Hua Yuan Securities: Maintains a "buy" rating on TOPSPORTS (06110), continuous expansion of new brands expected to drive additional growth.

Huayuan Securities released a research report stating that TOPSPORTS (06110), as a leading domestic sports apparel distributor, has industry-leading distribution channels and consignment brand resources. Deep cooperation with international brands has solidified the revenue base, and with the continuous expansion of new brands through the company's channel and brand advantages, it is expected to gain new growth drivers. Considering the company's advantages in the sports apparel distribution industry such as channels, brand resources, member loyalty, digital management, and the gradual recovery or expected recovery of main agency brands, as well as the potential of newly added agency brands to help the company expand its new customer base, the "buy" rating is maintained. Huayuan Securities' main points are as follows: Retail sales fell by a high single-digit percentage in the third quarter of FY25/26, overall meeting expectations The company announced its operational performance for the third quarter of FY25/26, with total retail sales (including retail and wholesale) in FY25/26Q3 decreasing by a high single-digit percentage year-on-year, which overall met expectations. From the perspective of optimizing the store network, as of November 30, 2025, the gross retail area of directly operated stores decreased by 13.4% year-on-year and by 1.3% month-on-month. The company's pace of store closures has slowed down, and it is expected that the number of store closures in FY26 will be reduced compared to FY25. Nike strengthens cooperation with distributors, and multiple measures may help TOPSPORTS reduce pressure to increase revenue According to the Nike official website, Nike's revenue in FY26Q2 increased by 1% year-on-year (excluding exchange rate changes), exceeding market expectations. The North America region led the market growth, but the Greater China region saw a 16% year-on-year decrease in revenue (excluding exchange rate changes), with wholesale channels in the Greater China region down by 15% year-on-year. Nike has realized the issues in the Greater China region and will closely cooperate with TOPSPORTS and other distributors to: 1) clear out old inventory; 2) more accurately segment consumer selection; 3) tell a more powerful brand story; and 4) create a more sophisticated visual display to reshape the brand image and restore profit growth in the Greater China region. Core international brand energy is gradually recovering, and new brands help the company diversify its layout The company has deep cooperation with top international brands Nike and Adidas, and with recent adjustments in Adidas and Nike's top management, there is hope for resumed growth, driving the company's performance higher. From the Adidas perspective, the exclusive Adidas Pioneer Sports Store (Future Of Style) has opened, which is expected to help push the company's Adidas agency business to new heights; from the Nike perspective, the new CEO Elliot Hill is set to drive third-party distributors to obtain more brand support policies, benefiting the company's future development. In addition, the company recently introduced running brands Soar and Norda, as well as top outdoor brand Norrna. Soar introduced city colors during the "Shanghai Marathon" period, while Norrna opened its first store in China on October 15 in Shanghai Pudong Kerry City. The diversified brand layout is expected to help the company expand its customer base and open up new avenues for revenue growth. Profit forecast The firm predicts that the company's net profit attributable to the parent company for FY2026-FY2028 will be 1.287 billion yuan / 1.479 billion yuan / 1.684 billion yuan, with year-on-year growth of 0.09% / 14.91% / 13.88% respectively. Risk warning: risks include the retail environment not recovering as expected, international brand development falling short of expectations, and new brand expansion not meeting expectations.