Anta Sports (2020 HK) Company Update Summary
Core Content
- Company: Anta Sports (2020 HK)
- Rating: Maintain BUY
- Target Price (TP): HK$128.94 (up from HK$113.30)
- Current Price: HK$109.70
- Up/Downside: +17.5%
Key Highlights
- Turnaround Outlook: The company is expected to show signs of turnaround in 2Q23E, with retail sales growth anticipated to be in the range of 4%-11%.
- Valuation: The current P/E ratio of 26x for FY23E is in line with the 5-year average, though it is higher than international peers' average of 20x. The target price is based on a 31x FY23E P/E.
- Earnings Revision: Revised net profit forecasts for FY22E, FY23E, and FY24E by -14%, -8%, and -8% respectively, due to increased promotions, inventory clearance efforts, and operating deleverage.
Financial Summary
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Revenue (RMB mn) |
35,512 |
49,328 |
53,891 |
63,012 |
71,400 |
| YoY Growth (%) |
4.7 |
38.9 |
9.2 |
16.9 |
13.3 |
| Net Income (RMB mn) |
5,162 |
7,720 |
7,242 |
9,628 |
11,357 |
| EPS (RMB) |
1.86 |
2.77 |
2.60 |
3.45 |
4.07 |
| YoY Growth (%) |
-3.2 |
49.2 |
-6.2 |
33.0 |
18.0 |
| Consensus EPS (RMB) |
n/a |
n/a |
2.94 |
3.68 |
4.50 |
| P/E (x) |
49.7 |
32.9 |
35.1 |
26.4 |
22.4 |
| P/B (x) |
10.4 |
8.5 |
7.5 |
6.2 |
5.2 |
| Yield (%) |
0.6 |
1.5 |
1.0 |
1.3 |
1.7 |
| ROE (%) |
21.5 |
26.7 |
21.9 |
24.1 |
23.8 |
| Net Gearing (%) |
Net Cash |
Net Cash |
Net Cash |
Net Cash |
Net Cash |
Earnings Revision
| Metric |
New (RMB mn) |
Old (RMB mn) |
Diff (%) |
| Revenue |
53,891 |
56,148 |
-4.0% |
| Gross Profit |
33,051 |
34,807 |
-5.0% |
| EBIT |
10,600 |
12,233 |
-13.3% |
| Net Profit |
7,242 |
8,382 |
-13.6% |
| Diluted EPS (RMB) |
2.597 |
3.005 |
-13.6% |
| Gross Margin |
61.3% |
62.0% |
-0.7ppt |
| EBIT Margin |
19.7% |
21.8% |
-2.1ppt |
| Net Profit Margin |
13.4% |
14.9% |
-1.5ppt |
Valuation Comparison with Peers
| Company |
Ticker |
Rating |
12m TP (LC) |
Price (LC) |
Up/Downside |
Mkt. Cap (HK$ mn) |
Year End |
P/E (x) |
P/B (x) |
ROE (%) |
3yrs PEG (x) |
Yield (%) |
| Anta Sports |
2020 HK |
BUY |
128.94 |
109.70 |
+17.5% |
297,684 |
Dec-21 |
35.1 |
7.4 |
25.5 |
2.6 |
1.3 |
| Li Ning Co |
2331 HK |
BUY |
73.08 |
73.20 |
0% |
192,803 |
Dec-21 |
35.9 |
6.7 |
26.1 |
2.1 |
0.9 |
| Xstep Intl |
1368 HK |
BUY |
10.52 |
9.05 |
+16% |
23,862 |
Dec-21 |
18.9 |
2.4 |
13.5 |
1.1 |
2.8 |
| 361 Degrees Intl |
1361 HK |
NR |
n/a |
3.29 |
n/a |
6,802 |
Dec-21 |
7.9 |
0.7 |
10.3 |
0.6 |
4.4 |
| Topsports Intl |
6110 HK |
NR |
n/a |
7.23 |
n/a |
44,835 |
Feb-22 |
17.6 |
3.5 |
21.3 |
2.9 |
4.5 |
| Pou Sheng Intl |
3813 HK |
NR |
n/a |
0.91 |
n/a |
4,847 |
Dec-21 |
27.2 |
0.5 |
(3.2) |
0.9 |
0.6 |
| China DX |
3818 HK |
NR |
n/a |
0.39 |
n/a |
2,296 |
Mar-22 |
n/a |
11.3 |
0.2 |
0.2 |
(14.0) |
Key Drivers for Turnaround in FY23E
- Inventory Clearance: Continued focus on reducing inventory levels through promotions.
- ASP Hike: Anticipated growth in average selling price (ASP) due to brand upgrades and high-end functional products.
- DTC Business Reform: Aimed at improving HSD OP margin within 2-3 years.
- Operating Leverage: Expected from FILA's turnaround, given its higher sales mix from shopping malls and larger stores.
- A&P Expenses Reduction: Targeted to reduce to 9-11% of sales from ~12-13% in FY22E.
Retail Sales Performance
- Anta/FILA: Expected to turn around in 2Q23E with retail sales growth of 4%-11%.
- Other Brands: Retail sales growth in 4Q22 was inline with expectations, but slowed due to the impact of the pandemic and high offline sales mix.
- E-commerce: Continued strong growth with Anta/FILA and other brands.
Assumptions
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Sales by Segment Growth (%) |
Shoes: 11.3% |
Apparel: 1.3% |
Accessories: 1.8% |
Total: 4.7% |
38.9% |
| Sales by Brand Growth (%) |
Anta: -10.9% |
Anta Kids: -37.0% |
FILA: 18.1% |
Descente & Others: 35.4% |
E-commerce: 13.8% |
| OP Margin |
Anta: 28.3% |
FILA: 25.8% |
Others: 8.4% |
Total: 25.8% |
22.3% |
| Net Profit Margin |
14.5% |
15.7% |
13.4% |
15.3% |
15.9% |
| Effective Tax Rate |
31.2% |
26.9% |
27.0% |
26.0% |
26.0% |
Conclusion
Anta Sports is on track for a turnaround in FY23E, with a focus on inventory clearance, ASP growth, and DTC reform. The current valuation is not too demanding, and the target price is raised to HK$128.94, reflecting a more optimistic outlook. The company's performance is expected to outperform its peers in the coming year, with a strong emphasis on e-commerce and brand development.
