20220622-招银国际-China_Sportswear_Sector_Decent_618_growth_but_with_margins_pressure_6页_806kb

China Sportswear Sector Summary

Core Content Overview

This report provides an analysis of the China sportswear sector performance during the 618 Festival in 2022, along with valuation insights and investment recommendations. It highlights the recovery of online sales, the impact of retail discounts on margins, and the relative performance of key brands and companies.

Key Performance Highlights

• 618 Festival Growth:

  • Overall e-commerce GMV reached ~RMB 696bn, up 20% YoY.
  • Comprehensive platforms saw 1% YoY growth, while live streaming platforms surged by 124% YoY.
  • Sportswear was one of the top-performing categories, growing by 9% YoY, with Ali-platforms (Tao Bao+Tmall) seeing a 27% growth.
  • Xtep was the standout brand, reporting a 64% GMV increase (Main brand +61%, Kids +103%, Saucony +135%), with JD sales growing by 5 times.
  • Li Ning saw ~27% growth on Ali-platforms, with Kids sales growing ~100%.
  • Anta and FILA achieved ~139% and ~17% growth on Tmall, respectively. Anta's JD sales also grew by ~100%.
  • Nike saw a 175% GMV increase on Tmall, while Adidas had ~26% growth.

• Sales Recovery:

  • The sector is believed to have bottomed out, with Xtep > Li Ning = Anta > Topsports > Pou Sheng as the recommended pecking order.
  • The online sales rebound is expected to offset the weakness in offline stores, and further guidance cuts for 2H22E are not anticipated.

Margin Pressure and Discount Trends

• Retail discounts increased during 618, with ASP (Average Selling Price) dropping ~10% YoY.
• E-commerce platforms introduced more promotions, such as RMB 50 off per RMB 300 spending, which was more aggressive than previous years.
• Sportswear brands imposed higher discounts to clear inventory in 2Q22E, which may have pressured gross margins.

Valuation Table Summary

Investment Recommendations

• Xtep (1368 HK): BUY, recommended as the top pick due to resilient retail sales growth, faster industry recovery, and a higher mix of lower-tier cities and ASP increases.
• Li Ning (2331 HK): BUY, despite moderate 618 growth, the MSD retail sales decline is expected to be less severe than previously guided.
• Anta (2020 HK): BUY, with strong performance on Tmall, and potential for less negative retail sales decline in 2Q22E.
• Topsports (6110 HK): NR (Not Rated), though Nike's online sales turned positive in May 2022, suggesting potential for recovery in 3Q22E.
• Adidas: Expected to take longer to recover, possibly into 4Q22E or beyond.

Key Insights

• Online sales played a crucial role in the sector's recovery, especially on live streaming platforms.
• Retail discounts and lower ASP have impacted gross profit margins, but the sector is expected to recover from the impact of the pandemic.
• The valuation table indicates Xtep and Anta as the most attractively valued among the domestic sportswear brands.
• The sector is expected to outperform the broader market over the next 12 months.

Summary

The China sportswear sector showed positive growth during the 618 Festival, with online channels performing notably better than offline stores. Xtep was the strongest performer, followed by Li Ning and Anta, with Topsports and Pou Sheng lagging. The report highlights resilient recovery and margin pressures due to increased discounts and lower ASP. Investment recommendations are BUY for Xtep, Li Ning, and Anta, while Topsports and Pou Sheng are not rated. The sector is expected to outperform the broader market.