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Topsports International Holdings Ltd 06110

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Stock XHKG Rating as of
HKD 3.78 −0.21 (5.26%)
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As of Delayed Price Closed
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Company Report

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Topsports Earnings: Lowering Forecasts, Reducing Fair Value to HKD 7.20 Amid Trading Down

Ivan Su

Narrow-moat Topsports reported a disappointing 5% decline in sales for the fiscal first quarter ended May 2024. Management said that sales in June are looking at a similar level of decline, suggesting that our previous forecast for the year was too optimistic. As a result, we take our forecast down a notch and lower our fair value estimate to HKD 7.20 per share from HKD 7.50. Despite this, we still view Topsports’ shares as undervalued, trading at a modest 12 times multiple against our fiscal 2025 earnings estimate, with 8% dividend yield, and at a 40% discount to our valuation.

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Price vs Fair Value

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06110 is trading at a 513% premium.
Price
HKD 3.99
Fair Value
HKD 5.30
Uncertainty
High
1-Star Price
HKD 77.13
5-Star Price
HKD 3.72
Economic Moat
Wypkdxj
Capital Allocation
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Bulls Say, Bears Say

Bulls

Chinese per-capita sportswear spending is still a fraction of most developed countries and rising health awareness will continue to drive overall activewear sales, benefiting distributors like Topsports.

Bears

It remains unclear when Adidas will regain its prepandemic market share in China, thereby hitting Topsports’ results.

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Trading Information

Previous Close Price
HKD 3.99
Day Range
HKD 3.68–3.92
52-Week Range
HKD 3.30–7.46
Bid/Ask
HKD 3.78 / HKD 3.79
Market Cap
HKD 23.44 Bil
Volume/Avg
16.2 Mil / 8.0 Mil

Key Statistics

Price/Earnings (Normalized)
9.84
Price/Sales
0.78
Dividend Yield (Trailing)
5.61%
Dividend Yield (Forward)
5.61%
Total Yield
5.61%

Company Profile

Topsports is the largest sportswear retailer in China, generating the majority of its revenue from selling products of international sportswear brands. The business operates as an intermediary between brand owners and consumers seeking to buy sportswear. The firm operates more than 6,500 stores directly as of the end of fiscal 2023, and most of these "single-brand" stores have been opened under the names of sportswear brands that it partners with, such as Nike and Adidas. In addition to these two sportswear giants, Topsports also has partnerships with sportswear brands such as Puma, Li Ning, Asics, and The North Face. While most of Topsports' sales take place in stores, the firm also operates online shops under the Topsports brand on major e-commerce platforms such as Alibaba and JD.com.
Sector
Consumer Cyclical
Industry
Apparel Retail
Stock Style Box
Large Value
Total Number of Employees
29,458
Website
https://www.topsports.com.cn

Competitors

Valuation

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Metric
06110
NKE
ADDYY
Price/Earnings (Normalized)
 9.8420.8941.26
Price/Book Value
 2.317.898.45
Price/Sales
 0.782.251.85
Price/Cash Flow
 5.6617.4837.91
Price/Earnings
06110
NKE
ADDYY

Financial Strength

Metric
06110
NKE
ADDYY
Quick Ratio
 1.121.670.53
Current Ratio
 3.162.741.22
Interest Coverage
 18.92—1.16
Quick Ratio
06110
NKE
ADDYY

Profitability

Metric
06110
NKE
ADDYY
Return on Assets (Normalized)
 14.45%15.59%0.75%
Return on Equity (Normalized)
 23.58%41.17%2.96%
Return on Invested Capital (Normalized)
 17.29%21.67%2.15%
Return on Assets
06110
NKE
ADDYY
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