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Topsports International Holdings Ltd 06110

Morningstar Rating
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Stock XHKG Rating as of
HKD 5.10 −0.04 (0.78%)
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As of Delayed Price Closed
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Company Report

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Topsports Earnings: Stable Outlook and Cheap Valuation

Ivan Su

Narrow-moat Topsports’ second-half fiscal 2024 (ending February) earnings were in line with our estimates. However, management's guidance for fiscal 2025 was somewhat ambiguous, indicating a wide range of positive revenue growth. We made minor updates to our model but kept our fair value estimate unchanged at HKD 7.50 per share. We expect a five-year revenue compound annual growth rate of 7% for Topsports. We think shares are undervalued currently, trading at a modest 13 times fiscal 2025 earnings, 7% dividend yield, and 25% discount to our valuation.

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Price vs Fair Value

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06110 is trading within a range we consider fairly valued.
Price
HKD 5.14
Fair Value
HKD 5.30
Uncertainty
High
1-Star Price
HKD 89.32
5-Star Price
HKD 3.30
Economic Moat
Fxzzzt
Capital Allocation
Htzjzlwns

Bulls Say, Bears Say

Bulls

Chinese per-capita sportswear spending is still a fraction of most developed countries and rising health awareness will continue to drive overall activewear sales, benefiting distributors like Topsports.

Bears

It remains unclear when Adidas will regain its prepandemic market share in China, thereby hitting Topsports’ results.

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Trading Information

Previous Close Price
HKD 5.14
Day Range
HKD 5.05–5.30
52-Week Range
HKD 4.74–7.56
Bid/Ask
HKD 5.09 / HKD 5.10
Market Cap
HKD 31.63 Bil
Volume/Avg
16.3 Mil / 6.3 Mil

Key Statistics

Price/Earnings (Normalized)
14.09
Price/Sales
1.06
Dividend Yield (Trailing)
4.23%
Dividend Yield (Forward)
4.23%
Total Yield
4.39%

Company Profile

Topsports is the largest sportswear retailer in China, generating the majority of its revenue from selling products of international sportswear brands. The business operates as an intermediary between brand owners and consumers seeking to buy sportswear. The firm operates more than 6,500 stores directly as of the end of fiscal 2023, and most of these "single-brand" stores have been opened under the names of sportswear brands that it partners with, such as Nike and Adidas. In addition to these two sportswear giants, Topsports also has partnerships with sportswear brands such as Puma, Li Ning, Asics, and The North Face. While most of Topsports' sales take place in stores, the firm also operates online shops under the Topsports brand on major e-commerce platforms such as Alibaba and JD.com.
Sector
Consumer Cyclical
Industry
Apparel Retail
Stock Style Box
Large Core
Total Number of Employees
29,896
Website
https://www.topsports.com.cn

Competitors

Valuation

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Metric
06110
ADDYY
NKE
Price/Earnings (Normalized)
 14.0943.1725.39
Price/Book Value
 3.128.849.74
Price/Sales
 1.061.932.74
Price/Cash Flow
 5.6439.6621.24
Price/Earnings
06110
ADDYY
NKE

Financial Strength

Metric
06110
ADDYY
NKE
Quick Ratio
 0.750.531.67
Current Ratio
 2.301.222.74
Interest Coverage
 14.171.16—
Quick Ratio
06110
ADDYY
NKE

Profitability

Metric
06110
ADDYY
NKE
Return on Assets (Normalized)
 12.37%0.75%15.59%
Return on Equity (Normalized)
 21.48%2.96%41.17%
Return on Invested Capital (Normalized)
 15.09%2.15%21.67%
Return on Assets
06110
ADDYY
NKE
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