Daiwa Research initiated coverage on Topsports International (06110) with a "buy" rating and a target price of HK$11.7.
The research house sees Topsports as the best proxy play on global sportswear giants' expansions in China (of which Nike and Adidas together accounted for 87.9% of Topsports' sales in 1H FY2020) as well as a key beneficiary of China's consumption upgrade theme and secular growth, driven by increasing awareness about health.
Daiwa thinks concerns about competition from brand partners' direct-to-consumer (DTC) initiatives are overblown, as Daiwa believes the differentiated retailers such as Topsports will remain an integral part of the global brands'development strategies to phase out undifferentiated retailers.
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