20180827-信达国际控股-安踏体育-02020.HK-FILA_takes_off_7页_917kb

ANTA Sports Summary

Core Content

ANTA Sports (ANTA) reported strong performance in 1H18, with revenue and net profit exceeding Bloomberg consensus by 10.3% and 8.1% respectively. The company's results beat expectations due to improved gross margin (GM), increased FILA contribution, and higher average selling prices (ASPs) for core brands.

Main Points

• Strong 1H18 Performance:

  • Revenue and net profit both exceeded Bloomberg consensus by 10.3% and 8.1%, respectively.
  • FILA contributed significantly to the growth, with GM up 370 bps YoY to 53.4%, well above market consensus and estimates (~50%).
  • Core brand revenue grew at mid-teens, driven by stable retail discount, robust online sales (>40% YoY), and strong kids segment (>40% YoY).

• FILA Outperformance:

  • FILA continued to outperform, with Non-ANTA brand RSV growth accelerating to 90-95% YoY (vs. 50-60% in 2Q17).
  • FILA's retail discount was at 15-20% off, contributing ~95% of Non-ANTA RSV.
  • FILA launched FILA FUSION to target the youth market and introduced a Milan Garden Kids collection.
  • FILA now has 1,248 stores (up from 1,086 in FY17).

• Other Non-ANTA Brands:

  • Brands like Descente, Kolon, and Sprandi had minimal sales, while Kingkow was acquired in 3Q17 and not yet included in RSV in 2Q18.
  • The company expects more visibility on these new brands in 2H18E.

• Financial Position:

  • ANTA's inventory turnover days increased to 83 days (from 75 days in end-Dec), raising concerns about inventory pile-up.
  • Inventory levels for ANTA brand are at <4 months, a historical low.
  • AR days decreased to 35 days, indicating improved collection efficiency.
  • Free cash flow (FCF) for 1H18 declined by 32.8% YoY to RMB1,225mn due to increased retail exposure and prepayment for raw materials.
  • ANTA's net cash was ~RMB9.0bn, representing ~11% of current market cap, providing strong capital for future investment and M&A.

• Earnings Forecast:

  • FY19E ex-cash PE is at 16.3x, which is undemanding compared to international peers (29.4x).
  • The target price was raised to HK$54.66 from HK$44.73, implying a 23.2x FY19E ex-cash PE.
  • ANTA is expected to deliver a 25.5% EPS CAGR from FY17 to FY20E.

Key Information

• Current Price: HK$40.15
• Target Price: HK$54.66
• Rating: Maintain BUY
• Upside: 36.1%
• 1H18 Revenue: RMB23,082mn
• 1H18 GM: 52.1%
• 1H18 Net Profit: RMB3,887mn
• 1H18 EPS: RMB1.45
• Net Cash (Debt): ~RMB9.0bn
• 1H18 FCF: RMB1,225mn
• Inventory Turnover Days: 83 days
• AR Days: 35 days

Exhibit Highlights

• Exhibit 1: FY18E and FY19E EPS forecasts were revised upward by 2.7% and 1.4%, respectively.
• Exhibit 2: Revenue, EBITDA, and Net Profit growth rates for FY18E-FY20E are expected to be 38.3%, 32.1%, and 25.9%, respectively.
• Exhibit 3: Segment revenue and GM growth projections show increasing contributions from FILA and core brand.
• Exhibit 4: ANTA's retail sales value (RSV) growth accelerated in 4Q17, with core online and kids segments showing strong growth.
• Exhibit 5: FILA's launch of FILA FUSION and new kids collection reflects its strategy to expand into youth market.
• Exhibit 6: ANTA completed a 50/50 joint venture with Kolon Sports, enhancing brand portfolio.
• Exhibit 7: Acquisition of Kingkow deepens ANTA's exposure to the kids segment.
• Exhibit 8: Financial forecasts show increasing revenue, EBITDA, and net profit over the forecast period.
• Exhibit 9: ANTA's 16.3x FY19E ex-cash PE is undemanding compared to international peers, and the company is maintaining a BUY rating.

Risk Factors

• Over-reliance on distributors
• Excess inventory in distribution channels
• Rising production costs
• Increasing competition from international and PRC peers
• Higher marketing spending and execution risks for FILA, Kolon JV, and Kingkow

Analysts

• Hayman Chiu
  • Title: Research Director
  • Email: hayman.chiu@cinda.com.hk
  • Phone: (852) 2235 7677

Rating Policy

• Stock Rating:
  • Buy: Outperform HSI by 15%
  • Neutral: Between -15% and 15% of HSI
  • Sell: Underperform HSI by -15%
• Sector Rating:
  • Accumulate: Outperform HSI by 10%
  • Neutral: Between -10% and 10% of HSI
  • Reduce: Underperform HSI by -10%

Disclaimer

This report is prepared by Cinda International Research Limited and does not constitute an offer to buy or sell securities. It is for informational purposes only and should not be considered a substitute for professional investment advice. The information is subject to change and may contain forward-looking estimates with inherent uncertainties. Cinda International Research Limited does not accept liability for any use of the report.