Guosen Securities has released a research report indicating that Topsports' (06110) revenue in the fiscal year 2024 is expected to increase by 6.9% YoY to 28.93 billion yuan. Driven by retail sales, new products, multi-brand revival, and synchronized growth in all channels, Topsports achieved high-quality growth with steadily improving profitability. The net income attributable to shareholders increased by 20.5% YoY to 2.21 billion yuan.
The bank stated that under the drive of improved discount rates and increased proportion of retail income, the gross profit margin increased by 0.1 percentage points YoY to 41.8%. Benefiting from the positive operating leverage, the overall expense ratio decreased by 1.0 percentage point to 32.8%. The net cash flow from operating activities was 3.13 billion yuan, and the net-to-cash ratio was 1.4. Ample cash flow lays a solid foundation for dividend distribution, with a year-end payout ratio of 101%.
The bank predicts that based on the company's stable cash generation capability, a high dividend payout rate of 101% for the whole year can be achieved, with a stock dividend rate of 6.8% calculated based on the closing price on May 22. It is expected that the net income in fiscal year 2025-2027 will be 2.3/2.51/2.7 billion yuan, an increase of 4.1%/8.9%/7.5% YoY, respectively. The bank maintains its “buy” rating and lowers the reasonable valuation range to HKD 6.8-7.2 (formerly HKD 7.5-7.9), corresponding to a 17-18x PE for fiscal year 2025.