20180709-中国银河国际证券-安踏体育-02020.HK-Industry_Leader_Offering_Multi-year_Growth_Story._Initiate_with_BUY_14页_1mb

Anta Sports Products [2020.HK] Summary

Core Content

Anta Sports Products (2020.HK) is recognized as the leading domestic sportswear company in China, driven by its core ANTA brand and the acquired FILA brand. The company is expected to deliver consistent growth over multiple years due to its strong market position, effective marketing strategies, and multi-brand approach.

Main Points

• ANTA Brand:

  • Dominates the domestic sportswear market, capturing over 75% of revenue in 2017.
  • Targets the mass market with functional sportswear for running, basketball, and cross-training.
  • Maintains steady growth amid intense competition and benefits from large-scale advertising and marketing spend.
  • SSSG (Same Store Sales Growth) has been strong, especially in 2017, with a double-digit growth rate.

• FILA Brand:

  • Contributes around 25% of total revenue in 2017, with a significantly higher GPM (60%–70%) than ANTA.
  • Positioned as a high-end sports fashion brand, complementing ANTA and increasing overall market share.
  • Expected to maintain strong growth (>30% YoY) due to store expansion and increasing consumer demand for premium products.
  • Store count exceeded 1,000 in 2017, and further expansion is expected in 2018E and 2019E.

• Multi-brand Strategy:

  • Anta has acquired or partnered with several international brands (e.g., Sprandi, Descente, Kolon Sport, Kingkow).
  • These new brands target emerging sports segments such as winter sports and are expected to benefit from the 2022 Winter Olympics.
  • While initial store numbers are small, the company believes these investments will yield long-term value.
  • The expansion may not generate significant returns in the short term, but the company's scale allows it to absorb potential losses.

• Financial Performance:

  • Net profit growth is expected to remain around 20% YoY in 2018E and 2019E.
  • EPS is forecasted at RMB1.40 and RMB1.68 for 2018E and 2019E, respectively.
  • The company has a strong track record of paying dividends at a 70% payout ratio.
  • ROE has shown consistent improvement, reaching 31.7% in 2019E.

• Valuation and Investment Thesis:

  • The target price of HK$49.16 is based on a 24x 2019E PER, factoring in earnings growth and the premium for being an industry leader.
  • The company's P/E ratio has been declining, from 34.3x in 2016 to 16.6x in 2020E, reflecting market confidence in its long-term growth potential.
  • Anta is considered a clean balance sheet holder with strong operating cash flow and has used its cash reserves for M&A activities.

Key Financials (2016–2020E)

Risks

• Revenue Growth Slowdown:

  • If FILA or other brands experience slow growth, it could impact overall revenue and operating margins.
  • Factors like poor product launches, ineffective marketing campaigns, or increased competition could lead to this slowdown.

• Unsuccessful Expansion of New Brands:

  • The FILA model may not be easily replicable for other brands.
  • New brands such as Kolon Sport and Sprandi may take years to generate meaningful returns.
  • Potential write-offs could negatively impact SG&A costs and operating margins.

• Worse-than-Expected SG&A Control:

  • The company's ability to control operating expenses is crucial for maintaining its profit growth.
  • Any increase in SG&A costs could affect net profit and overall financial performance.

Conclusion

Anta Sports is positioned as a strong growth story in the Chinese sportswear market, with a dominant ANTA brand and a high-growth FILA brand. The company's multi-brand strategy and consistent earnings growth make it an attractive investment, despite some risks related to brand expansion and market competition. The analysts recommend initiating a "BUY" position with a target price of HK$49.16, based on its earnings growth and industry leadership status.