The Anta Superstore we visited is fairly competitive and should be a decent growth driver onwards, supported by its superior price to quality and great variety of choices. Moreover, it can also acquire more family-type customers, and it has reasonable room for store expansion and decent financials (both sales per store and sales per sq.m are better than Anta regular stores, based on our estimates). We were slightly doubtful about Anta's execution of its segmentation strategy back on its Investor Day in Oct 2023, but the success of many of its new store formats such as "Anta Superstore", "Anta Champion", "ANTA SNEAKERVERSE", as well as the "Anta Arena" and "Anta Palace" have given us a lot more confidence in its future growth.
We have visited the "Anta Superstore" in Shenzhen Universiade World on 26 Sep 2024. The "Anta Superstore" is one of the new store formats (targeting the mass market) introduced this year, as part of Anta's segmentation strategy announced back in Oct 2023, in order to capture the needs of different levels of consumers. The other store formats such as "Anta Arena" and "Anta Palace" are for the high-end market and prime locations, while the "Anta Champion" and "ANTA SNEAKERVERSE" are for the niche market. This Anta Superstore we visited was opened in 28 Jul 2024 (the same day for the Shenzhen Universiade World). It has three key features, namely: 1) a super wide range of categories, 2) super high technology and 3) super value for money. At the moment, it has four major product series at the store, including: 1) training, 2) professional sports, 3) outdoor and 4) sports culture. The store can showcase around 1,000 SKUs (about 600/ 300/ 100 for apparel/ footwear / accessory), and sales from apparel/ footwear/ accessory are about 35%/ 65%/ 10% of the total, while sales from adults/ kids make up about 80%/ 20%. Noted that the SKUs in this store is a bit different from the regular Anta stores (only 0% to 10% items are the same, depending on categories). Also, the share of functional/ fashion products is still be the same vs regular Anta stores, but the share of ever-green products will increase.
Maintain BUY and raise TP to HK$ 107.84. The new TP is based on 20x FY25E P/E (up from 18x FY25 P/E, to factor in the better investor sentiment after the stimulus rolled out by the central government). Given the 12% sales CAGR and 16% net profit CAGR during FY23-26E, and compared to its 5- year average of 25x, the current valuation of 16x FY25E P/E is not too demanding, in our view.
The store performance is rather encouraging. With a sales area of 670 sq.m (860 sq.m if we include the warehouse), this Anta Superstore in Shenzhen has generated monthly sales per store of over RMB 1mn (CMBI est. RMB 1.5mn), which is the best- performing store so far in China. The ticket size is at about RMB 330 (price per item is at around RMB 150-200, while items per ticket is at 2.0). Management is targeting monthly sales of RMB 2mn and yearly sales per sq.m of RMB 30,000 and we do find it fairly encouraging. The reasons behind such performance, in our view, are likely: 1) an extremely high price to quality ratio (not just vs Anta regular stores but also many other sportswear and apparel brands) and 2) a great variety of product categories. Based on our estimation, even though there are limited retail discounts being offered, due to the high value-for-money nature, the GP margin may not be too high. However, thanks to its good sales per store and sales per sq.m, we still think the operating leverage is decent, and so is the NP margin at the end.
Going forward, we do think it is a decent growth driver for Anta brand and the group. Firstly, the superstore should be helpful in terms of bringing in more new customers and widening the range of its target customers (like families and students), as over 90% of the customers are new to the Anta group (most of them also joined the membership as well). Secondly, management is now targeting to have 10 stores by FY24E and 40 stores in 3 years' time. Since the customers are new to Anta group, the room for new store opening should be ample. Thirdly, the financials are still very encouraging, because current sales per store (at RMB 1.5mn) and yearly sales per sq.m (at RMB 21k) of the Anta Superstore are already far ahead of Anta regular stores' RMB 300k and RMB 16k, let alone its target of RMB 2mn and RMB 30k. Based on our estimates, these 40 Anta Superstores may contribute up to 2% of the Anta brand sales by FY26E. Also, in our view, it would not be surprising that Anta Superstore's NP margin is higher than the average.
