Analyst

Steve

Equity Bottom-Up

Topsports International Holdings / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/topsports-international-holdings" target="_blank" data-smartkarma-citation="entities:28153:1" rel="noopener">Topsports International Holdings (6110 HK)</a> announced first half FY24 (fiscal year ending February) results last week, with net profit up 17% yoy.</li>
<li>The company trades at a 7% dividend yield, backed by strong free cash flow.</li>
<li>The stock is not only a yield play, but also a call option on the recovery of Nike and Adidas' retail performance in China.</li>
</ul>



Topsports International Holdings (6110 HK) announced first half FY24 (fiscal year ending February) results last week, with net profit up 17% yoy.
The company trades at a 7% dividend yield, backed by strong free cash flow.
The stock is not only a yield play, but also a call option on the recovery of Nike and Adidas' retail performance in China.


Topsports (6110 HK):  High Dividend Yield Supported By Strong Free Cash Flow

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>
<a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a> achieved a decent 3Q23 with sales performance of major brands outperformed. With a low comparison base, 4Q23 sales will be even more impressive. </li>
<li>Indications are that sales for the Golden Week are satisfactory and "double-11" sales are optimistic. The acquisition of MAIA ACTIVE will further add to its product portfolio.</li>
<li>Amer's IPO is another catalyst and reports are that this has been filed in the US. Anta Sports' stake may be valued at US$4bn, almost 12% of its market cap.</li>
</ul>



Anta Sports Products (2020 HK) achieved a decent 3Q23 with sales performance of major brands outperformed. With a low comparison base, 4Q23 sales will be even more impressive. 
Indications are that sales for the Golden Week are satisfactory and "double-11" sales are optimistic. The acquisition of MAIA ACTIVE will further add to its product portfolio.
Amer's IPO is another catalyst and reports are that this has been filed in the US. Anta Sports' stake may be valued at US$4bn, almost 12% of its market cap.


Anta Sports (2020 HK): Bucking the Challenging Trend

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>We initiate BUY on Topsports with TP based on 18x FY2/25E P/E and put it as our sector top pick.</li><li>We forecast 12%/ 20% of sales/ NP CAGR in FY2/23-26E vs -5%/ -4% during FY2/19-23, driven by major improvements in: 1) international brand sales (Nike to maintain its leadership and Adidas to see turnaround with effective strategy in China),</li><li>2) sales per store (driven by higher sales per sq. and increase in store size) and 3) the associated operating leverage.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We initiate BUY on Topsports with TP based on 18x FY2/25E P/E and put it as our sector top pick.We forecast 12%/ 20% of sales/ NP CAGR in FY2/23-26E vs -5%/ -4% during FY2/19-23, driven by major improvements in: 1) international brand sales (Nike to maintain its leadership and Adidas to see turnaround with effective strategy in China),2) sales per store (driven by higher sales per sq. and increase in store size) and 3) the associated operating leverage.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Topsports (6110 HK) – Localization and Efficiency-Led Turnaround

Thematic (Sector/Industry)

<ul><li>On one hand, retail sales growth in 5-1 Golden Week was a beat (after a soft Feb-Mar and an inline Apr).</li><li>On the other hand, retail discounts surprisingly widened due to increased competition from the de-stocking by brands like Adidas and Li Ning.</li><li>While fundamentals (sales, discounts and inventory) are trending good into 2H23E and setting up for a decent FY24E, we should still keep our eyes on the end demand and intensity of competition. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

On one hand, retail sales growth in 5-1 Golden Week was a beat (after a soft Feb-Mar and an inline Apr).On the other hand, retail discounts surprisingly widened due to increased competition from the de-stocking by brands like Adidas and Li Ning.While fundamentals (sales, discounts and inventory) are trending good into 2H23E and setting up for a decent FY24E, we should still keep our eyes on the end demand and intensity of competition. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Sportswear Sector – 5-1 sales beat but competition intensified

<ul>
<li>The new share placement of <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a> has caught the market by surprise, but we think long-term story for the company should not be affected.</li>
<li>With proceeds to be used for repayment of outstanding debts, expansion in China and pursuing SE Asia markets, we should not overlook the benefits to be generated. </li>
<li>An IPO of Amer Sports is clearly brewing and this represents an important catalyst. Anta's 26.4x and 20.9x FY23 and FY24 PERs do not look stretched relative to earnings growth. </li>
</ul>


The new share placement of Anta Sports Products (2020 HK) has caught the market by surprise, but we think long-term story for the company should not be affected.
With proceeds to be used for repayment of outstanding debts, expansion in China and pursuing SE Asia markets, we should not overlook the benefits to be generated. 
An IPO of Amer Sports is clearly brewing and this represents an important catalyst. Anta's 26.4x and 20.9x FY23 and FY24 PERs do not look stretched relative to earnings growth. 


Anta Sports (2020 HK): Our View After Placement

China

Topsports International Holdings Limited operates as a sports shoes and apparel retailer. The Company sells sports shoes, sports shirts, and other products. Topsports International Holdings markets its products throughout China.

Topsports International Holdings (6110 HK)

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Topsports International Holdings (6110 HK)

Topsports (6110 HK): High Dividend Yield Supported By Strong Free Cash Flow

Topsports is not only a yield play, but also a call option on the recovery of Nike and Adidas' retail performance in China, which have been...

Steve

Anta Sports (2020 HK): Bucking the Challenging Trend

Anta Sports had a solid 3Q23, with major brand sales outperforming. 4Q23 sales are expected to be even better. Acquisition of MAIA ACTIVE and...

Osbert Tang, CFA

Topsports (6110 HK) – Localization and Efficiency-Led Turnaround

We forecast 12%/ 20% of sales/ NP CAGR in FY2/23-26E vs -5%/ -4% during FY2/19-23, driven by major improvements in: 1) international brand sales

CMB International

China Sportswear Sector – 5-1 sales beat but competition intensified

While fundamentals (sales, discounts and inventory) are trending good into 2H23E and setting up for a decent FY24E, we should still keep our eyes...

CMB International

Anta Sports (2020 HK): Our View After Placement

With proceeds to be used for debt repayment, expansion in China and pursuing SE Asia markets, we should not overlook long-term benefits. News flow...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Topsports (6110 HK): High Dividend Yield Supported By Strong Free Cash Flow

Topsports is not only a yield play, but also a call option on the recovery of Nike and Adidas' retail performance in China, which have been...

Steve

Anta Sports (2020 HK): Bucking the Challenging Trend

​Anta Sports had a solid 3Q23, with major brand sales outperforming. 4Q23 sales are expected to be even better. Acquisition of MAIA ACTIVE and...

Osbert Tang, CFA

Topsports (6110 HK) – Localization and Efficiency-Led Turnaround

We forecast 12%/ 20% of sales/ NP CAGR in FY2/23-26E vs -5%/ -4% during FY2/19-23, driven by major improvements in: 1) international brand sales

CMB International

China Sportswear Sector – 5-1 sales beat but competition intensified

While fundamentals (sales, discounts and inventory) are trending good into 2H23E and setting up for a decent FY24E, we should still keep our eyes...

CMB International

Anta Sports (2020 HK): Our View After Placement

With proceeds to be used for debt repayment, expansion in China and pursuing SE Asia markets, we should not overlook long-term benefits. News flow...

Osbert Tang, CFA

Anta Sports had a solid 3Q23, with major brand sales outperforming. 4Q23 sales are expected to be even better. Acquisition of MAIA ACTIVE and...