Core Viewpoint - Topsports reported a decline in revenue and net profit for 1HFY26, attributed to ongoing challenges in offline retail, but aims to maintain a stable net profit and improve net profit margin for the full year [1][2][3] Financial Performance - Revenue decreased by 5.8% YoY to RMB12,299 million, while net profit fell by 9.7% YoY to RMB788 million, with total sales down by mid-single digits to high-single digits YoY in both Q1 and Q2 [2] - Gross profit margin remained stable at 41.0%, slightly down from 41.1% in 1HFY25, supported by incentives from brand partners [2] - The company closed 332 stores, reducing total store count to 4,688, a 19% YoY decline, and cut headcount by 16% YoY, leading to a 12% YoY reduction in rental expenses [2] Future Outlook - Topsports reiterated its full-year guidance of flattish net profit and improving net profit margin, implying an estimated 23% YoY growth in net profit for 2HFY26 [3] - The company is focusing on omni-channel expansion, including store-based livestreaming, to mitigate the impact of weaker offline sales [2][3] Brand Dependency - Revenue from Nike and Adidas remains critical, contributing 87.9% to total revenue, with a slight increase of 0.9 percentage points YoY [4] - Nike's recent updates indicate a prolonged recovery period in the Greater China market, adding uncertainty to Topsports' sales outlook [4] Valuation and Rating - The target price has been raised to HK$3.5 based on a 14x FY2027E P/E ratio [7] - The company maintains a HOLD rating, with an attractive dividend yield of over 9%, but faces potential share price pressure post-dividend date if fundamentals do not improve [6]