TOPSPORTS(HK:06110) EBSCN·2025-10-23 09:19Investment Rating - The report maintains an "Accumulate" rating for the company [1] Core Views - The company experienced a decline in performance due to fluctuations in demand during the first half of the fiscal year, with revenue and net profit decreasing by 5.8% and 9.7% year-on-year, respectively [5][9] - The company continues to enhance its omnichannel retail capabilities and has optimized its offline store network while expanding its online presence [9] - The company has adjusted its profit forecasts for fiscal years 2026 to 2028, lowering the expected net profit by 5% to 6% [9] Financial Performance Summary - For the first half of fiscal year 2026, the company reported revenue of 12.3 billion RMB, down 5.8% year-on-year, and a net profit of 790 million RMB, down 9.7% year-on-year [5] - The earnings per share (EPS) for the period was 0.13 RMB, with a proposed interim dividend of 0.13 RMB per share, resulting in a payout ratio of 102.2% [5] - The gross margin decreased by 0.1 percentage points to 41.0%, while the operating margin fell by 0.5 percentage points to 8.1% [6][8] Revenue Breakdown - Revenue from the main brands (Nike and Adidas) decreased by 4.8%, while other brand revenues fell by 12.2% [7] - Retail and wholesale revenues declined by 3.0% and 20.3%, respectively, with total store count decreasing by 332 [7] Cash Flow and Inventory Management - The company reported a 48.2% decrease in operating net cash flow to 1.35 billion RMB [8] - Inventory as of August 2025 decreased by 2.8% quarter-on-quarter to 5.83 billion RMB, with inventory turnover days increasing by 2 days year-on-year [8] Future Outlook - The company is focusing on improving operational efficiency and expanding its brand matrix, including collaborations with new running and outdoor brands [9] - The projected EPS for fiscal years 2026 to 2028 is expected to be 0.20, 0.22, and 0.24 RMB, respectively, with corresponding price-to-earnings (P/E) ratios of 15, 14, and 12 [9]