Key points of investment
The company announced the 22Q3 turnover: the turnover of the Anta brand, FILA, and other brands in 22Q3 achieved a year-on-year medium unit, 10-20% low range, 40-45% increase. In Q3, under the weakening of the epidemic and low base factors for the same period last year, the turnover of various brands improved markedly compared to 22Q2.
Anta brand: Discounts are relatively stable and downstream improvements are expected. Q4 is expected to deepen discounts to absorb inventory. 1) In terms of flow, the number of units of major brands in 22Q3 increased year-on-year. Among them, large goods, children, and e-commerce increased the number of units, high units, and high units respectively. The flow in July-August improved significantly. Although September was adversely affected by the partial rebound of the domestic epidemic and the warm-up of the Winter Olympics in the same period last year, the 22Q3 flow was still improved compared to 22H1, which is overall in line with our expectations. 2) In terms of inventory, the 22Q3 Anta brand's inventory sales ratio was slightly more than 5 times higher than normal. It was partly influenced by pre-sale preparations for promotional activities such as National Day Golden Week at the end of September and “Double Eleven” that began in October. The company expects to digest inventory and promote a return to a healthier level through important e-commerce activities in Q4. 3) In terms of discounts, there was no significant deepening of the 22Q3 Anta discount. Among them, discounts for large goods remained the same year over year, discounts for children improved by 2-3 pct year over year, and online discounts increased. The company expects 22Q4 to prioritize inventory removal and increase discounts as appropriate.
FILA: Outstanding online performance, priority is given to going to the library in Q4. 1) In terms of flow, 22Q3FILA turnover increased 10-20% year-on-year, the best quarterly performance since 21H2. Among them, large goods, children's, and trendy brands achieved medium unit numbers, double digits, and 20% or more year-on-year increases respectively. The rebound of the epidemic in Tier 1 and 2 cities in September had a major impact on FILA's offline operations, but the company boosted online channels to promote low-carbon products through cooperation with Tmall and increase investment in new channels such as Xiaohongshu and Douyin's live streaming, which contributed to a 65% year-on-year increase in online sales, reflecting the strong consumer appeal of the FILA brand. 2) In terms of inventory, as of the end of September, FILA's inventory sales ratio was 7-8 times higher than normal. The company expects to work hard to absorb inventory during important e-commerce activities such as Double Eleven to return to normal levels by the end of the year. 3) In terms of discounts, 22Q3FILA discounts have been appropriately increased, with a comprehensive discount of 7.4-7.5 percent off, and a store discount of 8.5-8.6 percent. The deepening of the discount comes from an increase in the proportion of online accounts (the online discount itself is higher) and the deepening of discounts by prioritizing inventory removal.
Other brands: Benefiting from the boom in outdoor activities, continued to grow at a high rate, exceeding company expectations. In 22Q3, sales of other brands increased 40-45% year-on-year. Among them, Descente and Colon sales increased 35% + and 55% + year-on-year respectively. The growth exceeded the company's expectations, mainly benefiting from the popularity of outdoor activities such as camping and hiking in China after the pandemic. Among them, the Colon brand benefited the most directly. Online and offline increased 50% + year on year, Q3 Cologne store efficiency reached 400-500,000 yuan/month, and profit levels improved markedly. AMEAS's brands continue to operate steadily, and the positive trend in profit margins continues as joint ventures optimize financial expenses, depreciation and amortization expenses, and improve operating efficiency.
Profit forecast and investment rating: The company is a leader in multi-brand sportswear in China. The 22Q3 domestic epidemic improved compared to Q2, but there was still a slight repetition. Combined with the weakening of the 21H2 base, the company's brand turnover improved to a certain extent compared to 22H1, which is in line with our overall expectations. Currently, the domestic consumption environment is still facing uncertainty. The company will continue to manage it dynamically. Q4 will prioritize inventory, effectively promote inventory removal in important e-commerce activities, and strive to achieve annual performance guidelines. We are optimistic that the company will continue to consolidate its leading position under a multi-brand strategy. We expect the recovery in domestic consumption to drive the company's performance back to a relatively rapid growth range, maintaining the forecast of 4.1%/28.1%/20% year-on-year net profit for 22-24, respectively. Corresponding PE is 25/20/16X, maintaining the “buy” rating.
Risk warning: The epidemic has repeatedly affected operations, and inventory digestion has fallen short of expectations.