20220120-招银国际-安踏体育-02020.HK-4Q21_inline_but_we_are_prudent_about_FY22E_9页_1mb

Anta Sports (2020 HK) Equity Research Summary

Core Content

Anta Sports is a leading Chinese sportswear company, and the report provides an update on its performance and future outlook. The report maintains a BUY rating but revises the target price (TP) to HK$132.66, a decrease from the previous TP of HK$156.06. The current stock price is HK$112.70, with a +17.7% upside to the new TP.

The company's performance in the fourth quarter of 2021 (4Q21) was in line with the cautious expectations of CMB International Securities. The report expresses prudence regarding the profit margins for the fiscal year 2022 (FY22E), citing the impact of macroeconomic conditions and the ongoing effects of the pandemic.

Main Points

4Q21 Performance

• Anta Retail Sales: Grew by mid-teens YoY, in line with CMBI estimates, faster than the low-teens growth in 3Q21.
• Inventory to Sales Ratio: At 5 months, similar to 3Q21.
• Retail Discounts: At 26% off, consistent with previous quarters.
• FILA Retail Sales: Missed expectations slightly, with a YoY growth of HSD, slower than CMBI's estimate of 12%.
• Inventory to Sales Ratio: At 6-7 months, similar to 3Q21.
• Retail Discounts: At 24% off.

FY21E Performance

• Positive Profit Alert: Anta's net profit (NP) grew by 45%+, attributed to:
  1. Rapid sales growth of 35%, supported by DTC transformation.
  2. Higher finance income and less loss from the American joint venture (Amer JV).
• Sales Growth: 4% higher than CMBI's estimate, but NP was 6% lower due to low-margin DTC sales and greater than expected FILA operating deleverage.

FY22E Outlook

• Guidance Likely to Stay: Management indicated a decent Jan-TD growth, but it is too early to judge.
• Anta Brand Growth: Expected to grow by 20%+, driven by:
  1. More ASP hikes through high-end product launches.
  2. Larger store openings.
  3. Category expansion (e.g., women, kids, online).
  4. Greater investments in advertising and promotion (A&P).
• FILA Brand Growth: Expected to grow by 15%+, with limited benefit from the domestic fashion mania.
• Valuation: Current valuation at 27x FY22E P/E is not demanding compared to a 5-year average of 20x and international peers' average of 23x.

Amer Sports Expansion

• Amer's Losses: Narrowed to ~RMB 300m in FY21E despite supply chain disruptions.
• Growth Outlook: Positive, with Arc'teryx expanding rapidly in China and opening flagship stores in the US, while Wilson became the official basketball brand.
• Break-Even Expectation: Anta expects Amer to break even in FY22E.

Earnings Summary

Valuation Table (Peers)

Key Information

• Maintain BUY: The stock is maintained with a BUY rating.
• Target Price Cut: The TP is revised down to HK$132.66 due to sector de-rating.
• NP Forecast Cut: NP forecasts for FY21E, FY22E, and FY23E are cut by 6%, 7%, and 5% respectively, to account for slower FILA growth and lower OP margins.
• Valuation Context: The current valuation is not too demanding at 27x FY22E P/E, with a 32% NP CAGR expected during FY20-FY23E.
• Investment Year: FY22E is expected to be an investment year, with brand momentum likely to take time to materialize.
• Key Drivers for Anta: High-end product launches, store expansion, category growth, and A&P investments.
• FILA Challenges: Limited benefit from the domestic fashion mania, slower growth than expected.
• Amer Sports: Expected to break even in FY22E despite early losses.

Shareholding Structure

• Free Float: 42.22%
• Family & Executives: 57.78%

Stock Performance

Summary

Anta Sports is a key player in the Chinese sportswear market, with a BUY rating and a revised target price of HK$132.66. The company's performance in 4Q21 was in line with cautious expectations, and the outlook for FY22E remains positive but with caution on margins. Anta's growth is attributed to DTC transformation, higher finance income, and strategic brand expansions. FILA, however, shows slower growth than expected, impacting overall NP. The Amer JV is expected to break even in FY22E. The stock's valuation is considered reasonable, and the company's future growth is expected to be driven by high-end product launches, store expansion, and A&P investments.