We estimate that there is a 70-80% chance that Topsports International Holdings Limited's share price will fall by 10-15% in the next two months.

Topsports International Holdings Limited released sales figures for 3QFY22 (September-November 2021) after the close on December 21. Due to supply chain problems, overall sales (including retail and wholesale) fell by 20-30% year-on-year, a larger-than-expected decline.

Looking at 4QFY22 (December 2021 to February 2022), we expect supply chain problems to persist, while the company's inventory of new products (within 3 months) is likely to become more scarce than 3QFY22, and Topsports International Holdings Limited will face a higher base in 4QFY22. Considering the above disadvantages, we expect that the retail performance of 4QFY22 is less likely to take a turn for the better than 3QFY22.

Although we believe that supply chain problems will only affect the company's normal sales performance in the short term, it will not affect the company's long-term fundamentals and growth. However, two consecutive quarters of lower-than-expected retail performance is likely to affect the market's investment sentiment in the company in the short term, eventually causing the share price to fall.

However, as the main retail partner of international brands in China, we have long been optimistic about Topsports International Holdings Limited's digital ability and offline operation performance in the field of sportswear retail. We maintain our 12-month "buy" rating on Topsports International Holdings Limited.