20230322-招银国际-安踏体育-02020.HK-Fair_guidance_but_decent_inventory_and_margin_11页_1mb

Anta Sports (2020 HK) Summary

Core Content

Anta Sports has shown signs of improvement in its financial performance and operational efficiency, with a notable reduction in inventory levels and positive retail sales growth. The company is viewed as a top pick in the sector due to its potential for margin improvement and net profit growth. The report highlights that Anta and FILA's retail sales in the first two months of 2023 exceeded expectations, indicating a strong recovery from the previous year's challenges, particularly the impact of the 2022 Winter Olympics.

Key Financial Highlights

• Revenue Growth: Anta's revenue grew by 9% YoY to RMB53.7bn in FY22, aligning with estimates. For FY23E, the revenue is projected to increase by 14.7%, reaching RMB61.56bn.
• Net Profit: Net profit in FY22 decreased by 2% YoY to RMB7.59bn, but the company raised its FY23E net profit forecast by 3%, expecting it to reach RMB10.41bn.
• Earnings Per Share (EPS): EPS for FY22 was RMB3.41, up 25.3% YoY.
• P/E Ratio: The P/E ratio for FY23E is estimated at 28.5x, up from 31x in previous estimates, reflecting improved earnings outlook.
• Target Price: The target price for Anta Sports is raised to HK$126.05, up from HK$123.25, with a 15.8% upside from the current price of HK$108.90.

Inventory and Sales

• Inventory to Sales Ratio: This ratio dropped sharply to a healthy level of 4.5 to 5 months in Jan-Feb 2023, down from over 5 to 6 months in 4Q22. This is attributed to more conservative trade fair orders, reduced previous orders, and strong retail sales.
• Retail Sales Growth: Anta and FILA's retail sales growth in Jan-Feb 2023 was positive and better than expected, despite the high base from the Winter Olympics.
• Retail Discounts: Retail discounts in 1Q23 returned to levels similar to 1Q22, showing stability in pricing strategies.

Sales Growth Guidance

• FY23E Sales Growth: Anta and FILA are expected to grow retail sales by 10%+, with FILA potentially outperforming due to a lower base post-pandemic.
• Growth Drivers: Anta's growth is expected to be driven by ASP growth, new large stores, improved store productivity through DTC reforms, and the upcoming Asian Games in Hangzhou.
• FILA Reforms: FILA has implemented successful reforms, including the launch of professional sports products and differentiation between core and fusion lines.

Margin Improvement

• OP Margin: The operating profit margin is expected to rebound to 21.9% in FY23E from 20.9% in FY22, driven by normalized retail discounts, absence of inventory provisions, and operating leverage from FILA's turnaround.
• Net Profit Margin: Anta's net profit margin is expected to improve to 15.5% in FY23E, up from 14.1% in FY22.
• Expenses: A&P, labor, and R&D expenses are expected to remain stable in FY23E, with A&P expenses at ~10% of sales.

Valuation and Performance

• Valuation: Anta's valuation is supported by a 33x FY23E P/E ratio, which is about 1 standard deviation above the 5-year average of 26x.
• Shareholding: Mr. Ding Shi Zhong & Family hold 54.5% of shares, while BlackRock Fund holds 1.6%.
• Market Cap: The current market cap is HK$294,392.5 million.
• Share Performance: Over the past 12 months, the share has shown a price performance of 22.0% absolute and 16.9% relative to the market.

Earnings Revision and Comparison

• Earnings Revision: CMBIGM has revised its earnings estimates upwards for FY23E and FY24E, with a 3% increase in FY23E net profit forecast.
• Consensus vs CMBIGM: CMBIGM estimates are generally lower than the consensus, with the largest discrepancies in net profit for FY25E.
• Margin Trends: CMBIGM estimates show improvements in gross margin, EBIT margin, and net profit margin compared to previous estimates.

Operational Performance

• Anta Brand Sales: Anta's retail sales have shown significant growth, with a notable increase in online sales and store productivity.
• FILA Brand Sales: FILA's sales have also seen growth, with a focus on core and fusion product lines, as well as online channels.
• Other Brands: Brands such as Descente and Kolon have shown positive growth, contributing to the overall performance of the group.

Peer Comparison

• Valuation Table: Anta is compared to other sportswear companies in terms of P/E, P/B, ROE, and other financial metrics.
• Competitors: The report includes comparisons with Li Ning, Xtep, 361 Degrees, Topsports, Pou Sheng, and Dong Xiang, highlighting Anta's strong position in the market.

Conclusion

Anta Sports is demonstrating a strong turnaround, with improved inventory management, positive retail sales growth, and a clear path for margin improvement. The company's guidance for FY23E is in line with expectations, and its valuation is supported by strong earnings growth and improved financial metrics. The report maintains a "BUY" rating with an increased target price, reflecting confidence in the company's future performance.