20210825-招银国际-安踏体育-02020.HK-Guidance_maintained_but_be_cautious_on_opex_9页_1mb

Anta Sports (2020 HK) Equity Research Summary

Core Content

This document provides an equity research update on Anta Sports (2020 HK), focusing on its financial performance, guidance, and valuation. It outlines the key financial metrics for the company and its peers, and highlights the outlook for the company's performance in the coming fiscal years.

Main Points

Financial Performance

• 1H21 Net Profit: Surged by 132% YoY, slightly beating expectations. This was driven by GP margin expansion and less-than-expected losses for Amer, despite reduced government grants.
• Dividend Payout Ratio: Raised to 35% from 30%, indicating improved financial flexibility.
• Inventory Days: Remained healthy at 117 days, better than 122/135 days in previous periods, even with DTC consolidation.
• 1H21 Revenue: Increased by 56% YoY to RMB 22,812 million, slightly above the CMBI estimate of RMB 22,267 million.
• 1H21 Gross Profit: Grew by 73% YoY to RMB 14,408 million, exceeding the estimate by 10%.
• 1H21 Operating Profit (EBIT): Increased by 64% YoY to RMB 5,905 million, with OP margin at 25.9%, slightly below the CMBI estimate of 26.0%.
• 1H21 Net Profit: Achieved RMB 3,840 million, 132% YoY growth, beating the CMBI estimate by 10%.

Guidance and Outlook

• Guidance Maintained: Despite a bumpy retail sales growth in Jul-Aug 2021 (with Aug 2021 below expectations due to flooding and the pandemic), the FY21E target of 20%+ for Anta and 30%+ for FILA is still maintained.
• Cautious on 2H21E: Potential retail sales slowdown, higher A&P expenses (due to Olympics sponsorship, rebranding, and Descente expansion), higher staff costs, and greater rental expenses may drag down margins.
• 2H21E Net Profit: Expected to be RMB 4,381 million, with a 25% YoY growth, though margin pressure is anticipated due to raw material costs and supply chain disruptions in Southeast Asia.

Descente as a Bright Spot

• Descente Sales: Grew by ~100% YoY in 1H21 to over RMB 1 billion, after 60% growth in FY20.
• OP Margin: Surpassed FILA's margin (estimated at 30%), thanks to higher price points and outstanding sales per store (RMB 900K per month).
• Mid-term Growth Target: Expected to reach RMB 5 billion in sales, making it a key growth driver.

Earnings Forecast

• FY21E Net Profit: Estimated at RMB 8,221 million, 59.3% YoY growth.
• FY22E Net Profit: Estimated at RMB 10,849 million, 32.0% YoY growth.
• FY23E Net Profit: Estimated at RMB 13,270 million, 22.3% YoY growth.
• Net Profit Margin: Projected to be 16.8% in FY21E, 17.9% in FY22E, and 18.6% in FY23E.

Valuation and Target Price

• Current Price: HK$171.20.
• Target Price: HK$210.85, up 23.2% from the current price.
• Valuation: The current P/E ratio (FY22E) is 37x, which is considered attractive compared to peers like Li Ning (45x), Xtep (28x), Nike (34x), Adidas (30x), and Lulu's (48x).
• PEG Ratio: 1.3x over the past three years, suggesting reasonable valuation.

Key Information

Stock Performance

• Market Cap: HK$462,810 million.
• Average 3-Month Turnover: HK$1,298.83 million.
• 52-Week High/Low: HK$191.9 / HK$73.15.
• Total Issued Shares: 2,703.3 million.

Shareholding Structure

• Mr. Ding Shizhong (CEO) & Mr. Ding Shijia (V-Chairman): Hold 57.78%.
• Lai Shixian (CFO) & Family Free Float: Hold 42.22%.
• Source: HKEx.

Earnings Revision

• Revenue: Revised up by 4.0%, 5.0%, and 5.2% for FY21E, FY22E, and FY23E, respectively.
• Gross Profit: Revised up by 7.6%, 8.6%, and 8.8%.
• Net Profit: Revised slightly down for FY21E (-0.3%), up for FY22E (-0.9%), and slightly up for FY23E (0.0%).
• Diluted EPS: Revised slightly down for FY21E (-0.3%), up for FY22E (0.9%), and down for FY23E (-1.4%).

Operating Assumptions

• Sales Growth: Anta is expected to grow by 38.0% in FY21E, 20.0% in FY22E, and 17.0% in FY23E.
• GP Margins: Anta's margins are expected to increase to 52.3% in FY21E, 53.5% in FY22E, and 54.9% in FY23E.
• Opex Breakdown:
  • A&P Expenses: Expected to rise to 12.5% of sales in FY21E.
  • Labour Costs: Expected to increase to 14.2% of sales in FY21E.
  • Rental Expenses: Expected to increase to 11.1% of sales in FY21E.
  • Selling & Distribution Costs: Expected to rise to 33.9% of sales in FY21E.
  • Admin Expenses: Expected to increase to 6.5% of sales in FY21E.
• OP Margin: Expected to be 25.5% in FY21E, 26.5% in FY22E, and 27.0% in FY23E.
• Effective Tax Rate: Expected to be 27.0% in FY21E, 26.0% in FY22E, and 26.0% in FY23E.
• NP Margin: Expected to be 16.8% in FY21E, 17.9% in FY22E, and 18.6% in FY23E.

Peer Comparison

Key Risks

• Margin Pressure: Higher opex in 2H21E could reduce profitability.
• Supply Chain Disruptions: Impacting raw material costs and operating margins.
• Retail Sales Slowdown: Possible slower growth in 2H21E due to economic factors and external shocks.

Conclusion

Anta Sports has delivered strong performance in 1H21, with 132% YoY net profit growth and healthy inventory levels. Despite caution on margin pressures in 2H21E, the company's current valuation is considered attractive. Descente is expected to be a key growth driver, with ~100% YoY sales growth and superior margins. The target price of HK$210.85 is maintained, with a 23.2% upside from the current price. The earnings forecast and operating assumptions indicate sustainable growth in the coming years.