Date: 14 October 2024
Broker Name: UOB Kay Hian
Company Overview
Anta Sports is a leading sportswear company in China, with several key brands under its portfolio, including Anta, Fila, Descente, and Kolon. Additionally, the company holds a 52.7% equity stake in Amer Sports, which owns prominent global brands such as Arc’teryx, Salomon, and Wilson.
Stock Data
- Bloomberg Ticker: 2020 HK
- Shares Issued: 2,829.2 million
- Market Capitalization: HK$283,205.6 million (US$36,445.8 million)
- 3-month Average Daily Turnover: US$123.1 million
- 52-week High/Low: HK$107.5/HK$58.52
- Major Shareholder: Anta International Limited (42.4%)
Key Financial Metrics (2024 Forecast)
- Net Turnover: RMB 70,642 million
- EBITDA: RMB 22,439 million
- Net Profit (Reported): RMB 13,288 million
- Net Profit (Adjusted): RMB 12,149 million
- EPS: 428.9 fen
- PE Ratio: 21.2x (2024F)
- Dividend Yield: 2.7% (2024F)
- Net Cash per Share: RMB 1.20
3Q24 Performance Overview
3Q24 Sales Performance
Anta Sports’ 3Q24 sales performance missed management’s expectations due to the challenging consumption environment, particularly affecting Fila’s performance. The Anta brand achieved mid-single-digit retail sales growth, while Fila recorded a low-single-digit retail sales decline. Management had set quarterly target execution rates at around 90%, but both Anta and Fila fell short of these targets.
Despite these results, some brands under Anta’s portfolio performed well. Kolon and Descente achieved 65-70% and 35-40% year-on-year retail sales growth, respectively. Anta’s online channel showed robust growth, with over 20% sales growth for the Anta brand, while other brands delivered 45-50% sales growth in the same period.
Golden Week Performance
While the overall 3Q24 sales performance lagged, sales during China’s Golden Week exceeded expectations, outperforming the broader sportswear industry. Both Anta and Fila brands saw improvements in traffic, and for the Anta brand, the basket size also increased. This strong performance during Golden Week contrasts with the weaker 3Q24 results.
Inventory and Discounts
Anta’s inventory levels remain healthy, with Anta brand inventories staying below five months and Fila inventories close to five months by the end of 3Q24. There has been no significant discounting pressure, with flat offline discounts and improved online discounts year-on-year for the Anta brand, while Fila maintained stable discounts both online and offline.
Challenges for Full-Year Sales Targets
Management has expressed concerns about achieving the company’s full-year sales targets, especially given the weaker-than-expected 3Q24 performance. However, they remain confident in the company’s ability to meet its profit goals, provided that both Anta and Fila achieve their internal sales targets in 4Q24.
Financial Forecasts (2023-2026)
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2023 Net Turnover: RMB 62,356 million
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2024 Net Turnover: RMB 70,642 million
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2025 Net Turnover: RMB 80,917 million
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2026 Net Turnover: RMB 92,199 million
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2023 EBITDA: RMB 20,229 million
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2024 EBITDA: RMB 22,439 million
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2025 EBITDA: RMB 25,179 million
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2026 EBITDA: RMB 27,999 million
Key Risks
The primary risks to Anta Sports’ outlook include:
- Lower-than-expected sales growth
- Potential deeper discounting pressures
- Increased advertising and promotional (A&P) expenses
Valuation and Recommendation
UOB Kay Hian maintains a BUY recommendation for Anta Sports, with a target price of HK$132.30. This target price is based on a discounted cash flow (DCF) model and implies a 23.3x PE for 2024F and a 20.8x PE for 2025F. The current stock is trading at 21.2x 2024F PE and 17.6x 2025F PE.
Earnings Revisions
There have been no earnings revisions in this report.
This comprehensive update provides insights into Anta Sports’ performance in 3Q24 and its prospects for the remainder of 2024.
