Guosen: Maintaining TOPSPORTS (06110) with a "outperform" rating, lowering the fair value range to 3.2~3.5 Hong Kong dollars.

Guosen released a research report stating that due to significant disruptions in offline retail, it has slightly lowered the profit forecast for TOPSPORTS (06110). It is expected that the net profit for FY2026-2028 will be 12.2/13.3/14.9 billion yuan respectively (previously 12.9/14.1/15.7 billion yuan), with a year-on-year change of -5.3%/+9.6%/+11.5%. Based on the revision of profit forecasts, the reasonable valuation range has been adjusted to 3.2-3.5 Hong Kong dollars (previously 3.8-4.0 Hong Kong dollars), corresponding to a 14-15x PE ratio for the 2027 fiscal year, maintaining a "outperform the market" rating. Guosen's main points are as follows: Company announcement: In the third quarter of FY2026, the total sales volume of the group's retail and wholesale business recorded a high single-digit year-on-year decrease. As of November 30, 2025, the gross sales area of directly operated stores decreased by 1.3% compared to the previous quarter end, and decreased by 13.4% compared to the same period last year. Revenue Growth: In the third quarter of FY2026, sales revenue decreased by a high single-digit year-on-year, with online channel growth still outperforming offline channels, but the differentiation narrowed compared to the first half of the year. According to the company's announcement, in the third quarter of FY2026 (September to November 2025), the pre-tax total sales of directly operated and wholesale businesses decreased by a high single-digit percentage, continuing the trend of the FY26Q2, slightly weaker than the first half of the year overall. By channel, online channel growth still outperformed offline channels, but due to base effects, online growth slowed slightly compared to the first half of the year, while offline performance improved slightly compared to the first half of the year. By the end of November, the gross sales area of directly operated stores decreased by 1.3% compared to the end of the previous quarter, and decreased by 13.4% compared to the same period last year, narrowing from FY26Q2; continuing to optimize the offline store network, cautiously opening and renovating stores, eliminating underperforming stores, focusing on extending the online channels of offline stores; it is expected that the number of store closures for the full year will be significantly reduced compared to the previous year, with a slower closure rate in the second half of the fiscal year compared to the first half. The running brand collective store "ektos" made its debut at the Shanghai Marathon Sports Expo at the end of November, bringing together nearly 20 top brands; the exclusive agent of the Norwegian outdoor brand Norrona landed in Shanghai Pudong Kerry City in October in the form of a pop-up store. Regarding inventory, the total inventory amount at the end of the third quarter decreased year-on-year, in line with sales performance, maintaining good turnover efficiency; the company and brand partners continue to prioritize dynamically managing healthy inventory as the top priority, but it is becoming increasingly difficult to manage inventory healthily under the strong promotional atmosphere in the industry. Regarding discounts, the depth of discounts increased year-on-year due to the increase in the proportion of online channels, but the discount rate narrowed due to the narrowing of sales differentiation between offline and online channels compared to the first half of the fiscal year. Nike: FY2026Q2 performance slightly better than management's previous guidance and consensus expectations, recovery speeds differ by region and channel, greater pressure in the Greater China region, Q3 guidance below consensus expectations, management indicates that the company is in the mid-term stage of recovery. Revenue in FY2026Q2 was $12.4 billion, up 1% year-on-year, unchanged at constant exchange rates, better than management's previous guidance and consensus expectations. By region, North America led the growth in revenue, EMEA region had steady performance, Asia Pacific and Latin America had mixed performance, with positive performance in Latin America but sluggish performance in Asia Pacific, with a decrease in store traffic in the Greater China region, a decrease in season-end sell-through rates, and continued aging of market inventory dragging down overall performance. The decrease in gross margin was better than the previous guidance and consensus expectations. Looking ahead, it is expected that Q3 revenue will decline by a low single-digit percentage, with a decrease in gross margin of approximately 175-225 basis points; short-term performance will be impacted by adjustment measures and external tariff pressures, but the continued strong performance in North America and the running category demonstrates long-term improvement potential, and the Win Now initiative is making significant progress; wholesale business is expected to moderately grow this fiscal year, with ongoing pressure in the Greater China region and on the Converse brand, expectations of reduced impact from tariffs on gross margin, although it remains an important influencing factor. Adidas: Revenue in the third quarter fell short of consensus expectations, operating profit exceeded consensus expectations but net profit fell short of consensus expectations; all regions and channels achieved double-digit growth in the first three quarters (excluding the impact of Yeezy), benefiting from the company's upward brand momentum, better-than-expected business performance, and partially successful mitigation of the additional costs brought about by the increase in U.S. tariffs, with management raising the full-year guidance. Adidas saw a continuation of the recovery momentum in Q3 of 2025, with revenue from the Adidas brand at constant exchange rates growing by 12% (company overall +8%), operating profit increasing by 23% year-on-year to 736 million euros, and a more significant increase in profit for the main brand after excluding the profit base impact of Yeezy. Most regions, channels, and categories achieved double-digit growth (North America region only grew by 8%; accessories grew by only 1%), with a strong performance in professional and fashion, footwear, and apparel categories. The full-year guidance was raised, primarily due to the company's continuing upward brand momentum, better-than-expected business performance, and partially successful mitigation of the additional costs brought about by the increase in U.S. tariffs. Investment recommendation: Positive outlook on the company's operational resilience and long-term cash returns. In the third quarter (September-November), the company's retail business was under pressure with a high single-digit decline, largely maintaining the trend of the second quarter, with inventory improvement and a narrowing of discount reductions compared to the previous quarter. The company's main brand customers, Adidas, have maintained rapid growth globally and in the Greater China region since last year, with Adidas management expecting double-digit growth for the main brand in FY2025; Nike's FY2026Q2 performance was better than the management's previous guidance and consensus expectations, but faces challenges in the Greater China region, requiring collaboration with TOPSPORTS to develop a high-end positioning and standardized management system for the Wuxi Online Offline Communication Information Technology Co., Ltd. Omni-channel integration; in addition, TOPSPORTS has ramped up its outdoor and running track in recent years, becoming the exclusive agent in the Chinese market for outdoor brands such as Norda, Norrona, and soar, and opening the running brand collective store "ektos." Risk factors: Consumer recovery falls short of expectations; supply chain and logistics disruptions; channel optimization and reform fall short of expectations.