Matters:
On April 17, the company announced retail performance for the first quarter. In the first quarter of 2024, Anta's main brands recorded positive growth in the number of units, FILA recorded high positive unit growth, and other brands recorded positive growth of 25-30%.
Guoxin Textile's opinion:
1. First quarter of 2024: High-base upstream growth, 100% target achievement rate for each brand, improved inventory sales ratio, and narrower discounts; 2. Risk warning: the epidemic repeatedly impacted consumer demand; reforms fell short of expectations; brand image was damaged; and the systemic risk of the market.
3. Investment advice: The quality of operations in the first quarter was high, and I am optimistic about the main brand potential upgrade and the growth potential of the multi-brand matrix. Anta and FILA respectively grew in the first quarter in terms of the number of units and high numbers of units, mainly due to the high base after the liberalization of epidemic control last year. In fact, the target achievement rate of each brand reached 100%, good inventory and discounts, and high operating quality. In 2024, with the support of Anta's main brand star effect, product matrix channel upgrades and multi-brand incubation efforts, the Group is expected to continue to maintain industry-leading growth. In the medium to long term, Anta Group is expected to continue to enhance its competitiveness in the global sports market with its multi-level brand matrix in the Chinese market and multi-brand layout in the global market. Maintaining the profit forecast, net profit due to mother for 2024-2026 is expected to be 134.6/134.8/14.78 billion yuan respectively, up 31.5%/0.2%/9.6%. The adjusted net profit to mother will be about 118.6/134.8/14.78 billion yuan, respectively, an increase of 15.8%/13.7%/9.6%. The target price was maintained at HK$104-113, and the target price was 23-25x compared to the adjusted EPS in 2024, maintaining a “buy” rating.
Commentary:
First quarter of 2024: High base upstream growth, 100% target achievement rate for each brand, improved sales ratio, narrowing discount 1. Number of units in Anta's first quarter turnover growth, target achievement rate of 100%, inventory sales ratio less than 5, narrowing online retail discounts 1) Month by month: March was significantly better than January-January, and the target achievement rate for the second half of March was close to 120%.
2) Channel distribution: Due to differences in online and offline channel bases, online growth was 20-25%.
3) Inventory ratio: Inventory sales ratio at the end of the quarter is less than 5, slightly lower than the previous quarter, and inventory health is high.
4) Retail discounts: Online retail discounts have narrowed.
2. FILA's first quarter turnover increased by a high number of units, inventory sales ratio was less than 5, and online and offline retail discounts narrowed 1) Distribution by brand: FILA's bulk sales growth was better than Kids and Fusion. It is expected to mainly optimize the product portfolio and store layout, while Fusion and Kids stores closed part of the adjustment process.
2) Distribution channel flow: Online growth of about 25% on a high base.
3) Inventory ratio: The inventory sales ratio at the end of the quarter was less than 5, and slightly lower than the previous quarter.
4) Retail discounts: offline discounts narrowed by 1 point, and online discounts narrowed by 3 points.
3. The turnover of other brands increased by 25%-30% in the first quarter, inventory improved, and discounts narrowed
1) Sales by brand: Kolon increased by 50%, and Descente and Kolon both had strong double-digit growth.
2) Discounts and inventory: Inventory and online and offline discounts all improved compared to the previous quarter.
Investment advice: The operating quality was high in the first quarter. I am optimistic about the main brand potential upgrade and the growth potential of the multi-brand matrix. Anta and FILA increased the number of units respectively in the first quarter, mainly due to the high base after the liberalization of epidemic control last year. In fact, each brand achieved 100% target rate, good inventory and discounts, and high operating quality. In 2024, with the support of Anta's main brand star effect, product matrix channel upgrades and multi-brand incubation efforts, the Group is expected to continue to maintain industry-leading growth. In the medium to long term, Anta Group is expected to continue to enhance its competitiveness in the global sports market with its multi-level brand matrix in the Chinese market and multi-brand layout in the global market. Maintaining the profit forecast, net profit due to mother for 2024-2026 is expected to be 134.6/134.8/14.78 billion yuan respectively, up 31.5%/0.2%/9.6%. The adjusted net profit to mother will be about 118.6/134.8/14.78 billion yuan, respectively, an increase of 15.8%/13.7%/9.6%. The target price is maintained at HK$104-113, and the target price is 23-25x compared to the adjusted EPS in 2024, maintaining a “buy” rating.
Risk warning
The pandemic has repeatedly impacted consumer demand; reforms have fallen short of expectations; brand image has been damaged; and the market's systemic risks.