Key points of investment

In 24Q3, the retail turnover of the Anta brand, FILA, and other brands increased by 45-50% year-on-year in terms of number of units, a decline of low number of units, and an increase of 45-50%.

Anta brand: Continue to promote public positioning and upward brand strategy, bucking the trend, and healthy inventory and discounts. The number of units in the 24Q3 Anta brand turnover increased year over year. Among them, the number of units in adult/child sales increased year over year. Online sales increased 20% +, continuing H1 growth. At the operational level, the inventory sales ratio remained at a healthy level of less than 5 months, offline discounts remained flat year over year, and online improvements were made. Domestic apparel retail sales were -5.6%/-1.9% year-on-year respectively in July/August, and overall consumer confidence was weak. The Anta brand should make timely adjustments to the consumption downgrade environment, and innovate in terms of channels and products. For example, the launch of the new Super Anta store to cover more consumers and the launch of PG7, a new cost-effective running shoe, maintained positive year-on-year growth in high quality in an unfavorable environment.

FILA: The environmental impact is under pressure, and we will continue to push for the adjustment of children's & trendy brands. The number of units in 24Q3FILA sales declined year-on-year. Among them, large products are expected to perform better than children's and trendy brands, and online performance is better than offline performance. FILA is positioned as mid-range and high-end, and is relatively influenced by consumers' conservative consumption in the current environment. At the same time, children and fashion brands themselves are affected by changes in birth rates and consumer demand. The brand is expected to continue to push for the adjustment of children and trendy brands to better meet consumer demand. At the operating level, the 24Q3 inventory ratio maintained a healthy level of less than 5 months, and discounts were basically stable.

Other brands: Remain strong, and turnover is growing rapidly. In 24Q3, the turnover of other brands increased 45-50% year over year. Among them, Descent/Colon increased by 35-40%/65-70% year on year respectively. As the outdoor market continues to be hot and humid, the two brands maintained strong growth with their unique brand positioning and excellent product competitiveness.

Profit forecast and investment rating: The company is a leading multi-brand sportswear company in China. The overall performance of 24Q3 fell slightly short of expectations in the volatile consumer environment, but the Anta brand continued to improve in terms of stores, positioning, and products, and other brands remained highly competitive. We expect FILA to gradually recover after adjustments. Sales were good during the National Day Golden Week, which exceeded the company's expectations. We look forward to continued good performance during the Double Eleven period. Considering that Q3 turnover fell slightly short of expectations, we adjusted 24-26 net profit from 13.68/13.48/15.19 billion yuan to 13.47/13.48/15.19 billion yuan, corresponding to the 24-26 PE of 14/14/13X, maintaining a “buy” rating.

Risk warning: The domestic consumption environment is sluggish and competition is intensifying.