指导保持；优先利润而非销量

Topsports (6110 HK) Guidancekept;prioritizingprofit over sales Target PriceHK$3.77(Previous TPHK$3.62)Up/Downside15.4%CurrentPriceHK$3.27 1H26(ending Aug 2025)resultswereslightly better than expected, thanks toresilient GP margin. Even thoughwe are cautious about sales growth ahead in2H26E, margin expansion is still likely given the strong support from principalbrands and closure of many under-performing stores. Thanks to various positivesigns out of Nike, we start to have more confidenceonitsturnaround (even itmay take quite some time).Due to the 8% FY27E yield, we maintain BUY. China Consumer DiscretionaryWalter WOO(852) 3761 8776walterwoo@cmbi.com.hk Retail sales trend QTD in 3Q26E (ending Nov 2025) was similar to lastquarter.Retail sales dropped by HSD YoY in 2Q26 (Jun-Aug 2025),widenedvs MSD drop back in 1Q26(Mar-May 2025).According tomanagement, the trend is kind of similar in Sep-Oct 2025, for both onlineand offline channels. Inventory level was still healthy (inventory days was at150 days in 1H26 vs 148 days in 1H25, or dropped by 5% YoY on RMBterms in 1H26). But the retail discounts werestill widening YoY in 2Q26(even thoughthe magnitude of increase has kind of narrowed QoQ). Stock Data No change on the FY26E guidance,which we do find achievable.Despite the profit drop in 1H26, management hasreiterated the FY26Eguidance of flattish net profit (vs FY25) and increase in NP margin (vsFY25). They are also confident on paying out around 100% of net profit asdividends. We believe sales could be still falling fast in 2H26E, giventhat:1) sportswear industry demand is still subdued because of the macrouncertainty, 2) both the traffic and conversion rate are still under greatpressure, 3) online marketplace is still highly competitive and promotional(which is bad for both Nike and Topsports as they prioritize margin oversales growth at the moment), and 4) store count has dropped a lot and it isstill falling. But we are relatively confident about net profit as well asprofitability, because: 1)GPmargin could still be expanding,thanks tomeaningful and continual support from the principal brands, as well as thelow base for retail discounts (many promotions weredone back in Oct 2024for inventory clearance),2) OP margin is likely to improve, sincequite a fewof the under-performing storeshavealreadybeenclosed in the past 12 to18 months, 3) average sales per store havestarted to grow positively in1H26(including the new retail sales contribution)and therefore theoperating deleverage have stabilized. Maintain BUY but fine-tune TPto HK$ 3.77, based on 15x FY27E P/E(rolled over from 16x FY26E P/E).We have revised down FY26E/ 27E/28E net profit by 1%/ 8%/ 10%, in order to factor in: 1) weakeroffline sales,2) higherstore closures, but 3) a better GP margin. On one hand, we arehighly cautious onthesportswear sectorin near term(due to potentiallyunfavorable weather, weak consumer sentiment, rising competition andaworsening landscape).On the other hand, there are already some positivesigns about Nike’s turnaround.Plus the healthy cash flow and generouspayout ratio,andits FY26E/ 27E yield is still high at 7%/ 8%, wethusbelieveTopsports share price could still be resilient going forward. Recent Reports:JNBY Design (3306 HK)-Sales trendimproved but guidance is prudent(10Sep25) Anta Sports (2020 HK)-Softer Anta andstronger others, as expected(28Aug25) Li Ning (2331 HK)-Still positive despiteall margin drags in 2H25E(25Aug25) Xtep (1368 HK)-FY25E guidanceunchanged after 1H25 beat(19Aug25) 361 Degrees (1361 HK)-Guidanceunchanged but we are concerned(15Aug25) We have seen some positive signs out of Nike, but the reform is still on-goingandcould take more time.We are encouraged to see Nike’s new products getting bettertraction: 1) running shoes like VomeroPluslaunched inAug 2025arevery hot-selling,andthe sell-throughrate was as high as 60%,and2) apparelslike Milano Jacket andbasketball shoes likethe Kobe series are also very hot-selling. Noted that the runningsegment sales havealready returned to positive in Jan-Sep 2025. Going forward, Nikeis going to invest more in the outdoor segment and revamp many of its stores in China,whichisall beneficial for Topsports (4 out of the 5 ACG stores in China were opened byTopsports and the store format will be re-designed to become more relevant to theconsumersnowadays with a much lower Capex per store). Moreover, management alsopointed out the tradefair orders growth (presumablyWinter 2026 and Spring 2027) forNike wasonly mildlynegative, which is certainly an indication of improvement, in ourview, given the large number of store closures. But since many of these reforms are atthe very early stage, we tend to be cautious and would not expect a meaningfulturnaround in the near future. 1H26 (ending Aug 2025) results wereslightly better than expected.For 1H26,Topsports’ sales declined by 6% YoY to RMB 12.3bn,2% higher than BBG est./ inlinewith CMBI est., while net profit dropped