BOCOM INTL maintains a "neutral" rating on TOPSPORTS (06110), sales in the first half of the 2026 fiscal year continue to be under pressure.

BOCOM INTL released a research report stating that TOPSPORTS (06110) management maintains the guidance of flat year-on-year net profit and improved net profit margin for the full year, and indicates that recent sales trends are similar to the second quarter, with discounts still deepening compared to the same period last year. The bank expects clearer signs of recovery in the second half of the fiscal year, and is keeping its profit forecasts and target price unchanged, maintaining a neutral rating. The company's mid-term payout ratio is 102%, and an expected dividend yield of close to 7% will provide downside protection for the company's stock price. The company's operating income for the first half of the 2026 fiscal year was 12.3 billion yuan, a decrease of 5.8% year-on-year, mainly due to fluctuations in consumer demand for sports goods and offline customer traffic. Despite facing operational pressures, the company's gross margin and expense ratio control in the first half of the fiscal year were relatively good, with the gross margin decreasing slightly by 0.1 percentage points year-on-year to 41.0%, affected by changes in discounts and an increase in the proportion of online revenue, but offset to some extent by the rise in retail business contribution and brand support. The company's operating expense ratio increased slightly by 0.1 percentage points year-on-year to 33.2% in the first half of the fiscal year, benefiting from rental structure and operational team optimization; net profit margin decreased by 0.3 percentage points year-on-year to 6.4%, with net profit decreasing by 9.8% year-on-year to 790 million yuan, roughly in line with expectations. In terms of brands, the main brand/other brands decreased by 4.8%/12.2% year-on-year, with the main brand's decline outperforming other brands and overall performance. The company stated that it is actively cooperating with the main brand to improve Wuxi Online Offline Communication Information Technology Co., Ltd.'s channel management and overall discount levels. In addition, the company plans to focus on deepening the running and outdoor segments, developing new brands such as norda, soar, Ciele, and Norrna. Management stated that the first ektos running collection store opened on October 1st, dedicated to creating a multi-functional space, serving runners, and providing a new retail experience. The company continues to adjust store structure and improve quality. As of the end of August 2025, the company's number of directly operated stores decreased by a net of 332 to 4,688, still on a downward trend, with total sales area decreasing by 14.1% year-on-year, but single store area increasing by 6.5% year-on-year. Management stated that offline customer traffic is still under pressure, with double-digit declines in same-store offline customer traffic during the period. The company is implementing the "quality + optimization" principle, implementing stricter standards for new and renovated stores, with larger store areas but more restrained decoration investment. At the same time, the company continues to improve the extension of its online business, with double-digit growth in online retail business year-on-year during the period, actively exploring a multi-operational form of "1 (offline store) + N (online multi-scene layout)".