Oct. 11 (NBD) -- China's largest sportswear retailer Topsports International Holdings Limited (06110.HK) landed on Hong Kong exchange market at HK$8.5 (1.08 U.S. dollars) per share on Thursday.

Shares of the Shenzhen-based company once soared 11.76 percent in the trading hours on the day and closed 8.82 percent higher at HK$9.25 per share. On Friday, growth continued and the stock climbed 4.86 percent to HK$9.7 per share, with a market value of HK$60.15 billion. 

The listing of Topsports on the Hong Kong stock exchange signifies the return of its parent company Belle International, China's largest retailer of women's shoes, to the capital market. Belle was taken private and delisted from the Hong Kong bourse in 2017 in a HK$53.1 billion deal.

Hundreds of customers were waiting for the lottery of limited-edition Nike shows at a supermall in Jinan, Shandong on Aug. 31, 2019. (Photo/Tuchong)

National Business Daily (NBD) noticed that Topsports intends to use roughly 45 percent of the net proceeds from the float to repay outstanding amounts due to Belle International and its fellow subsidiaries and 26.8 percent for its short-term bank borrowings.

According to the prospectus, Topsports boasted revenue of 21.7 billion yuan, 26.6 billion yuan, and 32.6 billion yuan for fiscal 2017, 2018, and 2019, respectively. Topsports' continually increasing revenue reflects the booming sportswear market driven by millennials' rising awareness of health and on the other hand, good relationships in the past with top global sports brands considerably bolstered the company's financial performance. 

Looking globally, research & consulting firm Frost & Sullivan forecasts a large increase in the market size of the global wellness industry, which is expected to reach 6 trillion U.S. dollars in 2023 at a CAGR of 6 percent from 2018. Tne Chinese sports market is seeing vigorous growth with the overall consumption on sports-related goods and service predicted to reach 610.1 billion yuan in 2023 at a CAGR of 8.5 percent from 2018.

Topsports' brand portfolio primarily include Nike, adidas, Puma, Converse, VF Corporation's brands (namely Vans, The North Face and Timberland), Reebok, ASICS, Onitsuka Tiger and Skechers, and the former two are the largest revenue sources. For the years ended February 28, 2017, 2018 and 2019, revenue generated from sale of products from the two principal brands accounted for 90.0 percent, 89.4 percent, 87.4 percent of Topsports' total revenue from sale of goods.

In such case, maintaining great relationships with brand partners will be critical to Topsports' future performance. NBD observed that the sportswear retailer's retail agreements generally have terms of one to five years. 

"If we fail to maintain good relationships or renew our retail agreements with our brand partners, our profitability and business prospects may be materially and adversely affected," noted Topsports in the prospectus. "Our brand partners may sell their sportswear products through e-Commerce platforms or their own physical stores instead of through us, which may materially and adversely affect our business, results of operations and financial conditions."

Email: lansuying@nbd.com.cn