20180704-东英亚洲证券-安踏体育-02020.HK-Key_takeaways_from_Guangzhou_site_visit_7页_1mb

Anta Sports Products Limited (2020 HK) Equity Research Summary

Core Information

• Company: Anta Sports Products Limited
• Sector: Sportswear
• Stock Code: 2020 HK
• Rating: BUY
• Target Price: HK$51.4 (+26.1% from current price of HK$40.75)
• Market Cap: HK$109,404.91 million
• Issue Share: 2,684.78 million
• Major Shareholder: Director Ding & associates (61.81%)

Key Takeaways from Guangzhou Site Visit

1. FILA Performance: FILA's year-to-date growth exceeded management's initial expectations, with a year-over-year growth of 30-40%. This is attributed to increasing brand recognition and the progress of multi-brand operations.
2. Anta Core Brand: Anta's core brand also outperformed expectations, with mid-teens year-over-year growth, driven by improved product competitiveness amid industry consolidation.
3. Gross Margin Normalization: Anta's 1H18E gross margin is expected to normalize from the high base of 1H17 due to a return to average raw material costs.
4. Operating Expenses: Higher operating expenses in 1H18E are expected due to increased advertising and promotion efforts for new brands like FILA fusion and Kingcow.
5. Earnings Revision: FY18E and FY19E earnings estimates were revised downward by -1.5% and 0.0%, respectively, to RMB3,644mn and RMB4,426mn, reflecting the increased opex and better-than-expected performance.

Financial Highlights

Earnings Forecast and Valuation

• Revenue: Expected to grow steadily, with a slight deceleration in growth rate from FY18E to FY20E.
• Net Profit: Growth is anticipated to continue, though at a slower pace compared to earlier years.
• Diluted EPS: Projected to increase, with a slight adjustment due to revised earnings estimates.
• Valuation: Based on a 25x FY19E P/E, the target price remains at HK$51.4, aligning with the average valuation of international peers like Nike, Adidas, and Puma.

Risks

1. Macro Economic Downturn: Potential decline in consumer confidence could affect sales.
2. Execution Risks: Challenges in launching new brands and product lines.
3. Raw Material Costs: Unfavorable fluctuations in costs could impact margins.

Peer Group Comparison

Conclusion

Anta Sports Products Limited is a leading player in the China sportswear sector, with strong performance from both its core brand and new sub-brands such as FILA fusion. Despite a slight revision in earnings estimates due to higher operating expenses, the company's fundamentals remain robust, and the target price remains unchanged at HK$51.4 based on a 25x FY19E P/E. The BUY rating is reiterated, reflecting its strong position and growth potential in the sportswear market. However, macroeconomic risks, execution challenges, and raw material cost fluctuations are noted as potential headwinds.