Investment advice: China's sports industry has entered a new stage of stable total volume and structural differentiation. As a scarce multi-brand sports leader, the company is in line with the new development trend. We maintain the 2024-2026 net profit attributable to the mother of RMB 132.6/140.7/16.08 billion yuan, respectively. The current stock price corresponds to PE of 17/16/14 times, respectively, and maintains the “increase” rating.
Amer's Q1 revenue and profit both beat expectations. Q1 Amer's revenue was US$1.18 billion, up 13% year over year, higher than the previous 6-8% guideline. It mainly benefited from Archaeopteryx's strong overall sales performance in all regions and channels, as well as the excellent performance of Salomon's DTC channels and footwear products. The gross margin was 54.3%, up 1.1 pct from the previous year, higher than the previous 53.5% guideline, mainly due to the high gross margin technical apparel sector's share of revenue exceeding expectations. The adjusted diluted EPS was $0.08, up 14% year over year, above the previous guidance of -0.01-0.02.
Archaeoptery/Salomon performed well, maintaining revenue guidelines/slightly increasing profit guidelines throughout the year. 1) Technical Apparel Division: Q1 revenue of $510 million, up 44% year over year, up from the previous 30% + guideline. By channel, DTC revenue increased 46% year over year, and wholesale revenue increased 40% year over year.
2) Outdoor clothing division: Q1's revenue was US$400 million, up 6% year over year, higher than previous flat guidance, mainly due to strong sales of Salmon DTC channels and footwear products in Asia (including Greater China). 3) Ball division: Q1 revenue of USD 273 million, a year-on-year decrease of 14%, in line with the guidelines. By region, China's revenue increased slightly, while other regions declined. For the full year of 2024, Amer maintained its revenue growth guide, and the EPS guidance was in the high range of $0.3-0.4 (previously $0.3-0.4).
We are optimistic that Amer will boost Anta Group's performance in 2024. Considering the limited increase in Amer's EPS guidelines, we maintain Amer's expectation that Anta Sports will contribute around RMB 500 million in investment income in 2024. At the same time, I am optimistic that the main brand will fully upgrade its products, channels and brand power with the support of the Olympic year; FILA sports fashion products have a deep foundation, and breakthroughs in the professional scene are worth looking forward to; and the growth potential of other brands is expected to continue to be unleashed.
Risk warning: Competition in the industry intensifies, and store expansion falls short of expectations