CMB International: maintains a "buy" rating on TOPSPORTS (06110) with a target price reduced to HK$2.89

CMB International has released a research report, maintaining a "buy" rating on TOPSPORTS (06110) with a target price reduced from HKD 6.78 to HKD 2.89. The new target price reflects a slowdown in industry and Nike-related sales growth, a greater decline in gross profit than expected, and operating leverage weaker than expected. The bank still has concerns about the group's outlook and believes there is currently no sign of a turning point. The company's latest forecast expects a 35% year-on-year decrease in net profit for the first half of fiscal year 2025. The bank believes the group's performance has been below expectations, mainly due to deleveraging operations, and the company's outlook remains bleak, but the stock dividend remains attractive after the share price decline. The bank notes that TOPSPORTS remains highly cautious about the outlook. Management believes there will be no signs of improvement in the next quarter, or even the entire second half of the fiscal year, based on the sluggish macro environment and drag from some brands. Therefore, CMB International expects the group's retail sales to decline as well as gross profit. There is still a high chance of a more than 30% decline in net profit in the second half of the fiscal year.