Multi-engine growth set to fly
- Anta Sports held its Investors Day on 17-18 Oct in Beijing, where it announced its development plan for the next three years, themed “multi-brand synergy and value”.
- It re-emphasised its strategy of focusing on each market (mass and premium), and enhancing its multi-brand strategy and omni-channel management capabilities.
- For FY23F, company maintains its guidance for both Anta and Fila brands to achieve double-digit yoy sales growth, and the Descente and Kolon brands to grow 40%+ yoy.
- We reiterate our Add rating, with an unchanged DCF-based TP of HK$134, as we believe Anta has the potential to further improve its store efficiency and margins.
Anta brand to deliver a 10-15% sales CAGR for 2023–26F
Management said at the meeting that it expects a 10-15% sales CAGR for the Anta brand in 2023-26F, reaching Rmb60bn in 2026F (from Rmb40bn in 2023F), driven by brand and product upgrades targeting the mass market. Anta delivered high single-digit yoy growth in 2020-22, and its three-year sales target indicates accelerated sales growth, in our view. Its FY24F growth drivers are: 1) a 5% ticket volume growth for offline channels, 2) improving offline ticket size from Rmb670-680 to Rmb800 through increasing footwear sales contribution and product IPs, and 3) enhancing its omni-channel retailing capabilities by increasing product differentiation in online and offline channels, according to management. Management also said that it would extend its sportswear uniform supply agreement with the International Olympic Committee (IOC) for 2024-2027F and expects to achieve 30% growth in 2024F for its Olympics products. The company set up a Southeast Asian business unit for the Anta brand earlier this year. It aims to achieve US$1.5bn sales for Anta brand and Amer business for the next five years in Southeast Asian. Anta’s joint product with the NBA star Kyrie Irving will be launched in Mar 2024F.
Robust growth expected for Fila and other brands in 2023-26F
Management said at the meeting that it expects a 10-15% sales CAGR for the Fila brand in 2023-26F, reaching Rmb40bn-50bn in three years, driven by: 1) sports fashion enhancement, 2) omni-channel management, and 3) full coverage of products (core, kids, fusion, athletics and golf). Fila will launch more joint IP products and expand its golf, basketball and running products. For its new online channel, Fila targets 15-20% sales CAGR for the next three years. For the Descente and Kolon brands, the company aims to achieve sales CAGRs of 20-25% and 30-35%, respectively, from 2023F to 2026F. For Descente, the company will focus on: 1) enhancing brand awareness, 2) product iteration, and 3) connecting to the functional sportswear community. The company set an Rmb10bn sales target for Descente by 2026F. For Kolon, the company will focus on the premium outdoor market through diversified product offerings (e.g versatile waterproof jackets), a revitalised camp-line portfolio, and more footwear products.
Unchanged guidance for FY23F
For FY23F, the company maintains its previous guidance for both Anta and Fila brands to achieve double-digit yoy sales growth, and Descente and Kolon brands’ sales growth to be above 40% yoy. Management expects higher A&P expenses for the Anta brand in 2H23F and 2024F as early preparation for the 2024 Paris Olympics and cross-over products with Kyrie Irving (to be launched in Mar 24F). For Fila and other brands, management expects yoy stable A&P expenses ratio.
Our DCF-based TP of HK$134 remains unchanged
We maintain our FY23-25F EPS forecasts. We derive our TP using the DCF method (9.7% WACC; 3% terminal growth rate). We reiterate our Add rating, as we believe Anta Group has the potential to improve its store efficiency and OPM over the long term (20-25% for Anta and 25-30% for Fila and other brands in the next 3-5 years). Potential catalysts are better-than-expected retail sales and margins in 4Q23F. Downside risks: 1) weak macro, which could impact sportswear demand, 2) intense competition, which could lead to more discounts and dilute margins, and 3) more A&P expenses, impacting net profit