The Zhitong Finance App learned that Xiaomo released a research report stating that it maintains the “gain” rating of Anta Sports (02020) and is the preferred stock in China's sportswear sector, with a target price of HK$144. The company released the latest operating data for the 1st quarter of 2024. The retail sales of the Anta brand/Philharmonic brand increased the number of units/high units year-on-year (in line with expectations and reached the high end of the expected range (low to medium units/medium to high units)), while retail sales of other brands increased 25-30% (more than the expected increase of about 20%).

According to the report, the Anta brand/Philharmonic brand met expectations in the first quarter of 2024; other brands exceeded expectations. The number of units in the Anta brand's retail sales in the first quarter of 2024 increased year-on-year, and the growth momentum began to accelerate in mid-March. By channel, online business grew 20-25% and outperformed offline business. The inventory level dropped further to less than 5 months; the discount rate for offline business remained flat, and the discount rate for online business narrowed. The retail sales of the Philharmonic brand increased by a high number of units year-on-year in the first quarter of 2024. Philharmonic adults performed better than other Philharmonic business segments because Philharmonic Adults optimized the store layout and strengthened products, while Philharmonic Kids/Fusion is undergoing store updates (net closing of stores by about 10% in 2023). By channel, the online business maintained a growth trend based on a high base (growth of about 40% in the first quarter of 2023), with a year-on-year increase of 25-30%. Inventory also remained at a healthy level of less than 5 months, and the discount rate for online/offline businesses narrowed by 3/1 percentage point, respectively. Other brands maintained steady growth of 25-30%, with Kolon growing by more than 50% and Descente growing by double digits.

The bank expects Anta Sports' sales/profit to increase by 13%/17% year over year in 2024, respectively. The bank expects revenue growth to be driven by: sales of the Anta brand and Philharmonic brand will increase by 10%/12% respectively, and net open 70-300 stores or 130-230 stores respectively; other brands will increase by 31%, and Discent/Colon will open 30-40 or 15-25 stores respectively. The bank expects a net profit margin of 17.2% for 24 years, an increase of 0.7 percentage points over the previous year. The reasons are: 1) gross margin will increase 0.3 percentage points due to improved product structure, narrowing discounts, and normalization of inventory levels; 2) Amafin's listing is expected to bring about a one-time non-cash accounting income of about 1.6 billion yuan; 3) the profit contribution of the Amafin joint venture; but this will be partially offset by 4) the 3.8 percentage point increase in advertising and promotion expenses due to investment in Olympic marketing and brand upgrade plans.