TOPSPORTS(06110) Guoxin Securities·2024-10-25 03:42Investment Rating - The investment rating for the company is "Outperform the Market" [3][5][24]. Core Views - The company experienced a decline in revenue and net profit in the first half of the fiscal year 2025, with revenue down 7.9% year-on-year to 13.05 billion yuan and net profit down 34.6% to 870 million yuan, primarily due to weak macro demand and reduced offline foot traffic [3][24]. - Despite the challenges, the company maintains a strong cash flow, with operating cash flow net amounting to 2.61 billion yuan, a 2.5% increase year-on-year, supporting a high dividend payout ratio of 99% [3][24]. - The company is optimistic about future performance as it anticipates a recovery in consumer demand and adjustments from downstream clients, which could lead to a return to growth [3][24]. Summary by Sections Financial Performance - Revenue for the first half of fiscal year 2025 decreased by 7.9% to 13.05 billion yuan, while net profit fell by 34.6% to 870 million yuan [3][24]. - The gross profit margin declined by 3.7 percentage points to 41.1%, influenced by increased discount rates and a higher proportion of lower-margin wholesale channels [3][24]. - The company has adjusted its profit forecasts for fiscal years 2025 to 2027, now expecting net profits of 1.44 billion, 1.79 billion, and 1.92 billion yuan respectively, reflecting a significant downward revision [3][24]. Business Model Analysis - Retail and wholesale channels saw declines of 8.9% and 2.2% respectively, with online retail outperforming offline, as the share of direct online sales increased to 30% [3][24]. - The company closed over 300 stores in the first half of the fiscal year, reducing the total number of stores to 5,813, a decrease of 396 year-on-year [3][24]. Market Position and Strategy - The company continues to focus on improving store efficiency and has implemented stricter standards for new store openings and renovations [3][24]. - Membership numbers have increased, with a total of 81 million members contributing 93.7% of sales, indicating strong customer loyalty and potential for future sales growth [3][24]. Valuation - The reasonable valuation range has been adjusted to 3.80 - 4.00 HKD, down from the previous range of 6.80 - 7.20 HKD, reflecting the revised profit forecasts [3][24].