20171218-招商证券_香港_-安踏体育-02020.HK-CFO_resigns,_but_everything_still_going_smooth_8页_1mb

Anta Sports Products (2020 HK) Company Report Summary

Core Content

Anta Sports Products (2020 HK) announced the resignation of its CFO, Mr. Jim Lam, due to personal reasons, with no negative impact on operations. Mr. Ding Shizhong, the Chairman/CEO, has been appointed as the authorized representative until a replacement is found. The company maintains a "BUY" rating with a target price of HK$36.17, based on a 22x FY18E target P/E, which is 2SD above its mean forward P/E. This is justified by the positive sector outlook and Anta's leading position in China's sportswear market.

Key Financial Performance

Revenue and Growth

• Revenue (RMB mn): 11,126 (2015), 13,346 (2016), 16,260 (2017E), 19,279 (2018E), 22,498 (2019E)
• YoY Growth (%): 24.7%, 20.0%, 21.8%, 18.6%, 16.7%

Net Profit and Growth

• Net Profit (RMB mn): 2,041 (2015), 2,386 (2016), 3,061 (2017E), 3,677 (2018E), 4,331 (2019E)
• YoY Growth (%): 20.0%, 16.9%, 28.3%, 20.1%, 17.8%

EPS and DPS

• EPS (RMB): 0.82 (2015), 0.95 (2016), 1.16 (2017E), 1.37 (2018E), 1.61 (2019E)
• DPS (RMB): 0.57 (2015), 0.67 (2016), 0.80 (2017E), 0.96 (2018E), 1.13 (2019E)

P/E and P/B

• P/E (x): 33.2 (2015), 28.4 (2016), 23.3 (2017E), 19.8 (2018E), 16.8 (2019E)
• P/B (x): 8.4 (2015), 7.3 (2016), 7.3 (2017E), 6.5 (2018E), 5.8 (2019E)

ROAE

• ROAE (%): 24.3 (2015), 25.5 (2016), 29.9 (2017E), 33.0 (2018E), 34.9 (2019E)

Operational Highlights

• Anta's FY17E-FY20E revenue CAGR target remains at 15-20%.
• The core brand Anta has a target growth rate of teens percentage, while FILA targets +30%.
• New brand DECENTE's retail performance is already matching FILA.
• Anta aims to reach 50 retail stores by FY17E, with 20 achieved in 1H17.
• The average retail discount and channel inventory are healthy at 4-5 months.
• Anta has signed an 8-year contract with the Chinese Olympic committee for brand promotions.
• Newly acquired brands (KOLON/KingKow) aim for profitability within two to three years.

Revenue Forecast and Brand Performance

• Overall Revenue Growth: Expected to continue with strong performance in 4Q17E and 1Q18E due to the cold winter and extended CNY shopping season.
• Revenue Growth by Brands:
  • ANTA: 5.0% (FY15), 2.0% (FY16), 5.2% (FY17E), 3.3% (FY18E), 1.6% (FY19E)
  • ANTA Kids: 60.0% (2016), 36.3% (FY17E), 26.7% (FY18E), 24.2% (FY19E)
  • FILA: 50.0% (FY15), 56.0% (FY16), 51.6% (FY17E), 33.6% (FY18E), 26.8% (FY19E)
  • E-commerce (ANTA brand): 132.0% (FY15), 63.0% (FY16), 60.0% (FY17E), 50.0% (FY18E), 40.0% (FY19E)

Financial Ratios and Metrics

• Gross Margin: 46.6% (2015), 48.4% (2016), 51.1% (2017E), 52.4% (2018E), 53.3% (2019E)
• Net Margin: 18.3% (2015), 17.9% (2016), 18.8% (2017E), 19.1% (2018E), 19.2% (2019E)
• Debt to Asset: 10.6% (2017E), 6.4% (2018E), 5.2% (2019E)
• Current Ratio: 2.9 (2017E), 2.8 (2018E), 2.9 (2019E)

Shareholding and Market Information

• Shareholding Structure:
  • Ding Shizhong: 61.99%
  • No. of shares outstanding (mn): 2,685
  • Free float: 34%
• Market Cap (HK$ mn): 87,232
• 52-week range (HK$): 20.75-37.25
• Avg. daily volume (mn): 5.83
• BVPS (RMB): 3.70

Valuation Comparison

• Anta's target P/E is in line with the average of international peers.
• Despite its smaller scale compared to Nike and Adidas, Anta is argued to deserve a fair valuation due to its strong earnings outlook (19% 3-year EPS CAGR), higher dividend yield, China market focus, and solid management and financial health.
• The 12-month target price is HK$36.17, with a potential upside of +11% from the previous price of HK$32.50.

Conclusion

The CFO's resignation does not affect Anta's operational performance, and the company is expected to maintain strong financial results. Anta's multi-brand strategy and focus on the Chinese market are key drivers of its growth and profitability. The target price remains unchanged, reflecting confidence in its future performance and market position.