Anta Sports (2020 HK) Company Update Summary
Core Content and Main Viewpoints
- Equity Research Rating: Maintain BUY with a revised target price of HK$113.30, a decrease from the previous HK$122.05.
- Valuation: The current P/E ratio of 18x for FY23E is considered relatively safe compared to the 5-year average of 21x and international peers' average of 18x.
- Outlook: A more cautious outlook for 4Q22E and FY23E due to weak consumer demand, social distancing measures, and inventory concerns. However, the outlook remains relatively positive compared to Li Ning.
- Performance: Anta's 3Q22 retail sales were in-line but at the low-end of expectations, with a retail discount of 26%, slightly better than the previous year. FILA's 3Q22 retail sales were also in-line with expectations, with a notable e-commerce growth of 65% YoY and a retail discount of 25.5%.
- Earnings Revision: Revised down FY22E, FY23E, and FY24E net profit and EBIT forecasts by 6%, 7%, and 7% respectively, primarily due to slower sales growth and less operating leverage.
- Growth Drivers: Anta's growth is supported by its other brands, particularly Kolon, which benefited from the China outdoor leisure boom and achieved 55%+ YoY retail sales growth in 3Q22. Desente and Kolon are expected to contribute ~9% of sales in FY22E.
- Amer Sports: Shows healthy growth potential and is expected to offset currency and growth risks in overseas markets.
- Pair Trade Suggestion: Long Anta (2020 HK) and hedge with Li Ning (2331 HK), as Anta's valuation is ~86% of Li Ning's, which is slightly below the 10-year average of 81%.
Key Financial Highlights
Earnings Summary (YE 31 Dec)
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Revenue (RMB mn) |
35,512 |
49,328 |
56,148 |
65,658 |
74,407 |
| YoY growth (%) |
4.7 |
38.9 |
13.8 |
16.9 |
13.3 |
| Net income (RMB mn) |
5,162 |
7,720 |
8,382 |
10,491 |
12,300 |
| EPS (RMB) |
1.86 |
2.77 |
3.01 |
3.76 |
4.41 |
| YoY growth (%) |
-3.2 |
49.2 |
8.6 |
25.2 |
17.2 |
| P/E (x) |
37.1 |
24.5 |
22.6 |
18.0 |
15.4 |
| P/B (x) |
7.7 |
6.3 |
5.4 |
4.4 |
3.7 |
| Yield (%) |
0.8 |
2.0 |
1.5 |
1.9 |
2.5 |
| ROE (%) |
23.4 |
29.2 |
26.6 |
27.8 |
26.9 |
Stock Data
| Metric |
Value (HK$) |
| Market Cap |
221,839 |
| Avg 3 mths t/o |
555.04 |
| 52w High/Low |
138.41/75.75 |
| Total Issued Shares |
2,713.6 |
Share Performance
| Period |
Absolute |
Relative |
| 1-month |
-10.7% |
1.0% |
| 3-months |
-11.5% |
8.3% |
| 6-months |
-12.4% |
13.7% |
| 12-months |
-32.8% |
2.6% |
Valuation Comparison
Peers Valuation Table
| Company |
Ticker |
Rating |
12m TP (LC) |
Price (LC) |
Up/Downside |
Mkt Cap (HK$mn) |
Year End |
P/E (x) |
P/B (x) |
ROE (%) |
3yrs PEG (x) |
Yield (%) |
| Anta Sports |
2020 HK |
BUY |
113.30 |
81.75 |
39% |
221,839 |
Dec-21 |
22.6 |
18.0 |
25.5 |
1.3 |
1.8 |
| Li Ning Co |
2331 HK |
BUY |
80.64 |
55.55 |
45% |
145,497 |
Dec-21 |
27.8 |
22.4 |
26.1 |
1.7 |
1.1 |
P/E Valuation Band
- The P/E ratio for Anta is 18x for FY23E, which is relatively safe compared to historical averages and international peers.
Operating Performance
Sales Growth Trends
- Anta brand's retail sales: In-line but at the low-end of expectations in 3Q22, with ~8% growth.
- FILA brand's retail sales: In-line with expectations, with ~13% growth and strong e-commerce performance.
- Kolon: Significant growth due to the outdoor leisure trend, with ~55%+ YoY growth in 3Q22.
- Desente & Others: Expected to grow at ~31% in FY23E, contributing ~9% of sales in FY22E.
Operating Expenses
| Expense Type |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| A&P Expenses / Sales |
10.0% |
12.4% |
12.2% |
11.8% |
11.6% |
| Labour costs / Sales |
12.5% |
13.5% |
14.2% |
14.4% |
14.5% |
| R&D expenses / Sales |
5.9% |
5.9% |
6.2% |
6.1% |
6.0% |
| Rental expenses / Sales |
10.4% |
11.6% |
11.7% |
11.6% |
11.3% |
| Selling & Distribution costs / Sales |
30.3% |
36.0% |
36.2% |
35.8% |
35.4% |
| Admin expenses / Sales |
6.0% |
5.9% |
6.6% |
6.3% |
6.2% |
Operating Margin
| Segment |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Anta |
28.3% |
20.6% |
20.4% |
21.3% |
21.8% |
| FILA |
25.8% |
24.7% |
23.0% |
23.5% |
24.0% |
| Others |
8.4% |
18.4% |
23.0% |
24.0% |
25.0% |
| Total |
25.8% |
22.3% |
21.7% |
22.5% |
23.0% |
Key Assumptions and Projections
Sales Growth by Segment
| Segment |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Shoes |
11.3% |
50.7% |
21.0% |
18.0% |
12.5% |
| Apparel |
1.3% |
32.1% |
9.3% |
16.4% |
14.0% |
| Accessories |
1.8% |
36.5% |
8.0% |
12.0% |
12.0% |
| Total |
4.7% |
38.9% |
13.8% |
16.9% |
13.3% |
Sales Growth by Brand
| Brand |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Anta |
-10.9% |
67.5% |
15.0% |
15.0% |
13.0% |
| Anta Kids |
-37.0% |
50.0% |
25.0% |
16.0% |
15.0% |
| FILA |
18.1% |
25.1% |
6.0% |
14.0% |
10.0% |
| Desente & Others |
35.4% |
51.1% |
41.0% |
31.0% |
25.0% |
| E-commerce |
13.8% |
20.2% |
19.0% |
23.0% |
15.0% |
| Total |
4.7% |
38.9% |
13.8% |
16.9% |
13.3% |
Sales Network
| Brand |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Anta |
6,851 |
6,422 |
6,652 |
6,682 |
6,702 |
| Anta Kids |
3,071 |
2,981 |
2,551 |
2,621 |
2,671 |
| FILA |
2,006 |
2,054 |
1,954 |
2,054 |
2,154 |
| Desente & Others |
457 |
459 |
505 |
630 |
840 |
| Total |
12,385 |
11,916 |
11,662 |
11,987 |
12,367 |
Conclusion
Anta Sports (2020 HK) is maintaining a BUY rating with a revised target price of HK$113.30, reflecting a more cautious outlook for the near term. The company's current valuation is seen as relatively safe compared to historical averages and international peers. Despite challenges in the fourth quarter of 2022 and fiscal year 2023, growth from other brands like Kolon and Desente is expected to support overall performance. The pair trade suggestion remains Long Anta and hedge with Li Ning, based on the valuation ratio and growth potential. Financial metrics indicate a steady improvement in margins and profitability, though the pace of growth is expected to slow down slightly.
