20181210-申万宏源研究_香港_-安踏体育-02020.HK-Team_spirit_6页_1mb

ANTA Sports Products (02020:HK) Summary

Core Content

ANTA Sports Products (02020:HK) is a leading Chinese sports apparel and footwear company that has announced a major acquisition of Amer Sports (AMEAS:FH), a Finnish sports equipment maker. This strategic move aligns with ANTA's long-term goal of becoming a global, multi-brand corporation.

Key Financials

Main Points

1. Acquisition of Amer Sports

• ANTA Sports Products, along with a consortium including FountainVest and Anamered Investment, is making a cash tender offer for Amer Sports at €40/share, totaling €4.6bn.
• The deal is expected to be completed within nine months.
• Amer Sports' board has recommended shareholders accept the offer, with four major shareholders (7.91% stake) already committed and another shareholder (4.29%) expressing positive views.

2. Strategic Alignment

• The acquisition supports ANTA's strategy of becoming a global, multi-brand entity.
• Amer Sports owns several high-quality outdoor and sports brands, such as Arc'teryx and Salomon, which can be integrated into ANTA's business in China.

3. Financial Impact

• ANTA will contribute €1.5bn to the transaction, with additional €1.3bn in bank loans.
• The company's debt will increase by €800m, but the interest rate is expected to be around 2%, leading to annual financial costs of approximately Rmb125m.
• The financial cost is projected to represent only 4% of ANTA's 2017 net profit.
• Management plans to reduce dividends temporarily to manage leverage.

4. Synergies and Growth Potential

• Although the acquisition will not be consolidated immediately, the long-term potential for growth in China is significant.
• Amer Sports' brands, which are new to the Chinese market, are expected to benefit from ANTA's distribution and supply chain capabilities.
• Synergies are anticipated in both product lines and operations.

5. Financial Health

• ANTA currently has strong financial position, with Rmb7bn in cash on hand in 1H18 and a low asset-liability ratio of 26.68%.
• The company maintains healthy cash flow and is well-positioned to fund the acquisition without major financial strain.

6. Investment Rating

• The analyst maintains a BUY rating for ANTA Sports Products.
• The target price is HK$45.60, which represents a 25.6% upside from the closing price of HK$36.30 on 7 December 2018.
• The analyst forecasts diluted EPS for 2018-2020 at Rmb1.38, Rmb1.78, and Rmb2.12, with YoY growth of 17.9%, 29.0%, and 19.1% respectively.

Key Information

• The acquisition is expected to enhance ANTA's global brand presence and market share.
• Amer Sports' financial performance in 2017 was €2.7bn in revenue and €93m in net profit, though its net margin was lower than ANTA's.
• The deal involves a mix of cash and bank loans, with ANTA acting as the guarantor.
• The analyst emphasizes that the financial cost of the acquisition will remain manageable due to the low interest rate and ANTA's current financial strength.

Conclusion

The acquisition of Amer Sports is a strategic move for ANTA Sports Products, aiming to expand its global presence and diversify its brand portfolio. The deal is backed by major shareholders and is expected to provide long-term growth opportunities, especially in the Chinese market. Despite the increase in debt, the financial impact is anticipated to be limited, and the analyst maintains a BUY rating with a target price of HK$45.60.