Main points of investment
The company released Q3 operating performance for the fiscal year 2022 ended November 30, 2021: total sales of the group recorded a low decline of 20-30% year-on-year.
Our comments are as follows:
Supply chain risks and outbreaks repeatedly hit Q3 sales. Topsports International Holdings Limited recorded a low drop of 20-30 per cent in FY22Q3, slightly better than his peer Baosheng International (sales in the same period were-28 per cent year-on-year). Mainly due to the instability of the supply chain affecting the arrival rate of new products, the negative impact of the supply chain will probably continue to affect the first quarter of 2022.
During the Singles' Day period, Topsports International Holdings Limited's platform-wide sales were + 20% compared with the same period last year, ranking first among sports shoes and clothing retailers in terms of sales, and O2O sales increased by 130% compared with the same period last year.
Continue to cultivate the strategy of "optimization + optimization". At the end of November, the gross sales area of direct stores increased by 3.9% month-on-month, an increase of 7.0% over the same period last year.
Topsports International Holdings Limited began to strengthen cooperation with the non-main brand Skage to disperse the brand management risk. Topsports International Holdings Limited previously non-main brand revenue volume is relatively small, non-main brand revenue accounted for only 12% in fiscal year 2021. Skaiqi's revenue in mainland China reached US $925 million (about 6 billion yuan) in fiscal year 2020, with less than 2000 stores in mainland China, and FY21Q3's revenue in mainland China was + 10% compared with the same period last year.
Our point of view:
Looking forward to the next 1-2 quarters, Topsports International Holdings Limited will continue to experience the test of tight supply chain, high base in February, recurrent epidemic, and negative leverage brought about by falling water. In view of the problems in the supply chain, the company has adopted the strategy of actively storing shoes, which is relatively strong in anti-risk ability and not easy to pass the season. It is estimated that the company's FY22/23/24 revenue is 318amp 369 / 41.1 billion yuan (the same as the unit below), year-on-year-12% Universe 16% Universe 11%, net profit of 27-30-33 billion Yuan respectively, year-on-year-4% Universe 12% Placement 11%. The current share price is 13.6 times PE in fiscal year 2023.
Risk tips: supply chain tension risk, inventory backlog, brand risk, epidemic recurrence.