Brief performance review
On March 26, the company disclosed its annual report, achieving revenue of 62.356 billion yuan (+16.2%) for the whole year, achieving net profit of 10.236 billion yuan (+34.9%), and net profit to mother of 10.954 billion yuan (+44.9%) after excluding losses from the joint venture; the dividend rate was 50.7%, better than market expectations.
Management analysis
Highlight 1: Increased flexibility and accuracy of product operations, and store efficiency drives both revenue and OPM growth. The revenue of the Anta brand broke through the 30 billion yuan mark in '23 (up 9.3% to 30.306 billion yuan), and FILA grew rapidly by 16.6% to 25.103 billion yuan. At the same time, OPM of the two brands increased 0.8 pct\ 7.6 pct to 22.2%\ 27.6% respectively, mainly due to: 1) Improved store model optimization, improved retail capacity, and increased double-digit store efficiency and floor efficiency led to an increase in positive operating leverage and a decrease in leasing and sales ratio; 2) Product operation efficiency improved. Management rated 23 as the best year for inventory management. There have been improvements, inventory impairment has been reduced, and the inventory sales ratio of all brands has returned below 5. We believe that the faster growth in brand revenue than the industry is the most direct indicator reflecting the upward trend of brand potential. Combined with the optimization of the company's endogenous management, it has strengthened our confidence that the company will continue to expand its brand share, respond flexibly to complex environments, and achieve a larger scale of business with a lighter inventory.
Highlight 2: The 24-year forecast is optimistic, and AMER is expected to start contributing positively to profits. According to Anta's management guidelines, Anta and FILA's turnover is expected to grow by 10-15% in '24, while Descente and Kolon are expected to grow by no less than 20% and 30% respectively. On the OPM side, the Anta brand will maintain a stable level of more than 20% on the basis of increasing investment in the Olympics, while FILA is expected to return to around 25%, and overall confidence is sufficient for 24 years. At the same time, based on the company's current shareholding ratio (43%) and guidelines for AMER SPORTS, it is estimated that AS will contribute about 45-550 million yuan in revenue to the joint venture in '24, adding 1.6 billion yuan of non-cash income (including other income) to significantly increase profits, and the burden of financial expenses after AS listing will decrease, and Anta Group's interest income will increase due to increased cash benefits, and the 24-year performance is highly certain.
Highlight 3: Dividend payouts have recovered above 50%. Previously, the company reduced its dividend rate due to mergers and acquisitions. Due to the successful listing of AMER SPORTS in '24, it has now resumed its dividend payout rate to 50.7% (+6.4pct year on year), and is expected to maintain a dividend rate of more than 50% in the medium to long term to enhance shareholder returns.
Profit Forecasts, Valuations, and Ratings
Faced with a complex external environment in 20-23, the company's brand power and operating efficiency continued to improve. It has the ability to flexibly regulate the supply chain and obtain business opportunities in the context of the 24 retail environment and slow social zero recovery in the first quarter, and is optimistic about the increase in EPS and valuation brought about by the company's scarce multi-brand assets+strong operating barriers. We expect the company's net profit to be 134,141,166 billion yuan in 2024-2026, and the current price of the company's stock is 16/15/13 times the PE valuation, maintaining a “buy” rating.
Risk warning
The retail environment fluctuates; the recovery in consumption falls short of expectations.