Incident: Anta Sports recently released its 2023 annual report and operations for the first quarter of 2024. In 2023, we achieved operating income of 62.356 billion yuan, an increase of 16.2% over the previous year, and net profit attributable to the parent company (excluding profit and loss of the joint venture) of 10.954 billion yuan, an increase of 44.9% over the previous year. The year-end dividend payout ratio was 50.7%, providing shareholders with continuous and steady growth in returns. In the first quarter of 2024, retail sales of the Anta brand achieved positive growth in the number of units, retail sales of the FILA brand achieved positive growth in high units, and retail sales of all other brand products increased 25-30%.
The multi-brand matrix helps the company continue to grow in the sports and outdoor industry. In 2023, the company's brands achieved high-quality growth, and the new brands built a new growth curve for the company. By brand: 1) The revenue of the Anta brand reached 30.306 billion yuan, an increase of 9.3% over the previous year. After the main Anta brand strategy was consolidated, it set sail again. 2) The FILA brand's revenue was 25.103 billion yuan, up 16.6% year on year. The Fila brand had outstanding highlights, including a new high store efficiency, excellent growth rate in the footwear category, and the children's clothing sub-brand exceeding 1 billion yuan in volume. 3) Other brands such as DESCENTE and KOLON had revenue of 6.947 billion yuan, with a year-on-year growth rate of 57.7%. The growth rate of new brands was excellent, and the new growth engine played an obvious role. DESCENTE consolidates its professional sports image. KOLON focuses on outdoor aesthetics, and there is collaboration under different brand positioning. Channel aspect: The company expands its brand influence through continuous optimization of the sales network. As of the end of '23, there were 7053 Anta Big Goods stores (net increase of 129) and 2,778 Anta Kids stores (net increase of 99), and stores were expanding. FILA has 1972 stores and closed 12 stores, contributing to an increase in store efficiency. DESCENTE and KOLON have 187 and 164 stores, respectively, and are generally stable. In summary, the company's multi-brand matrix can effectively meet consumer demand under consumption stratification and scenario refinement, and effectively achieve deep coverage of different sports-related scenarios.
Operating profit margins increased in '23, and the joint venture improved significantly and is expected to contribute impressive results in '24. The gross margin for 2023 was 62.6%, up 2.4 percentage points from last year, mainly due to Anta's main brands continuing to improve retail discounts for DTC and Fila brands. The operating profit margin was 24.6%, an increase of 3.7 percentage points, which was faster than on the gross margin side, reflecting the operating leverage effect after the company's revenue scale increased, as well as its strong ability to control costs. In terms of joint ventures, operations continued to improve significantly: the EBITDA of the joint venture company in 2023 was 3.745 billion yuan, +45.4% year on year, and the joint venture loss due to the Anta Group level in 23 was 718 million yuan. It is expected that in 2024, a profit of 1.6 billion yuan will be confirmed due to the listing of the joint venture company.
Brands experienced steady growth in the first quarter of 2024. In the first quarter of 2024, the apparel industry entered a stage of high base growth and weakness, but Anta's various brands still achieved good growth. In particular, while other brands achieved 75-80% growth in the same period last year, they still achieved 25-30% growth this year, which is a prominent growth engine.
Overall, the first quarter laid a steady foundation for full-year growth.
The multi-brand development strategy is clear to protect long-term development. In 2023, the company released a three-year (2024-2026) development plan with the theme of “Multi-brand Collaboration and Value”, striving to achieve the strategic goal of having the largest market share in China by 2025 and leading the world in 2030. Specifically, the company's strategic goals are achieved through multi-brand development: in the next 3 years, the Anta brand under the Anta Group will maintain double-digit growth; the FILA brand will achieve the goal of 40 billion to 50 billion yuan in turnover; the DESCENTE Descente brand and KOLON SPORT will strive to become the 3rd 10 billion brand of the Anta Group. In recent years, the company has firmly implemented the “multi-brand” development strategy. The company's multiple brands are positioned differently and effectively collaborated to construct the underlying logic of future medium- to long-term growth through multi-brand collaborative operation.
Profit prediction and investment rating: Optimistic about the company's ability to continue to seize the market by relying on a multi-brand matrix as a leader in the domestic sports industry. The company's net profit for 2023-2025 is estimated to be 128.50, 133.73, and 15.152 billion yuan respectively, with growth rates of 25.53%, 4.07%, and 13.30% respectively. Currently, the corresponding PE price is 19.7, 18.9, and 16.7 times, respectively, maintaining a “highly recommended” rating.
Risk warning: Overseas inflation continues to affect consumption, the RMB exchange rate fluctuates greatly, and raw material prices fluctuate sharply.