20220824-招银国际-安踏体育-02020.HK-Anta__FILA_to_turn_around___Amer_to_break_even_10页_1mb

Anta Sports (2020 HK) Company Update Summary

Core Content and Key Highlights

• Company Overview: Anta Sports is a leading Chinese sportswear company with a strong presence in the global market. The report highlights the company's performance and future outlook, particularly for the Anta and FILA brands, as well as its other brands like Amer and Desente.

• Recent Performance:

  • Anta's 1H22 results exceeded expectations, driven by strong DTC sales growth and improved operating margins.
  • The operating profit margin reached 22.3%, surpassing the CMBI estimate by 1.3ppt and significantly higher than the 19.2% in 2H21, despite a challenging environment due to the pandemic.
  • FILA's operating margin is expected to return to 24%–25% if inventory write-downs are adjusted, close to pre-COVID levels.
  • Amer's sales and EBITDA increased by 21% and 28% respectively in 1H22, with a likely break-even in FY22E.

• Guidance Update:

  • For 2H22E, the company is aiming for 10%+ retail sales growth for Anta, 10%+ for FILA, and 30%+ for other brands.
  • The company has revised its FY22E guidance to reflect a slight reduction in growth expectations, but this has already been factored into the market.

• Earnings Summary:

  • Revenue (RMB mn): FY20A 35,512, FY21A 49,328, FY22E 57,306, FY23E 67,912, FY24E 76,937
  • Net Income (RMB mn): FY20A 5,162, FY21A 7,720, FY22E 8,918, FY23E 11,301, FY24E 13,209
  • EPS (RMB): FY20A 1.86, FY21A 2.77, FY22E 3.20, FY23E 4.05, FY24E 4.74
  • P/E Ratio: 41.7 (FY20A), 27.6 (FY21A), 23.9 (FY22E), 18.8 (FY23E), 16.1 (FY24E)
  • P/B Ratio: 8.7 (FY20A), 7.1 (FY21A), 6.0 (FY22E), 4.9 (FY23E), 4.0 (FY24E)
  • Yield (%): 0.7 (FY20A), 1.7 (FY21A), 1.4 (FY22E), 1.8 (FY23E), 2.4 (FY24E)
  • ROE (%): 21.5 (FY20A), 26.7 (FY21A), 25.9 (FY22E), 26.6 (FY23E), 25.6 (FY24E)

Investment Recommendation

• Rating: BUY (Maintain)
• Target Price (HK$): 122.05 (Up 32.7% from previous TP of 115.47)
• Current Price (HK$): 92.00
• Earnings Forecast Adjustments:
  • Net profit and EPS forecasts have been raised by 6% for FY22E, FY23E, and FY24E.
  • The current valuation of 19x FY23E P/E is considered undemanding, compared to the 5-year average of 21x and international peers' average of 16x.

Market and Sector Analysis

• China Sportswear Sector:

  • The sector has seen mixed performance, with Anta and other players like Li Ning and Xstep showing resilience and growth.
  • Anta's market cap is HK$249,653 million, with a 3-month average trading volume of HK$727.15 million.
  • The 52-week high and low are HK$174.51 and HK$75.75, respectively.

• Shareholding Structure:

  • Mr. Ding Shizhong (CEO), Mr. Ding Shijia (V-Chairman), Mr. Lai Shixian (CFO) and Family Free Float hold 57.78% of shares.
  • The remaining 42.22% is held by other shareholders.

• Share Performance:

  • 1-month: -3.0% (Absolute), +1.7% (Relative)
  • 3-month: +5.3% (Absolute), +11.0% (Relative)
  • 6-month: -28.0% (Absolute), -13.9% (Relative)
  • 12-month: -45.1% (Absolute), -30.5% (Relative)

Key Drivers for Positive Outlook

• Premiumization Trend: High-end product sales are growing faster, driven by better technology and functionality.
• Successful Expansion: The company has successfully expanded into tier 1–2 cities with positive new store performance.
• Operating Margin Improvements: Anta and FILA are expected to see further improvements in operating margins as offline sales recover and operating leverage increases.
• Momentum from New Brands: New brands are showing faster sales growth and better gross and operating margins than the group average.

Related Reports

• Anta Sports (2020 HK, BUY): A resilient 2Q22 and a mild inventory concern – 12 Jul 2022
• Anta Sports (2020 HK, BUY): Factoring in a negative outlook for 2Q22E – 19 Apr 2022
• Anta Sports (2020 HK, BUY): A mixed guidance but long-term growth intact – 23 Mar 2022

Auditor

• Auditor: KPMG

Valuation Analysis

• Valuation Table (Peers):

  • Anta Sports (2020 HK): P/E 23.9 (FY1E), 18.8 (FY2E); P/B 6.3 (FY1E), 5.1 (FY2E); ROE 25.5 (FY1E), 25.5 (FY2E); 3-year PEG 1.2 (FY1E), 1.2 (FY2E)
  • Li Ning Co (2331 HK): P/E 33.1 (FY1E), 26.6 (FY2E); P/B 6.3 (FY1E), 5.4 (FY2E); ROE 26.1 (FY1E), 26.1 (FY2E); 3-year PEG 1.8 (FY1E), 1.2 (FY2E)
  • Xstep Intl (1368 HK): P/E 24.8 (FY1E), 19.8 (FY2E); P/B 3.3 (FY1E), 3.1 (FY2E); ROE 13.5 (FY1E), 13.5 (FY2E); 3-year PEG 1.2 (FY1E), 1.2 (FY2E)
  • 361 Degrees Intl (1361 HK): P/E 10.9 (FY1E), 9.5 (FY2E); P/B 1.0 (FY1E), 0.9 (FY2E); ROE 10.3 (FY1E), 10.3 (FY2E); 3-year PEG 0.9 (FY1E), 0.9 (FY2E)
  • Topsports Intl (6110 HK): P/E 12.8 (FY1E), 10.7 (FY2E); P/B 3.0 (FY1E), 2.7 (FY2E); ROE 24.1 (FY1E), 24.1 (FY2E); 3-year PEG 1.2 (FY1E), 1.2 (FY2E)
  • Pou Sheng Intl (3813 HK): P/E 13.8 (FY1E), 5.1 (FY2E); P/B 0.4 (FY1E), 0.4 (FY2E); ROE -3.2 (FY1E), -3.2 (FY2E); 3-year PEG 0.4 (FY1E), 0.4 (FY2E)
  • China DX (3818 HK): P/E 10.9 (FY1E), 9.5 (FY2E); P/B 1.0 (FY1E), 0.9 (FY2E); ROE 16.7 (FY1E), 16.7 (FY2E); 3-year PEG 0.0 (FY1E), 0.0 (FY2E)

• International Peers:

  • Nike (NKE US): P/E 29.4 (FY1E), 24.2 (FY2E); P/B 11.1 (FY1E), 9.8 (FY2E); ROE 43.1 (FY1E), 43.1 (FY2E); 3-year PEG 2.3 (FY1E), 1.1 (FY2E)
  • Adidas (ADS GY): P/E 22.9 (FY1E), 17.9 (FY2E); P/B 4.4 (FY1E), 4.2 (FY2E); ROE 29.5 (FY1E), 29.5 (FY2E); 3-year PEG -4.3 (FY1E), -4.3 (FY2E)
  • Puma (PUM GY): P/E 23.7 (FY1E), 19.2 (FY2E); P/B 3.8 (FY1E), 3.4 (FY2E); ROE 16.0 (FY1E), 16.0 (FY2E); 3-year PEG 1.3 (FY1E), 1.4 (FY2E)
  • Under Armour (UAA US): P/E 17.6 (FY1E), 12.6 (FY2E); P/B 2.1 (FY1E), 1.7 (FY2E); ROE n/a (FY1E), n/a (FY2E); 3-year PEG 3.9 (FY1E), 3.9 (FY2E)
  • Lululemon (LULU US): P/E 32.8 (FY1E), 28.6 (FY2E); P/B 12.5 (FY1E), 9.7 (FY2E); ROE 38.4 (FY1E), 38.4 (FY2E); 3-year PEG 1.7 (FY1E), 0.0 (FY2E)
  • Skechers (SKX US): P/E 14.4 (FY1E), 11.3 (FY2E); P/B 1.6 (FY1E), 1.4 (FY2E); ROE 23.3 (FY1E), 23.3 (FY2E); 3-year PEG -3.0 (FY1E), -3.0 (FY2E)
  • Vf Corp (VFC US): P/E 14.2 (FY1E), 12.8 (FY2E); P/B 4.4 (FY1E), 4.1 (FY2E); ROE 30.4 (FY1E), 30.4 (FY2E); 3-year PEG 8.1 (FY1E), 4.7 (FY2E)
  • Columbia (COLM US): P/E 14.3 (FY1E), 12.7 (FY2E); P/B 4.4 (FY1E), 4.1 (FY2E); ROE 23.3 (FY1E), 23.3 (FY2E); 3-year PEG -3.0 (FY1E), -3.0 (FY2E)

Conclusion

Anta Sports is demonstrating resilience in its performance, with strong DTC sales and improved operating margins, particularly for the Anta and FILA brands. The company is expected to benefit from the premiumization trend, successful expansion into key markets, and improved store performance. Despite a slight adjustment in guidance for 2H22E, the current valuation is seen as undemanding, and the company's outlook remains positive. The report recommends maintaining a BUY rating with an updated target price of HK$122.05.