TOPSPORTS(06110) KAIYUAN SECURITIES·2024-03-10 16:00Investment Rating - The investment rating for the company is "Buy" (maintained) [1][62]. Core Views - The report emphasizes that the low valuation of the company is due to market misconceptions about retail distributors, which are seen as lacking brand ownership and pricing power. However, the company possesses operational efficiency and a strong retail management capability, making it a valuable partner for international brands [4][12]. - The company is expected to benefit from the recovery of international brands in the Greater China region and the introduction of new brands, which will support a new round of store expansions [5][50]. Summary by Sections Financial Performance - The company's projected net profits for FY2024-2026 are 2.29 billion, 2.61 billion, and 2.91 billion CNY respectively, with corresponding EPS of 0.4, 0.4, and 0.5 CNY. The current stock price corresponds to PE ratios of 13.0, 11.3, and 10.0 times [4][62]. - The revenue for FY2024 is expected to be 29.58 billion CNY, showing a year-on-year growth of 9.3% [7][62]. Market Position and Growth Potential - The company is positioned to enhance its market share due to its efficient retail operations and the ongoing recovery of international brands, particularly Adidas, which is expected to exceed expectations in terms of growth [6][50]. - The report highlights that the company's average monthly store efficiency is leading compared to peers, and its digital management capabilities are expected to further enhance operational efficiency [5][39]. Competitive Landscape - The retail industry is shifting from scale expansion to quality improvement, with the company leveraging its digital and refined management to maintain a competitive edge [5][12]. - The report notes that the competitive landscape is becoming increasingly concentrated, with larger retailers gaining more market share, particularly in first to fourth-tier cities [5][44]. Operational Efficiency - The company has demonstrated resilience during the pandemic, with its revenue recovery outperforming competitors. The report indicates that the company's gross margin has remained stable, supported by effective inventory and discount management [11][27]. - The operational metrics show improvements in inventory turnover and cash flow efficiency, which are expected to enhance the company's return on equity (ROE) in the medium term [58][61]. Future Outlook - The company is expected to continue expanding its store network while focusing on improving efficiency rather than merely increasing the number of stores. The report anticipates a gradual return to expansion in FY2024, with a focus on enhancing store performance metrics [56][62]. - The introduction of new brands and the ongoing recovery of existing brands are projected to create additional growth opportunities for the company [55][62].