Morningstar

Topsports International Holdings Ltd 06110

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Company Report

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Topsports: Nike Troubles Continue to Plague; Fair Value Cut 6% to HKD 6.80

Ivan Su

We lowered Topsport’s fair value estimate to HKD 6.80 per share from HKD 7.20 following the company’s downbeat guidance about potential further deterioration in performance for the second half of fiscal 2025 (ending February), contrary to our previous expectation of sales and margin improvements. We now expect a 4% decline in sales for fiscal 2025, resulting in a 14% decline in net profit. However, we project a rebound in fiscal 2026, with an 8% increase in sales and a 48% growth in earnings. This turnaround is predicated on improvements in Nike's product offerings, driving both sales growth and operating leverage for Topsports.

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Price vs Fair Value

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06110 is trading at a 81% premium.
Price
HK$3.43
Fair Value
HK$2.90
Uncertainty
High
1-Star Price
HK$78.88
5-Star Price
HK$6.68
Economic Moat
Rjnvj
Capital Allocation
Xjlqnzjby

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
—
Day Range
—–—
52-Week Range
—–—
Bid/Ask
— / —
Market Cap
—
Volume/Avg
— / —

Key Statistics

Price/Earnings (Normalized)
8.46
Price/Sales
0.67
Dividend Yield (Trailing)
6.48%
Dividend Yield (Forward)
6.48%
Total Yield
6.48%

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
Mid Value
Total Number of Employees
29,458
Website
https://www.topsports.com.cn

Competitors

Valuation

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Metric
06110
NKE
02020
Price/Earnings (Normalized)
 8.4620.7723.09
Price/Book Value
 1.998.844.71
Price/Sales
 0.672.504.12
Price/Cash Flow
 4.8618.7415.37
Price/Earnings
06110
NKE
02020

Financial Strength

Metric
06110
NKE
02020
Quick Ratio
 1.121.511.21
Current Ratio
 3.162.401.59
Interest Coverage
 18.92—31.15
Quick Ratio
06110
NKE
02020

Profitability

Metric
06110
NKE
02020
Return on Assets (Normalized)
 14.85%16.76%14.49%
Return on Equity (Normalized)
 23.48%44.27%25.32%
Return on Invested Capital (Normalized)
 17.78%23.34%15.73%
Return on Assets
06110
NKE
02020

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