TOPSPORTS(06110) 光大证券·2024-10-24 07:40Investment Rating - Maintain "Overweight" rating with a target price of HKD 2.84 [1] Core Views - The company's H1 FY2024/25 revenue and net profit attributable to shareholders decreased by 7.9% and 34.7% YoY respectively, with a dividend payout ratio of 99.4% [1] - The company's performance is under pressure due to weak retail demand, but it maintains a high dividend policy and expects retail recovery driven by policy stimulus [2] - The company is adjusting its offline store structure, focusing on store efficiency, and expanding its online presence through live streaming [2] Financial Performance - H1 FY2024/25 revenue was RMB 13.05 billion, down 7.9% YoY, while net profit attributable to shareholders was RMB 870 million, down 34.7% YoY [1] - Gross margin decreased by 3.6 percentage points to 41.1%, mainly due to increased promotional efforts and higher online sales proportion [1] - Operating cash flow increased by 2.5% YoY to RMB 2.61 billion in H1 FY2024/25 [1] Business Segments - Revenue from the main brands (Nike + Adidas) decreased by 8.1% YoY, accounting for 87.0% of total revenue [1] - Retail and wholesale revenue decreased by 8.9% and 2.2% YoY respectively, with retail accounting for 83.7% of total revenue [1] - The number of directly operated stores decreased by 5.4% QoQ to 5,813 as of August 2024, with average store size increasing by 4.8% YoY [1] Future Outlook - The company expects retail improvement driven by recent consumption stimulus policies, particularly in the sports sector [2] - The company has revised its profit forecasts for FY2025-2027, with net profit attributable to shareholders expected to decrease by 11%, 4%, and 3% respectively compared to previous forecasts [2] - The company's EPS for FY2025/26/27 is forecasted to be RMB 0.21/0.26/0.31, with corresponding P/E ratios of 12/10/8 [2] Operational Adjustments - The company is focusing on optimizing store efficiency, opening new stores for main brands and professional vertical brands, and closing low-performing stores [2] - The company has significantly expanded its online presence, with over 2,500 mini-program stores and over 300 live streaming accounts as of August 2024 [2]