Goldman Sachs: gives TOPSPORTS a "neutral" rating, cutting its target price by 55% to HK$2.7.

Goldman Sachs released a research report stating that TOPSPORTS (06110) has been rated as "neutral," with the target price being significantly lowered from HK$6 to HK$2.7, reflecting mainly the downward revision of earnings. Goldman Sachs stated that the revenue forecast for the company for the fiscal years 2025-2027 has been reduced by 11%-15%, primarily due to the decrease in revenue forecast. The net profit forecast has been lowered by 30%-33%, mainly due to the headwinds in gross profit margin, as there is a greater discount pressure to digest inventory, an unfavorable channel mix, and negative operating leverage from offline store sales. In addition, TOPSPORTS has had a higher gross profit margin in the past, unlike POU SHENG INT'L (03813), where there is room for optimization, while TOPSPORTS will face higher risks in the short term. TOPSPORTS has issued a profit warning for the first half of the fiscal year 2025, with management expecting a year-on-year increase in revenue mainly affected by weak macroeconomic conditions, and a 35% year-on-year decrease in net profit. Goldman Sachs believes that the unexpected decline in net profit for the company is concerning. Management is also more conservative about the forecast for the second half of the fiscal year 2025, as they do not see growth catalysts and are afraid of offering more discounts under weak demand. As for its brands, its main brand faces more headwinds in product line adjustments, while other brands have already seen improvements in sales rates, discounts, and feedback in new product offerings.