Event: Topsports International Holdings Limited issued a quarterly operation announcement for the first time. In the FY2022Q3 financial quarter (September-November 2021), the company's omni-channel terminal flow declined by 20% and 30% compared with the same period last year.

The supply chain capacity of the brand side is limited, the local epidemic situation is superimposed repeatedly, the terminal of the company is under pressure, and the inventory structure is still healthy. On the day Topsports International Holdings Limited issued the quarterly business announcement, the company's partner NIKE released its quarterly report, revealing that on a currency-neutral basis, the revenue of the NIKE brand in Greater China fell 24% compared with the same period last year, mainly because the epidemic affected the supply chain capacity. As Topsports International Holdings Limited's main cooperative brand, the fluctuation of its supply capacity has an impact on Topsports International Holdings Limited's terminal sales. At the same time, the epidemic situation in some parts of China is still repeated in the Q3 financial season, and the regional control measures restrict the passenger flow of the company's terminal stores, and the terminal of the company is under pressure under the action of multiple factors. In terms of inventory management, we believe that the company's current inventory structure as a whole remains at a reasonable and healthy level.

The operation efficiency of e-commerce channel continues to improve, and the strategy of offline store optimization and optimization is steadily promoted. 1) online channel: the company continues to optimize the operating capacity of e-commerce channel, increases online revenue through platform e-commerce, Mini Program out-store sales and other tools in the increasingly normalized consumption environment, and hedges the risk of offline channel sales. According to the company's disclosure, during the Singles' Day period, the company's online platform-wide retail sales increased by 20% compared with the same period last year. 2) offline channels: the company always implements the strategy of stock store optimization and new store selection, and strives to increase the proportion of large stores. According to the company, as of the end of November, the sales area of direct stores increased by 7% compared with FY2021Q3 and 3.9% compared with FY2022Q2. We believe that Topsports International Holdings Limited, as the forerunner and leader of the big store strategy in the industry, has rich experience in the operation of large stores. According to our tracking of the increase in the number of large stores in the company, its operational efficiency and profitability are also maintained at a high level.

Looking ahead to FY2022's full fiscal year, we expect the company's revenue / performance to be-13% and 10%. Revenue / performance of the company in the first half of the fiscal year compared with the same period last year-1.2% of FY2022 9.3% of the company's terminal performance was sluggish in the Q3 fiscal quarter. Since the Q4 fiscal quarter, we believe that the supply problem of the brand continues to exist, and the epidemic situation is still uncertain. At the same time, considering the high base effect at the beginning of 2021, we expect the company's revenue / performance for the full fiscal year to be-13% and 10% respectively. In the current changeable macro environment and consumption situation, Topsports International Holdings Limited adheres to the concept of openness and continues to explore and deepen cooperation with brand partners, so in the long run, we believe that the company is still expected to maintain steady growth.

Profit forecast and investment advice: as the leading company in the downstream channel of sports shoes and clothing, the terminal store structure continues to be optimized, the digital transformation leads to the improvement of retail efficiency, and the efficient member operation continues to consolidate user stickiness, we adjust the profit forecast, the company's FY2022-FY2024 homing net profit is expected to be 24.86G 29.71G 3.557 billion yuan, the current price is 8.6pm, corresponding to 18 times FY2022PE, maintaining the "buy" rating.

Risk tips: the duration of the epidemic is longer than expected; terminal sales slow down; changes in brand cooperation bring operational risks.