If you want to wear Wang Yibo's same sneakers, 15000 Nike Dunk or 500RMB Anta overbearing 3.0, which one would you choose?

You can win the joint basketball shoes of NBA top player Thompson (Anta kt6) for less than 1000 yuan. Are you impressed?

The answer to the above two questions is not important in itself. the important thing is that apart from the label of high quality and low price, Anta seems to be able to compete with Adidas, Nike Inc and other well-known international sports brands to some extent.

In recent years, with the gradual improvement of consumer recognition of the Anta brand, the market demand for Anta shoes and clothing products is rising, which promotes the company's revenue expansion and profitability improvement. In 2020, Anta surpassed Adidas for the first time with a net profit of 5.162 billion yuan (net profit is about 3.314 billion yuan) to become the most profitable sports brand company in the world after Nike Inc.

Anta shares then ushered in a strong upward cycle. In the five years from 2016 to 2021 (as of June 30), its share price soared from HK $13.7 per share to HK $182.8, up 1242.9 per cent over the past five years, with an annualised income of 69.3 per cent.

Driven by the rise in share prices, Anta's market capitalization also rose. By the close of trading on July 7, Anta had a total market capitalization of HK $493.087 billion, after exceeding HK $500 billion, surpassing Adidas to become the world's second largest sporting goods group.

However, behind the seemingly calm, the market also has many misgivings about Anta. For example, the ability of scientific and technological innovation that has been criticized by the market, the low brand premium caused by the solidification of the main brand image, and the fierce competition pattern in the industry, all these problems may pose a threat to Anta's position. In the future, whether Anta can break through these growth pain points will be the key to its formation of the Matthew effect.

Based on the above considerations, this paper attempts to answer the following questions:

1. How does Anta open the gap with the domestic "Li Ning Co. Ltd."?

2. What is the magic weapon for Anta to surpass Adidas to become the second largest sports brand in the world?

3. How will Anta's future business be laid out?

4. What are the hidden worries of Anta?

Surpassing Li Ning Co. Ltd., Anta is firmly at the top of domestic sports brands.

Once upon a time, in the puberty of a group of post-80s and 90s, Li Ning Co. Ltd., Anta, Xtep and 361o were in charge of their shoe cabinets. For Nike Inc and Adidas, these children were only coveted.

At that time, the trend of the Beijing Asian Games brought about the first round of golden age of domestic sports brands.

In 1990, "Gymnastics Prince" Li Ning Co. Ltd. founded a sporting goods company of the same name in Sanshui, Guangdong Province, which fired the first shot to revitalize domestic sports brands.

In addition to the Li Ning Co. Ltd. brand with its own star aura, a number of sneaker brands starting from small workshops are quietly brewing in Jinjiang, Fujian, which is more than 700km away from Sanshui, among which Anta, Xtep and 361degrees are typical representatives. Compared with Li Ning Co. Ltd. 's image of "the son of Heaven", these Jinjiang enterprises have made a breakthrough in the sinking market by virtue of their extreme performance-to-price ratio, and their "travel shoes" have also become the unique memories of consumers at that time.

Whether it is the "regular army" or "wild road", these brands that support half the sky of China's sports shoes and clothing industry seem to have the same fate in the first half of their lives-they were founded in the 1990s and went on sale in the early 21st century.

The division of fate began in 2008.

This year, driven by the Olympic spirit, the enthusiasm of the national movement is unprecedentedly high, the demand for sports shoes and clothing is rising sharply, and domestic sports brands usher in a huge dividend period. Driven by demand, the market share of domestic brands such as Li Ning Co. Ltd. and Anta began to increase steadily, and the gap with Nike Inc and Adidas continues to narrow. From 2008 to 2010, Li Ning Co. Ltd. 's market share in China was 9 per cent, 9.8 per cent and 9.6 per cent respectively, while Anta's market share reached 5.8 per cent, 6.9 per cent and 8.1 per cent, respectively, according to Euromonitor.

In order to meet the market demand in short supply, Li Ning Co. Ltd. and Anta both embarked on the road of active expansion, but in terms of specific strategy, the choices of the two enterprises are diametrically opposite.

To put it simplyAnta's strategy tends to be "conservative", keeping the mass market dominated by second-and third-tier cities through its main brands; at the same time, introducing international sports brand FILA to expand the high-end fashion sports market. Li Ning Co. Ltd. chose a more aggressive expansion strategy, through vigorous transformation to reshape the brand, "comprehensively attack" the high-end market, and Nike Inc, Adidas head-on confrontation.

In 2010, Li Ning Co. Ltd. changed the brand LOGO and changed "anything is possible" to "let change happen". At the same time, he also adjusted the price of the product several times, increasing the price by as much as 7% and 17.9%. In the positioning of the target group, Li Ning Co. Ltd. abandoned the main consumer groups dominated by the post-70s and 80s, and positioned the core target as the post-90s generation.

However, at this time, Li Ning Co. Ltd. has a big gap from the high-end sports brand in terms of product design, scientific and technological innovation or brand reputation. And Li Ning Co. Ltd. 's image and story can not quickly occupy the consumer mind of the post-90s generation, and the post-70s and post-80s consumers who were originally highly loyal were also disappointed by Li Ning Co. Ltd. 's strategic switch.

Under the background of the decline of the audience, Li Ning Co. Ltd. 's large-scale price increase in his products made him lose the trust of price-sensitive consumers in second-and third-tier cities, and this part of the market share was quickly occupied by Anta, which adhered to the sinking market of the second and third tier.According to Euromonitor, Anta's domestic market share reached 8.8% in 2011, surpassing Li Ning Co. Ltd. 's 8% for the first time to become the best-selling domestic sports brand.

It was in this year that the sporting goods bubble fuelled by the Olympic Games officially burst. With the decline of the popularity of the Beijing Olympic Games, consumers' demand for sports shoes and clothing began to return to rationality, and the domestic sports shoes and clothing market shrank sharply; at the same time, under the impact of the subprime mortgage crisis in 2008, the sharp decline in overseas demand has also had a serious impact on the domestic textile processing industry, making it face the crisis of excess supply chain.

According to Euromonitor data, since 2011, the growth rate of China's sportswear industry began to slow significantly compared with the same period last year, with two consecutive years of negative growth in 2012 and 2013. AndUnder the influence of previous excessive expansion, domestic head brands have experienced the plight of oversupply, overstock, low revenue and loss of market share, and the industry as a whole has ushered in a growth bottleneck.

In the face of the predicament of the industry, Anta changed from brand wholesale mode to brand retail, and continuously improved the coverage of ERP system.Retail management of dealers in accordance with unified standards to improve the overall quality and operational efficiency of the sales network. Benefiting from the transformation of the business model and the promotion of the "flexible production" system, Anta's inventory turnover is significantly better than that of its peers. In 2011, Li Ning Co. Ltd. 's average inventory turnover increased by 21 days compared with the same period last year, while Anta increased by only 2 days in the same period.

On the contrary, Li Ning Co. Ltd., the industry crisis superimposed their own serious strategic mistakes, so that Li Ning Co. Ltd. sales continued to decline, inventory accumulation problem worsened.Affected by this, Li Ning Co. Ltd. began to discount and clear inventory on a large scale, the high-end strategy failed, and the brand image was damaged. At the same time, in order to control costs, Li Ning Co. Ltd. also adopted a large-scale store closure strategy. In 2012, Li Ning Co. Ltd. closed a total of 1821 stores.

In 2012, the most difficult year in the industry, Anta still made a net profit of 1.359 billion yuan thanks to the solid fundamentals of the sinking mass market and the higher operating efficiency of the new business model, while Li Ning Co. Ltd., who failed to make the transition, lost nearly 2 billion yuan in the same period. It was also this year.Anta surpassed Li Ning Co. Ltd. in revenue, profit and market share in all aspects, and successfully secured the top spot of domestic sports brands.

Why should Anta surpass Adidas?

Anta, who has a firm foothold in the mass market, focuses on high-end and internationalization.The successful operation of FILA is the first shot of Anta's high-end layout and internationalization, and it is also the key that Anta's net profit can surpass Adidas.

Since its introduction to the Chinese market in 2005, FILA has been tepid. After it transferred to Belle International in 2007, FILA's performance declined further. In 2008, FILA had only more than 50 stores in China, with an annual loss of nearly HK $40 million.

In 2009, Anta took over FILA and first reshaped the brand image of FILA. In 2011, Anta put forward the strategy of "returning to fashion" of FILA, redividing the FILA brand positioning from professional sports to high-end sports fashion, and then continuously strengthening the advanced sense of the FILA brand through a series of fashion marketing activities such as designer co-endorsement, star endorsement and return to Milan Fashion week. With its differentiated market positioning, FILA soon became the leader of domestic high-end sports fashion brands.

In addition to the correct brand positioning, Anta's successful operation of FILA is also inseparable from its bold direct business model innovation.Before Anta took over FILA, the original channel structure of FILA was mainly distribution, the terminal image was messy, and could not open the high-end consumer market. After Anta took over in 2009, it took back more than 100 dealer stores one after another, and carried out step-by-step reform and flattening management of FILA. Through direct operation, Anta expanded FILA offline stores on a large scale and focused its location on prime locations in first-and second-tier cities, accelerating the rapid establishment of FILA's high-end image.

After years of drastic reforms, FILA began to turn a profit in 2014, and in recent years, with the continuous improvement in the number of stores and floor efficiency (the average annual growth rate of FILA stores is more than 40%, close to Uniqlo), the high-margin FILA has successfully opened the ceiling of performance growth for Anta.

In terms of financial data, FILA contributes much more to the company than Anta's main brand in terms of revenue and gross profit margin. In 2020, FILA achieved 17.45 billion yuan in revenue, accounting for 49.1%, accounting for half of Anta's total revenue, while Anta's main brand accounted for 44.3% of the revenue in the same period.

In terms of gross profit margin, FILA's gross profit margin was 69.3% in 2020, while the average gross profit margin of all other brands in the group was 65.9%, while that of Anta's main brand was only 44.7%. Driven by FILA's high gross profit margin and high share, Anta's overall gross profit margin rose 3.2 percentage points to 58.2% in 2020 compared with the same period last year.

In addition to the direct positive performance, Anta's successful operation of FILA is of greater strategic significance. First of all, FILA is a sharp weapon for Anta to open up the high-end market; second, Anta's direct management model of FILA shows the way for its comprehensive transformation of DTC model; finally, the successful operation of FILA provides a replicable business template for Anta's next road of multi-brand management, and inspires Anta's confidence to expand its product camp and market segment through capital operation.

In recent years, with the accelerated pace of mergers and acquisitions of Anta, the prototype of its multi-category and multi-brand sporting goods group began to emerge, especially after the acquisition of Amer with 4.66 billion euros in 2019, quickly made up for the gap of Anta in the international high-end professional sports market. Through the multi-brand and multi-category brand matrix, Anta has formed a good synergy in the field of sporting goods, contributing to the further expansion of revenue and profitability; at the same time, the strong operation of professional high-end brands in market segments such as Amer and Disante has also become a favorable means for Anta to open the international market.

How to develop in the future?

• Three major brand business groups help Anta break through from shoes and clothing brands to sporting goods groups.

After years of "buying", Anta is no longer a simple sportswear company, but has been transformed into a sporting goods group with many brands.

According to the company's brand matrix map, it is not difficult to see Anta's ambition and layout. At present,安Through the vertical coverage of the mass market and the high-end market, the brand is subdivided horizontally into fashion sports brands and professional sports brands represented by skiing, outdoor, balls and bicycles, forming a cross-coverage of the whole market, multi-categories and multi-brands.

It is true that it takes a huge amount of money to acquire these brands, but it is Anta's management ability that really tests Anta. After the acquisition of Amer in 2019, Anta made a major adjustment to its organizational structure and finally divided it into three brand business groups: professional sports, fashion sports and outdoor sports.

Professional sports brands include Anta, Anta Children, Sprandi; fashion sports brands including FILA, FILA Fusion, FILA Kids, KINGKOW, etc., while outdoor sports brands include Disante, Kelon, and Amer's Archaeopteryx, Salomon and so on.

Among them, Anta main brand is the core brand of professional sports business group, which mainly focuses on the emerging middle-class sports shoes and clothing market, with a product pricing range of 140-2200 yuan; FILA is the core brand of fashion sports business group, focusing on high-end market fashion sports shoes and clothing, with a product pricing range of 25-3300 yuan Amer's Archaeopteryx and other brands are the key business direction of the outdoor sports business group, focusing on professional market segments of high-end sporting goods, product pricing range of 1200-20000 yuan.

Anta main brand

Anta's main brand, which focuses on mass professional sports, is the foundation of the group.

Compared with other shoes and clothing, popular professional sports brands have higher requirements for professional image and functionality, which forms a higher barrier and ensures the profit space of the main players.

In the future, the development strategy of Anta main brand is to promote the simultaneous upgrading of brand power and product power through marketing and scientific and technological innovation, so as to improve the pricing of individual products and cover a wider audience.

Marketing is the key measure for Anta to reshape the brand image and enhance the brand premium, adopting a two-pronged approach of professional marketing and trend marketing.

Professional marketing resources are limited, sports brands often have to spend a lot of money to snatch the sponsorship of the event. At present, Anta has won the heavy resources of the official partner of the 2022 Beijing Winter Olympic and Paralympic Games, and sponsored 27 national teams, such as lifting and falling, gymnastics, boxing and so on. During the same period, Li Ning Co. Ltd. only holds the right to sponsor three national teams.

In the past two years, a series of major events, such as the Tokyo Olympic Games, the Beijing Winter Olympic Games and the Paralympic Games, are a good opportunity for Anta to build up its brand image and expand its international popularity by virtue of professional marketing.

In terms of trend marketing, in April this year, Anta Guan Xuan Wang Yibo became the global chief spokesman for the brand. Just over a month ago, Wang Yibo just terminated the contract with Nike Inc because of the cotton incident.

Wang Yibo as a top student, there is no need to say much about the ability to carry goods. Wang Yibo's overbearing 3.0 sports casual shoes sold out within an hour after they went on sale online, according to media reports. In addition, according to the background data chart posted by netizens, as of 13:58 on the same day, the sales of Anta's official flagship store reached 59 million yuan in less than four hours after the new product went on sale, surging to the top of store sales in the same period.

Scientific and technological innovation is the key for Anta to enhance its product strength and stabilize its core competitiveness. For professional sports products, consumers attach great importance to functionality, and product functionality represents the result of R & D investment.

In recent years, Anta has almost become the sports brand with the most R & D investment in China. Take 2020 as an example, Anta's R & D expenditure is as high as 871 million yuan, while that of Li Ning Co. Ltd. is 323 million yuan, and that of Xtep and 361du is 223 million yuan and 205 million yuan.

With years of large R & D investment, Anta has accumulated more and more patent achievements. According to celestial eye inspection information, Anta currently has 1354 patents, including invention, appearance, utility model patents and so on. The number of patents owned by Li Ning Co. Ltd., Xtep and 361du is 248,431 and 1122 respectively.

At the same time, although Anta's annual R & D investment ranks first among domestic sports brands, the proportion of its R & D expenditure in total revenue is not high. As shown in the chart, in 2020, Anta's R & D expenditure accounted for 2.4%, compared with 4% for 361 degrees in the same period. This means that Anta has relatively abundant capital and still has a large space for R & D investment on the basis of not affecting profits.

In the long run, the strength of professional marketing and R & D innovation is not only the foundation for Anta's main brand to build core competition barriers, but also the key to enhance Anta's product strength and brand image.

FILA

FILA is the main focus of the company's high growth in the future.

As mentioned above, in recent years, thanks to the increasing domestic market share of FILA and the operating performance of high gross margin, the overall revenue and profit of Anta Group have improved greatly.

On this basis, Anta replicates the successful experience of FILA in sub-brand operation, focusing on building brand fission around FILA's "1x N" mode.

In 2015, FILA launched FILA Kids;, a sub-brand for the children's market, and FILA Fusion, a trendy brand for the 15-25-year-old generation. Through the fission of sub-brands, the audience of FILA products extends to 3-45 years old, forming a family-wide coverage from children, youth to adults.

The expansion and upgrading of stores for FILA Kids and FILA Fusion are expected to be the main driving force for the higher-than-expected growth of FILA in the future.

Up to now, the number of stores in FILA Kids and FILA Fusion is 580,250respectively, compared with 1250 in FILA Classic, there is still more space for exhibition stores. According to the estimation of Societe Generale Securities, the number of stores in FILA Kids and FILA Fusion is expected to reach 970,525 by 2024, with a net increase of about 200. Benefiting from the substantial expansion of the total number of stores, FILA is expected to have an operating income of more than 40 billion and a net profit of 8 billion in 2024, with a high probability of further exceeding expectations.

Outdoor sports brands such as Di Sant and Amer brands

Outdoor sports is a high potential growth market for China's sports industry. According to the research report of Societe Generale Securities, the retail scale of China's outdoor sports market is about 25 billion yuan, the per capita consumption is 20 yuan, and the outdoor participation rate is less than 20%. The development of outdoor sports in China is still in its infancy. In the countries where the development of outdoor sports is more developed, it has entered a high penetration stage, such as the outdoor participation rate of 50% in the United States and the per capita consumption of 430 yuan.

Low permeability means more room for growth. In recent years, with the continuous improvement of national disposable income and the awakening of residents' health awareness, China's outdoor sports market has ushered in a stage of rapid development. Especially with the approach of the 2022 Beijing Winter Olympic Games, outdoor ice and snow sports have become the focus of market attention.

In this regard, Anta has been through big acquisitions, set Disante, Kelon, Archaeopteryx, Salomon and other outdoor sports brands in one. Although China's outdoor sports market has not yet formed a brand monopoly, Anta has a certain first-mover advantage in terms of the number of brands, brand grade and longevity.

Among them, the exclusive management right of Santer, which Anta acquired in 2016, has shown a certain growth effect in terms of performance. Since Anta took over, the number of stores in China has grown from six to 145. in 2019, Di Sant made its first profit with revenue of nearly 1 billion yuan, a year ahead of FILA.

As for the brands of Amer Group, it seems that Anta replicates the brand operation experience of FILA and Disante to Archaeopteryx, Salomon and other new brands, including omni-channel, member management and so on. According to Anta's plan, Amer's share of revenue in China will rise to 15 per cent, with Archaeopteryx and Salomon as the main brands to expand its stores to 300 direct stores and 1000 franchisees by 2023.

In the future, benefiting from the continuous improvement of the layout of high-end line products and the higher gross profit space of high-end products, the outdoor product line is expected to become a springboard for Anta to achieve revenue leapfrogging again.

• The transformation of DTC mode promotes the further improvement of Anta's profits.

If the transition from a brand wholesaler to a brand retailer is the key to Anta's successful breakthrough in its start-up period, then the transition to the DTC model is expected to become the engine for Anta's profits to climb to another high-rise in the future.

After the results of the FILA direct operation model began to show, in 2020, Anta officially launched a comprehensive transformation of the DTC model, carrying out a mixed operation model in 11 regions of China, involving 3500 stores, of which about 60 per cent were operated by Anta, and about 40 per cent were operated by franchisees in accordance with Anta's new operating standards. Anta DTC will account for 70 per cent of Anta's business by 2025, according to financial data.

So, what exactly is the DTC mode?

DTC is the direct consumer (Direct to Consumer), which focuses on the needs of consumers to reverse guide the design, production, selection and marketing of manufacturers.

Anta also described the company's DTC strategy, saying that this model allows direct stores to directly use the logistics center to replenish orders and redistribute inventory, while using big data to analyze the real-time operating data of all stores in the country. In addition, the DTC model will also deepen the value of membership.

From the successful experience of the international market, benefiting from the optimization of the whole chain and reducing costs and increasing efficiency under the DTC mode, the brand side has obvious income-generating effect. For example, it is reported that the total revenue of lululemon in 2020 increased 11% year on year to $4.4 billion, of which the growth rate of DTC channel revenue from offline proprietary stores, official websites and China Tmall Mall reached 101%, much faster than the total revenue growth rate, accounting for 52% of total revenue, compared with 29% in 2019. At the same time, under the epidemic, Nike Inc's DTC business revenue accounted for 35% of the total revenue in 2020, of which the DTC business revenue in Greater China grew the fastest, with a growth rate of 43%.

As far as Anta is concerned, the beneficial effect of DTC transformation on Anta's main brand has initially emerged. Thanks to the DTC model, the proportion of retail business with high gross margins has increased, with the gross profit margin of Anta's main brand rising 3.4 percentage points year-on-year to 44.7 per cent in 2020, according to the financial report.

However, the DTC transformation based on the distribution and retail model will not only increase revenue and profits, but also inevitably lead to a lot of additional costs, as well as increased store operating costs and management difficulties. In the third quarter of last year, Anta spent 2 billion yuan to acquire 11 dealers in order to transition to the DTC model.

Hidden worry

The steadily growing market size, steadily expanding number of stores, superior star endorsement resources and increasing user reputation all seem to show that Anta is now in a golden era of rapid development. However, under the quiet years, some hidden worries are still worthy of investors' attention.

• Li Ning Co. Ltd. and Adi are always ready to pull back.

In the past 30 years of development, two important advances for Anta are overtaking Li Ning Co. Ltd. and Adidas.

However, these opponents who were overtaken by Anta did not give up, and they were always ready to make a comeback.

After three consecutive years of losses, founder Li Ning Co. Ltd. returned to the front line of company management at the end of 2014, which had an immediate positive effect. In 2015, Li Ning Co. Ltd. began to turn losses into profits, with revenue of 8 billion yuan and net profit of 643 million yuan in 2016.

Compared with Anta's solidified brand image, Li Ning Co. Ltd. has better brand effect and higher user loyalty in the domestic professional sports high-end market, and with the continuous efforts of Li Ning Co. Ltd., a powerful enemy in scientific and technological innovation, the market share of Anta professional sports in the future may still face the risk of being carved up by Li Ning Co. Ltd.. At the same time, in recent years, with the continuous emergence of Li Ning Co. Ltd. in the national tide market, the competition between them in the field of high-end market movement is becoming more and more fierce, and there is still great uncertainty about the future war situation.

And the strength of Adidas, which has just been taken away by Anta as the "second of ten thousand years", should not be underestimated.

In recent years, as the sinking market has been ignited, Nike Inc and Adidas have also targeted Anta's "hinterland"-the mass market in domestic low-line cities, and began to actively lay out their e-commerce business. During the 618, Singles' Day and other activities, there was a big discount on the goods, and even offered a low price of 30 or 40 yuan for a half sleeve and 100 yuan for a pair of shoes. Although this price is not in line with the image of its high-end sports brand, consumers are very happy with it.

As early as during the Tmall 618 promotion in 2019, Nike Inc and Adidas achieved sales of more than 100 million in 4 minutes and 53 minutes respectively, making them the only two sports outdoor brands in Top 9 with sales of more than 100 million in one hour.

Once Nike Inc, Adidas and other brands begin to popularize in the mass market of low-line cities, Anta may no longer be the yyds in the hearts of young people in small towns.

In addition, it should be noted that the net profit of Anta surpassed that of Adidas in 2020, in large part due to the objective factors of recurrent outbreaks overseas. Greater China, North America and Europe are the three major markets of Adidas. In the fourth quarter of 2020, for example, sales in the Asia-Pacific region grew by 7% year-on-year, and sales in North America increased by 2% year-on-year. In the European market, affected by a new round of epidemic blockades, about half of Adidas stores closed at the end of the year, and sales in the European market fell 6% in the quarter compared with the same period a year earlier.

With the large-scale vaccination of COVID-19 vaccine, the overseas epidemic situation shows signs of improvement. In the future, if the core market of Adidas returns to normal growth, whether Anta can take advantage of the opportunity to surpass Adidas needs a question mark.

• "Jinjiang system" replicates Anta's road to success

In addition to Li Ning Co. Ltd. and Adidas, there are covetously Xtep, 361 degrees and other "Jinjiang little brothers", they are trying to replicate Anta's road to success.

The first is to create a multi-brand matrix. Take Xtep as an example, since 2019, it has acquired the management rights of jogging shoes brand Soconi, mountaineering sports shoes brand Mailer, leisure shoes brand Gaseway and military boot brand Paladin in the Chinese market. As a result, Xtep has also formed three main business lines: professional sports (including Soconi and Mayer brands), fashion sports (including Gaswell and Paladin brands) and popular sports (mainly for the main brand of Anta), which is the same as Anta's strategy.

Capital is also optimistic about Xtep's strategy. Recently, Hillhouse Capital invested HK $1 billion in Xtep, of which about HK $500m will be used to develop the global business of Xtep's "Gaseway" and "Paladin" brands. The market is more enthusiastic about this. On the day of the announcement, Xtep rose more than 30 per cent in intraday trading and finally closed up more than 20 per cent.

Secondly, for their own main brands, most domestic sports brands are carrying out scientific and technological innovation to enhance the product strength and professionalism of the brand itself like Anta. For example, Anta launched a series of running shoes, Li Ning Co. Ltd. launched a series of running shoes and so on. In the competition of R & D and innovation, although Anta invests the most and has many patents, abundant funds and other first-mover advantages, from the market reaction of product sales, Anta's large investment does not seem to be significantly ahead of its peers.

Take marathon running shoes as an example, as shown in the picture, among the similar products of the four brands, Anta marathon running shoes have higher performance and price, but the sales volume is the least, which may explain to a certain extent. Anta's main brand products still have much room for improvement in terms of consumer experience and word-of-mouth.

• The short-term performance may be hit, and the stock price may fall with it.

Behind Anta's market capitalization of more than HK $400 billion is not without doubt.

In 2019, Anta was shorted three times in a year. Among them, Muddy Waters issued five short-selling reports in July.

Anta then announced its interim results for the year in August and disclosed for the first time the core performance indicators of the FILA brand. According to the financial report, Anta's revenue reached 14.81 billion yuan in the first half of 2019, an increase of 40.3% over the same period last year. Of this total, the revenue of the FILA brand was 6.538 billion yuan, an increase of 80% over the same period last year, with a gross profit margin of 71.5%.

Anta's shares jumped more than 5 per cent on the second trading day after the results were announced, suggesting that investors are extremely sensitive to changes in Anta's performance.

However, from the current valuation point of view, compared with Nike Inc, some domestic sports brands represented by Anta are likely to be overvalued. According to the table below, the net profit of Anta in 2020 is 5.2 billion yuan, while that of Nike Inc (from December 2019 to November 2020) is 18.9 billion yuan. When the profit scale is less than Nike Inc's 1/3, Anta's average price-to-earnings ratio from 2021 to now is about the same as that of Nike Inc.

At the same time, from Anta's own point of view, the average price-to-earnings ratio rose from 27.99 times to 38.57 times in 2018-2020, an increase of about 10 times in two years. Anta's average price-to-earnings ratio has increased by nearly 30 times in less than a year since 2021.

Behind exorbitant valuations is a potential asset bubble. In the future, Anta's share price is likely to face the risk of a pullback if expectations of performance growth are not met.

The comprehensive transformation of DTC and multi-brand operation is the risk point of short-term decline in Anta's performance. Whether it is the implementation of DTC or multi-brand operation, Anta needs to invest a lot of capital expenditure, which has a negative impact on profit performance to a certain extent.

Take DTC transformation as an example, according to Societe Generale Securities data, DTC transformation means the occurrence of additional costs such as dealer inventory recovery, out-of-season inventory clearance and store image upgrading, which will have a greater impact on the financial performance of Anta 2021. It is expected that Anta brand direct operating profit margin in 2021 is only single digits (wholesale operating profit is 26% in the past), thus affecting the performance of Anta comprehensive operating profit margin.