TOPSPORTS(06110) 交银国际证券·2024-05-24 01:32Investment Rating - The report maintains a Buy rating for Topsports International (6110 HK) with a target price of HKD 7.20, representing a potential upside of 26.3% from the current price of HKD 5.70 [1][2] Core Views - Topsports' FY24 results were in line with expectations, with sales and net profit growing by 6.9% and 20.4% YoY respectively, though slightly below consensus estimates by 3% [1] - The company achieved a payout ratio of over 100% and a dividend yield of 7%, continuing its trend of high shareholder returns [1] - Topsports is transitioning from a pure offline distributor to a robust omnichannel sports ecosystem, leveraging its strong membership base and content creation capabilities [1][2] Financial Performance - FY24 revenue reached RMB 28.93 billion, up 6.9% YoY, with net profit growing 20.4% to RMB 2.21 billion [1][5] - Gross margin improved by 0.1 percentage points to 41.8%, driven by reduced retail discounts and a higher proportion of retail sales [1][5] - Operating profit margin expanded by 0.7 percentage points to 9.6%, while net profit margin increased by 0.9 percentage points to 7.6% [5] Business Segments - Retail sales grew 9% YoY, supported by a 6% increase in average store size and high single-digit growth in sales per square meter, despite a 6% reduction in store count [1] - Wholesale sales declined 3% YoY, with a sharper drop of 6% in the second half [1] - Online retail sales accounted for mid-20% of total retail sales, up from low-20% in the previous year [1] Strategic Initiatives - Topsports is enhancing its omnichannel ecosystem through partnerships with Fanatics and the addition of the premium trail running brand norda [1] - The company is leveraging its 76.3 million members and WeChat followers to drive online sales and customer engagement [1] - Topsports is adapting its store operations to serve nationwide demand rather than just local demand, with increased focus on live streaming and online content marketing [1] Industry Comparison - Topsports' performance is compared with other major players in the sports apparel industry, including Li Ning, Anta, and Nike, highlighting its competitive positioning [8] - The report provides a detailed breakdown of retail and wholesale growth trends across different brands and regions [8] Valuation and Forecasts - The target price of HKD 7.20 is based on a 15.0x FY25-26E P/E ratio, down from a previous 17.0x FY24-25E average P/E [2] - Revenue is forecasted to grow at a CAGR of 9.5% from FY24 to FY27, reaching RMB 38.00 billion by FY27 [4][5] - Net profit is expected to grow at a CAGR of 14.4% over the same period, reaching RMB 3.31 billion by FY27 [4][5]