The current situation of the company
ANTA Sports Products released 3Q22 pipelining, and the performance of each brand is in line with expectations. Among them, retail sales of Anta brand are growing by a few units year-on-year, FILA brand retail sales are growing at a low level of 10-20% year-on-year, and retail sales of other brands are up 40% Mel 45% year-on-year.
Comment
The 3Q line was affected by the epidemic, but the two main brands performed well on the line. Although the decline in offline passenger flow caused by the September epidemic disturbance is a drag on the overall flow, we see that Anta and FILA still maintain a higher growth level online than the overall level, indicating that the two major brands still have strong consumer recognition.
Among them, Anta main brand continues the "win Plan" strategy to enhance brand potential energy, more importantly, Anta children's discounts still recorded 2ppt improvement compared with the same period last year, indicating good prospects for the development of children's business.
At the same time, driven by new products, new marketing methods and new sales channels, FILA has increased by 65% on the 3Q line, showing that the adjustments of the brand are gradually being recognized by consumers.
4Q inventory health will become the focus of the company. Under the influence of epidemic situation, winter and Singles Day stock and other factors, the inventory of Anta and FILA is slightly higher than the historical level of the same period (Anta warehouse sales ratio 5X/FILA inventory ratio 7-8X). Both 4Q Anta and FILA will put running water and inventory health in an important position in Singles' Day. We believe that the company's strong online sales channels will ensure that it will return to normal inventory levels by the end of 2022.
The outdoor sports boom has led to the high growth of other brands' business. In the context of the vigorous rise of outdoor and other emerging sports in China, while the number of Kolon Sports stores has not increased significantly, 3Q retail volume has increased by 55% more than expected, while profitability has improved significantly. At the same time, Disante continues its previous growth trend (+ 35% compared with the same period last year). We believe that Anta's high-quality outdoor brand cluster and the company's proven brand operation and retail management capabilities will enable its new brand to maintain rapid growth in the future.
Profit forecast and valuation
In view of the fact that the decline in offline passenger traffic caused by the epidemic still exists, we downgrade the company's 2022 EPS 23 forecast of 5% 10% to 2.96pm 3.68RMB, and the current share price corresponds to a price-to-earnings ratio of 19x 2022max 23. We believe that although there is pressure in the short term, the company is still a high-quality target of scarcity in the industry, still has good development prospects in the long run, and maintains a rating that outperforms the industry. The target price was cut by 10 per cent to HK $110.35, corresponding to 26 times 2022 earnings for 31 Universe, which has 35 per cent upside from the current share price.
Risk
Repeated disturbances of the epidemic; changes in consumer demand.