- Anta released 3Q22 operational update with steady recovery recorded across all brands
- Anta core brand achieved mid-single digit growth, while Fila achieved mid-teens growth in retail sales
- Inventory levels remain at higher levels in anticipation of Double-11 and festive seasons
- Trim earnings by 6%-13% in FY22-24E; Maintain BUY with TP trimmed to HK$113
Caution on 4Q22, with firm medium-term prospects. Decent recovery was achieved in 3Q22, particularly for Fila and other brands. However, due to weak consumer sentiment, inventory levels are at a higher level, which is likely to result in higher discounting activities into 4Q22. We expect medium-term prospects remain intact, along with an uptrend in sports spending per capita.
Valuation attractive, despite volatility. Anta is now trading at a 20.5x FY23F PE. We forecast Anta’s earnings to rebound by 11% in 2H22F, and report earnings growth of 20% in FY23F, driven by a recovery in same-store sales growth. Its 2021-24E CAGR is also estimated at 16% (Anta: 18%; Fila: 11%; other
In good position to further gain market share. Already the second largest in China, we believe Anta is well placed to gain market share in the sportswear industry, and on track to overtake Nike as the leading sportswear player in China in terms of sales by end-2023, based on our estimates. Its multi-brand portfolio provides not only diversification but also growth drivers in the medium to long run.
We trim our earnings by 6-13% in FY22-24E to account for trimmed sales and margin outlook. Our target price of HK$113 is based on unchanged DCF valuation, or 29x FY23E PE. (Previously HK$128)
Where we differ:
We expect Fila’s performance to see gradual improvement, which would remain steady going ahead.
Key Risks to Our View:
COVID resurgence in China/overseas; slower economic growth; weaker-than-expected performance from core brands; etc.