20180815-中国银河国际证券-安踏体育-02020.HK-Panic_Unjustified._BUY_on_Strong_1H18_Results___FILA_Growth_Story_8页_1023kb

Anta Sports Products [2020.HK] Summary

Core Content and Key Points

Anta Sports Products (2020.HK) experienced strong 1H18 results, with revenue growing 44% YoY to RMB10,554m and net profit increasing 34% YoY to RMB1,945m. Despite these positive results, the stock dropped over 10% on 14 August 2018, causing concern among investors. The report argues that this decline was unwarranted and that the company's fundamentals remain strong.

The FILA brand played a crucial role in driving the 1H18 performance, contributing significantly to revenue and profit growth. FILA's retail sales value growth accelerated from 85-90% in Q1 2018 to 90%-95% in Q2 2018, and its profitability improved during the period. The report also highlights that FILA is expected to continue as a key growth engine for the company, with a revised sales growth target of CAGR of 50% from 2017 to 2020.

The core ANTA brand is expected to grow moderately, and together with FILA, these brands are projected to deliver decent earnings growth in the coming years, which should offset the losses from recent investments in new brands like Descente, Sprandi, and Kingkow.

The report lifts its FY2019/20E EPS to RMB1.75/2.13, reflecting the improved long-term growth prospects of FILA. However, it slightly lowers the target price (TP) to HK$48.10, based on the weaker RMB and a 24x 2019E PER.

Investment Highlights

• Strong 1H18 Results:

  • Revenue: +44% YoY to RMB10,554m
  • Net Profit: +34% YoY to RMB1,945m
  • FILA and e-commerce were the main contributors to the growth.

• Downside Was Exaggerated:

  • Operating cash flow dropped 28% YoY to RMB1,476m, but this was attributed to:
    1. Increased working capital needs for FILA stores.
    2. One-off impact from prepayments to suppliers due to rising raw material costs.

• New Investments Dragged Down Performance:

  • Net profit margin (NPM) fell by 1.4ppt to 18.4%, due to increased advertising and promotion (A&P) expenses and losses from new brand investments.
  • These investments are expected to be loss-making in the short term but are on track for expansion.

• Growth Story Continues:

  • The report recommends BUYing on the dip, as the market's concern appears overblown.
  • The company's management remains optimistic about future growth, especially for FILA.

Key Financials

Valuation and Outlook

• The report forecasts 19.5% / 25.3% / 21.6% YoY growth in EPS for 2018E, 2019E, and 2020E, respectively.
• The target price (TP) is HK$48.10, which is +31.8% above the close of HK$36.50 on 14 August 2018.
• Despite weak operating cash flow and lower NPM, the report believes these are temporary effects of FILA's expansion and the seasonal nature of A&P expenses.

Brand Portfolio and Performance

Peer Comparison

Conclusion

The report suggests that the panic over the 1H18 results was unjustified, and that the company's long-term growth prospects remain strong. It recommends BUYing on the dip, citing the strong performance of FILA and the potential for earnings growth in the coming years. The target price is HK$48.10, reflecting the weaker RMB and lower 2019E PER. The analyst is confident in the company's ability to monetize FILA and offset losses from new investments.