high-quality items [12][13]. Brand Partnerships - The company adheres to an exclusive partnership model in China, recently announcing exclusive agency rights for several brands, including high-end outdoor and running brands [5][13]. - The introduction of new brands is aimed at enhancing consumer engagement and expanding market reach, particularly in the outdoor and running segments [5][13].

Core Viewpoint - The company, Tabo, has achieved an MSCI ESG rating upgrade from BBB to AA, becoming the first and only AA-rated enterprise in China's sports goods industry, reflecting significant progress in its environmental, social, and governance (ESG) practices [2][4]. Financial Performance - For the fiscal year 2024/25, Tabo reported a revenue of 27.01 billion yuan and a net profit of 1.29 billion yuan, marking a 41.9% decline in net profit, which is the lowest since its listing [2][12]. - The total number of Tabo's direct-operated stores decreased from 6,144 in 2024 to 5,020 in 2025, a reduction of 1,124 stores or 18.3% [7][9]. ESG Initiatives - Tabo implemented various measures for green operations, including a 3.4% reduction in direct energy consumption to 822.0 MWh and a 14.0% decrease in water usage to 13,270.7 cubic meters [4][5]. - The company has set a carbon reduction target to decrease absolute greenhouse gas emissions by 40.2% by the fiscal year 2034/35 and has begun detailed assessments of Scope 3 emissions [4][14]. Store Closures and Operational Efficiency - The company closed an average of nearly four stores daily, leading to a total reduction of 3,375 stores over seven years, representing a closure rate of approximately 40.2% [7][9]. - The closure of low-efficiency stores has contributed to a decrease in overall energy consumption and waste generation, aligning with Tabo's ESG goals [9][10]. Employee Metrics - Tabo's workforce decreased to 27,279 employees, down by 2,179 from the previous year, with an employee turnover rate of 34.35%, an increase of 2.26% [10]. - Despite the reduction in employee numbers, Tabo reported a slight increase in revenue per employee from 982,000 yuan to 990,000 yuan, a rise of 0.82% [10]. Brand Diversification - To reduce reliance on core brands like Nike and Adidas, which account for 86.3% of revenue, Tabo is expanding its partnerships with high-end niche brands, although challenges remain in market recognition and pricing strategies [12][14]. - Over 70% of Tabo's brand partners have set carbon reduction targets, with 50% committing to carbon neutrality by 2050 [13].

Financial Performance - Revenue for the fiscal year ending February 28, 2025, was RMB 27,012.9 million, a decrease of 6.6% from RMB 28,933.2 million in the previous year[6] - Gross profit decreased to RMB 10,383.4 million, down 14.1% from RMB 12,080.8 million, resulting in a gross margin of 38.4% compared to 41.8% last year[6] - Profit attributable to equity holders decreased by 41.9% to RMB 1,286.0 million, down from RMB 2,213.0 million, leading to a profit margin of 4.8% compared to 7.6% previously[6] - Operating profit fell to RMB 1,592.7 million, a decline of 42.8% from RMB 2,786.5 million, with an operating margin of 5.9% versus 9.6% last year[6] - The company's total revenue for the fiscal year decreased by 6.6% year-on-year to RMB 27,012.9 million, impacted by weak consumer demand and declining offline foot traffic[17] - Gross profit margin fell by 3.4 percentage points to 38.4%, while profit attributable to equity holders decreased by 41.9% to RMB 1,286.0 million, resulting in a profit margin of 4.8%[17] Cash Flow and Dividends - The company generated a net cash inflow from operating activities of RMB 3,755.3 million, an increase of 20.0% year-on-year, which is 2.9 times the profit attributable to equity holders[8] - The board proposed a final dividend of RMB 2.00 per share and a special dividend of RMB 12.00 per share, resulting in a total dividend payout ratio of 135.0%, an increase of 34.1 percentage points year-on-year[8] - Cash and cash equivalents increased by 32.3% year-on-year to RMB 2,587.4 million, despite a 43.5% decline in pre-tax profit[18] - The company maintained a high dividend payout ratio of 135.0%, with total dividends distributed since its listing amounting to RMB 12.96 billion[18] Inventory and Management - Inventory decreased by 4.5% year-on-year, aligning with revenue trends, and the average inventory turnover period improved[9] - The company implemented a dynamic forecasting model to enhance inventory management and improve cash flow amidst challenging market conditions[9] - Inventory management improved, with total inventory amount effectively controlled and turnover efficiency recorded as improved by the end of the fiscal year[25] - As of February 28, 2025, the group's inventory net amount is RMB 6,004.0 million, with a cumulative impairment provision of RMB 218.6 million recognized in the consolidated income statement[187] Store and Sales Performance - The total number of stores decreased by 18.3% year-on-year to 5,020, with a total sales area reduction of 12.4%[20] - Online sales, including both public and private domains, experienced double-digit growth year-on-year, with direct online sales accounting for 30%-40% of total direct sales[24] - The company launched new retail experience spaces, including concept stores, to cater to the dual needs of functionality and social interaction for younger consumers[22] - The sales contribution from members accounted for 93.2% of total in-store retail sales (including VAT) as of August 31, 2023[30] Strategic Partnerships and Brand Development - The company has formed deep partnerships with over 20 brands, expanding its brand matrix to include diverse running and outdoor brands for the Chinese market[12] - The company launched the SOAR Running brand in China, focusing on high-performance and personalized running gear, with plans for online flagship stores and offline presence[31] - The partnership with the high-end outdoor brand Norrøna aims to enhance brand promotion and market penetration in China, leveraging both online and offline strategies[32] Sustainability and ESG Initiatives - The company achieved a significant milestone in sustainable development, receiving LEED Gold certification for its green stores, showcasing its commitment to ecological responsibility[13] - The company's ESG rating improved by two levels to AA, reflecting its leadership in the Chinese consumer goods industry[13] - The company has set a ten-year carbon reduction target in response to the UN Sustainable Development Goals and national carbon neutrality objectives[34] - The group is committed to reducing the environmental impact of its business activities and has complied with relevant laws and regulations[112] Corporate Governance and Board Structure - The board consists of two executive directors, three non-executive directors, and three independent non-executive directors as of February 28, 2025[133] - The board held a total of five meetings during the fiscal year ending February 28, 2025, in accordance with operational and business development needs[138] - All independent non-executive directors confirmed their independence in writing, ensuring compliance with listing rules[140] - The company has adopted a corporate governance code and believes it has complied with all applicable provisions for the fiscal year ending February 28, 2025, except for one[132] Risk Management and Internal Controls - The audit committee is responsible for overseeing the financial reporting process of the group[196] - The company has established an internal audit department that operates independently and conducts audits based on an annual plan approved by the audit committee[165] - The company has implemented a comprehensive review of the risk management and internal control systems for the fiscal year ending February 28, 2025[166] - The company has identified significant risks affecting its strategic objectives, prioritizing them based on likelihood and impact[164] Employee and Stakeholder Engagement - The total number of employees as of February 28, 2025, is approximately 27,279, with 17.0% male and 83.0% female[158] - The group emphasizes corporate social responsibility, ensuring fair treatment of employees and contributing to the community while providing quality products and services[174] - The company has established a whistleblowing policy allowing employees and business partners to report misconduct confidentially[173] - The board is committed to maintaining effective communication with investors and shareholders through regular financial reports, investor briefings, and shareholder meetings[176]

Investment Rating - The investment rating for the company is "Buy" and is maintained [6]. Core Views - The company achieved a revenue of 27.01 billion yuan for FY2025, a year-on-year decrease of 6.6%, and a net profit attributable to shareholders of 1.29 billion yuan, down 41.9%, which met expectations. The second half of FY2025 recorded a revenue of 13.96 billion yuan, a decline of 5.4%, and a net profit of 410 million yuan, down 52.9%. The total dividend for the year was approximately 1.7 billion yuan, with a dividend yield of 135%, exceeding expectations, primarily due to cash flow performance significantly outpacing net profit [2][4]. Summary by Sections Financial Performance - For FY2025, the company reported total revenue of 27.01 billion yuan, a decrease of 6.6% year-on-year, and a net profit of 1.29 billion yuan, down 41.9%. The second half of FY2025 saw revenue of 13.96 billion yuan, a decline of 5.4%, and a net profit of 410 million yuan, down 52.9%. The annual dividend was around 1.7 billion yuan, with a dividend yield of 135%, attributed to strong cash flow performance [2][4]. Profitability and Cost Management - The company's gross margin for FY2025 decreased by 3.4 percentage points to 38.4%, mainly due to increased discounting and a higher proportion of online sales. The selling and administrative expense ratios were 29.4% and 3.7%, respectively, benefiting from a 1.3% reduction in rental costs. The company closed approximately 1,100 stores, resulting in a total of 5,020 stores, which improved operational efficiency [8]. Inventory and Cash Flow - The company significantly optimized its inventory, with inventory turnover days decreasing by 1 day to 135 days and inventory down 4.5% year-on-year to 6 billion yuan. Operating cash flow increased by 20% year-on-year to 3.76 billion yuan, while accounts receivable decreased by 600 million yuan to 750 million yuan [8]. Future Outlook - The company is expected to face revenue pressure in FY2026 due to store closures and cautious procurement. The overall revenue is projected to decline, with net profit estimates for FY2026 and FY2027 at 1.32 billion yuan and 1.42 billion yuan, respectively, corresponding to P/E ratios of 12.57X and 11.74X [10].

Core Viewpoint - The financial report of the sports retail giant, Tmall, for the fiscal year 2024/25 shows a significant decline in revenue and net profit, indicating challenges faced due to brand dependency and strategic adjustments by key partners [2][6]. Financial Performance - Total revenue for the fiscal year reached 27.0129 billion RMB, a year-on-year decrease of 6.8% [3][5]. - Net profit was 1.286 billion RMB, down 41.89% year-on-year, marking a five-year low [2][3]. - The gross profit margin was 38.4%, while the operating profit margin was 4.8% [3]. Brand Contribution - Nike and Adidas together contributed over 80% of total revenue, with Nike's sales in Greater China dropping by 17% [2][5]. - Revenue from other brands was 3.5048 billion RMB, accounting for 13% of total revenue, indicating a weak contribution from non-Nike and non-Adidas brands [5]. Strategic Adjustments - Tmall is restructuring its channel strategy, transforming physical stores into "experience centers" and enhancing online presence through WeChat mini-programs, resulting in a significant increase in direct online sales [3][4]. - The company is also diversifying its brand portfolio by partnering with high-end outdoor brands like Norrøna and Soar, aiming to reduce reliance on Nike [4]. Market Challenges - Despite efforts to diversify, Tmall faces challenges in improving short-term performance, particularly with new brands that may struggle against local competition and consumer awareness [5][6]. - The financial report reflects the anxiety of traditional sports retail agents in adapting to brand dependency and channel transformation [6].