Core views

24Q1 Anta's main brand saw significant growth in the number of units, inventory sales ratio and discount rate in the same period last year; the Anta brand discount rate was at a healthy level; the completion rate in March was higher than in January-January, and sales are expected to accelerate in the second quarter, and sales are expected to accelerate; the FILA brand's Q1 sales volume grew higher, and the offline sales performance was superior to Kids, Fusion, and e-commerce logistics. The discount rate for online and offline businesses was narrowing; the total turnover rate for other brands increased by 25% to 30% year on year, of which 20% increase was 20% +, Kolon 50% + growth. Looking forward to 24 years: 1) FILA and Anta's main brands are expected to see low double-digit growth, and store opening will accelerate; 2) gross margin will fluctuate due to discount rates. Sales expenses are expected to rise slightly during the '24 Olympics, and OP Margin will decline slightly. Improved performance after Amer's listing and one-time non-cash income from listing will contribute to significant performance growth.

occurrences

The company released its operating performance report for the first quarter of 2024: The retail sales of the Anta brand, FILA brand, and all other brands achieved positive year-on-year growth in the number of medium units, positive growth in the number of high units, and positive growth of 25%-30%, respectively.

Brief review

24Q1 by brand:

1) Anta's main brand: There was an increase in Q1 under a high base in the same period last year, and the inventory ratio and discount rate were at a healthy level. Under a high base, the number of units of Anta's main brand turnover increased in 24Q1. Among them, large goods and children increased slightly; the company continued to promote online growth of 20%-25% in 24Q1. On a monthly basis, the March completion rate is expected to increase compared to January-January. The 24Q1 inventory sales ratio is less than 5 months, omni-channel discounts are at a good level, and the Anta brand discount rate has narrowed. Product-side companies will continue to strengthen the layout of mass products and continuously improve product expertise; the channel side will comprehensively improve offline single-store sales efficiency and refurbish existing stores to suit the mass market.

2) FILA brand: Q1 e-commerce traffic increased significantly, discount rates improved, and channel efficiency continued to improve. FILA's 24Q1 saw a high year-on-year increase in the number of units. It is expected that offline bulk products will perform better than Kids and Fusion, mainly due to sales growth brought about by optimizing the store image. Fusion and Kids were mainly affected by net store closures in 2023; overall online growth was 25%.

At the end of 2024Q1, the FILA brand inventory sales ratio is expected to be between 4-5, and discounts will continue to improve. FILA online discounts will improve by 3 percentage points, and offline discounts will improve by 1 percentage point.

3) Other brands: Descente and Kolon continued to increase, with inventory at the best level in recent quarters. In 24Q1, the total turnover of all other brands increased by 25%-30%, of which Kolon grew by 50% +, and brand inventory and retail discounts remained at a good level.

2024 outlook: 1) In terms of turnover, the company's management maintains annual guidelines. In 2024, Anta and FILA brand turnover increased by 10%-15%, Descente's sales growth rate was 20% +, Kolon's sales growth rate was 30% +, and attention was paid to the performance of May 1st holiday consumer brand terminals; 2) In terms of profitability, the discount rate will change depending on the consumer environment. Due to the hosting of the 2024 Paris Olympics, it will be an important marketing year for the company. It is expected that advertising and promotion expenses will increase. OP Margin targets the main marketing year for the company. FILA is around 25%; 3) Amer: After Amer's listing in 2024, it is expected that financial expenses will be drastically reduced and the company's own endogenous operations will improve, which is expected to contribute to the company's positive performance. Combined with the dilution of Amer Sports' rights and interests in the listing, the company will receive a one-time income of about 1.6 billion yuan in non-cash profits in 2024. (Anta Sports shared the loss of 718 million yuan, including impairment of goodwill of 594 million yuan); 4) The dividend ratio is expected to return to 50%.

Profit forecast: The company's 2024-2026 revenue is expected to be 698.6, 781.3, and 86.10 billion yuan, respectively; net profit due to mother is 133.1 billion yuan, 139.5 billion yuan, and 15.92 billion yuan respectively, up 30.0% year on year (excluding 1.6 billion impact, corresponding growth rate of about 18%), 4.8% (excluding 1.6 billion impact, corresponding growth rate of about 15%), and 14.1%; corresponding to the latest P/E are 16.5x, 15.7x, and 13.8x, respectively. Maintain a “buy” rating.

Risk warning:

The deepening retail discount rate affects brand profit margins: If some brands remove inventory by deepening the discount rate, it will intensify price competition in the industry, which in turn affects the level of the company's discount rate. The deepening discount rate will have an impact on the brand's profit margin.

The progress and magnitude of the revenue recovery falls short of expectations: It is expected that with the gradual recovery of travel and consumption, the company's brand's revenue performance will also directly benefit. If the company's brand's revenue recovery progresses or falls short of expectations, it will affect the company's operating performance.

Weak overseas demand affects AMER sales in overseas markets: Amer Sports accounts for a relatively high share of overseas sales. If travel demand declines in overseas markets such as Europe and the US, it will affect Amer's sales performance.