Maintain BUY and adjusted our TP to HK$ 150.66, based on 34x FY22E P/E (revised down from 36x due to recent sector de-rating). We are highly confident on Anta group’s mid-term potential, thanks to multiple growth drivers, such as Anta’s rebranding, Descente to yield profits, Amer’s big brands, China and DTC initiatives. We believe the current valuation of 27x FY22E P/E is still attractive, compared to Li Ning/ Nike/ Adidas/ Lulu’s 35x/ 34x/ 27x/ 46x.
- FY20 results roughly inline. Sales grew by 5% YoY and net profit fell by 3% YoY in FY20, 3% and 5% below CMBI est., mainly attributable to: 1) weaker-than-expected Anta sales (higher discounts, cut in 4Q20 trade fair orders and temporary drags from DTC reform), 2) stronger-than-expected GP/ OP margin for Anta and 3) higher-than-expected tax rate.
- So far so good in Jan-Feb 2021. Management was delighted with 1Q20 retail sale growth so far (to be announced). In Jan-Feb 2021, while Anta’s inventory level (excluding ~1month inventory for online and warehouse) normalized to ~4.5 months (vs ~5 months in Dec 2020), its offline retail discounts also improved significantly (~2-3ppt less vs 4Q20 and even better than 1Q19).
- FY21E guidance raised and a remarkable mid-term game plan. Management raised FY21E retail sales growth guidance for Anta/ FILA to mid-teens/ 30%+ (from 10%+/ 20%+). We also turned more positive on its future growth, because 1) Anta rebranding project (DTC development, 10th generation stores, launch of a new high-end sub brand, further penetration into online channel, sales mix to reach 40% in 5 years from ~25% in FY20) should resume its growth to industry leading, 2) FILA’s GP margin improves as retail discounts gradually normalize (still MSD higher currently), and 3) decent profit growth from Descente begins to kick in (sales +60% with a higher than 8% OP margin achieved in FY20).
- Amer’s 5 years target is still intact. Management reiterated its 5 billion sales target (Arc’teryx, Solomon, Wilson, China and DTC) in 5 years, despite the drags from COVID-19, we think is highly encouraging. Besides, losses for Amer’s JV should be narrowed in FY21E with a lower PPA expenses of ~RMB 150mn (vs ~RMB 200mn in FY20), supported by robust growth in China (stores doubled in FY20) and DTC channel (e-commerce sales up 60% YoY in FY20). Also, Sunnto is likely to be disposed but subject to impairment risks.
Maintain BUY and adjusted our TP to HK$ 150.66. We maintain BUY and adjusted TP to HK$ 150.66, based on 34x FY22E P/E (from 36x for sector de-rating). We fine-tuned our FY21E/ 22E NP forecasts by -0.2%/ -0.3%, to factor in: 1) faster FILA growth and 2) better GP margins. Current valuation is still attractive at 27x FY22E P/E, given a 33% NP CAGR during FY20-23E.
