Anta Sports Products (2020 HK) Summary
Core Content
Anta Sports Products (2020 HK) is a leading mainland Chinese sportswear brand, with a strong market position and growth potential. The report outlines the company's performance, future outlook, and valuation in the context of the improving China sportswear sector.
Main Points
- Market Leadership: Anta holds 10% of China's sportswear market share in 2015, second only to Nike and Adidas. It has superior margins and a healthy balance sheet.
- Growth Drivers:
- Fila, Anta Kids, and e-commerce are identified as strong growth drivers.
- The company is expected to benefit from the overall sector upcycle and market consolidation.
- Financial Performance:
- Anta's revenue is forecasted to grow by 24%, 12%, and 10% for FY15E, FY16E, and FY17E respectively.
- Net profit is expected to increase by 29.3%, 22.8%, and 13.4% over the same periods.
- Earnings per share (EPS) are projected to grow by 23%, 13%, and 10% YoY.
- Valuation:
- Anta's FY16E P/E ratio is 19x, which is higher than the sector average of 12x and peer average of 13x.
- Despite the rich valuation, it is considered justified due to the company's market leadership, operational quality, and growth prospects.
- The target price (TP) is set at HK$24.44, which is a 12% upside from the current price of HK$21.90.
Key Information
Revenue and Net Profit Growth
| Year |
Revenue (RMB mn) |
Growth (%) |
Net Profit (RMB mn) |
Growth (%) |
| 2013 |
7,281 |
-4.5 |
1,315 |
-3.2 |
| 2014 |
8,923 |
22.5 |
1,700 |
29.3 |
| 2015E |
11,055 |
23.9 |
2,088 |
22.8 |
| 2016E |
12,419 |
12.3 |
2,369 |
13.4 |
| 2017E |
13,689 |
10.2 |
2,608 |
10.1 |
EPS and DPS
| Year |
EPS (RMB) |
DPS (RMB) |
Growth (%) |
| 2013 |
0.53 |
0.38 |
- |
| 2014 |
0.68 |
0.48 |
- |
| 2015E |
0.84 |
0.58 |
- |
| 2016E |
0.95 |
0.66 |
- |
| 2017E |
1.04 |
0.73 |
- |
P/E and P/B
| Year |
P/E (x) |
P/B (x) |
| 2013 |
34.6 |
6.8 |
| 2014 |
26.8 |
6.2 |
| 2015E |
21.8 |
5.7 |
| 2016E |
19.3 |
5.2 |
| 2017E |
17.5 |
4.8 |
ROE
| Year |
ROE (%) |
| 2013 |
18.4 |
| 2014 |
22.1 |
| 2015E |
25.1 |
| 2016E |
26.4 |
| 2017E |
26.8 |
Growth Drivers
- Fila: Despite contributing only 10% of total revenue in 2014, Fila is the fastest-growing brand within Anta's portfolio. The company is expected to increase Fila POS from 540 to 800 over the next 2-3 years.
- Anta Kids: Anta Kids is a key growth segment, contributing 6% of revenue in 2014 and expected to grow to 10% by 2017.
- E-commerce: E-commerce is also a key growth driver, expected to increase its revenue share from 2.9% in 2014 to 10% in 2017.
- Sector Growth: The China sportswear market is expected to grow from RMB140bn in 2014 to RMB180bn by 2017, with a CAGR of 8%.
Valuation and Catalysts
- Valuation: Anta's FY16E P/E of 19x is considered rich but justified by its market leadership, operational quality, and growth prospects.
- Catalysts:
- FY15 results are expected to beat market consensus.
- 2H16E sales fair value growth is expected to remain at double digits.
- Continued improvement in SSSG (Sales, Stock, and Store Growth) due to brand mix and sector improvement.
Balance Sheet and Cash Flow
- Anta has a healthy balance sheet and strong cash flow.
- The company has a net cash position of RMB5.3bn as of end-1H15.
- Working capital is expected to remain stable with inventory, receivable, and payable days at around 58, 35, and 67 days respectively.
- Cash position is expected to improve with increasing earnings from operations and minimal capex needs.
Related Research
- 361 Degrees (1361 HK): "BUY" rating with a focus on strong sportswear sector growth.
- Xtep International (1368 HK): "BUY" rating with positive outlook for FY16E results.
- Other HK-listed sportswear brands: Also received "BUY" ratings with positive growth expectations.
Future Outlook
- Anta is expected to continue its growth trajectory through the expansion of its brand portfolio and e-commerce initiatives.
- The company may pursue more acquisitions of overseas sports brands to further boost its growth and profit margins.
- The sportswear sector is expected to continue its recovery, with Anta leading the way for mainland brands.
