CICC has adjusted its earnings forecasts for TOPSPORTS (06110), reducing FY26/27 EPS estimates by 4% and 13% to RMB 0.20 and RMB 0.23, respectively. The current share price reflects 14x and 12x FY26/27 P/E multiples. The firm retains its Outperform rating but cuts the target price by 7% to HK$3.88, implying 17x and 15x FY26/27 P/E and a 24% upside potential.

Key takeaways from CICC’s analysis include: - **3QFY26 Performance (Sep–Nov):** Total retail and wholesale sales declined by high-single digits YoY, while gross selling area for directly operated stores fell 1.3% compared to August-end. - **Market Conditions:** The sportswear sector remained sluggish, aligning with TOPSPORTS’ expectations. Retail channels outperformed wholesale, with offline sales showing slight improvement due to a low base. - **Store Optimization:** The company continued shutting underperforming stores at a slower pace, reducing gross selling area by 13.4% YoY and 1.3% sequentially by November-end. Online growth decelerated due to base effects. - **Inventory & Discounts:** Inventory levels dropped YoY with healthy turnover, though retail discounts deepened annually—albeit at a narrower margin—driven by higher online sales and promotions.

**Recent Trends & Outlook:** December sales weakened further due to weather volatility and holiday timing shifts, but retail discounts stabilized YoY on a low base. Management remains cautious, prioritizing disciplined discounting and operational health, while acknowledging challenges in meeting full-year guidance. Cost optimization in 2HFY26 is expected to yield positive results.

TOPSPORTS plans to collaborate with core brands to enhance market conditions and expand into segments like running and outdoor sports with new partners, aiming to be a one-stop operational partner for brands in China.

**Risks:** Intensified competition, weaker-than-expected retail demand, and slower channel optimization.