Anta Sports (2020 HK)

Transcription

1 Equity Research Consumer Discretionary Anta Sports (2020 HK) Buy (maintained) Target price: HK$18.50 Product mix improvement in 4Q15 order book 4Q15 order book kept at low-teen, better product mix Order book (including the Anta brand and Kids) was maintained at low-teens despite a high base (lowteen in 4Q14 vs digit in 3Q14). Overall, volume was faster than ASP, and footwear was faster than apparel. Footwear ASP grew at a digit, driven by increased order of NBA basketball shoes and professional running shoes with higher ASP. By category, running and basketball footwear accounted for 40-50% and low-teen of sales volume, respectively. We expect a GM improvement YoY in the 4Q15 order book as the GM of footwear is higher than apparel. Albert Yip, CFA SFC CE No. ADT599 albertyip@gfgroup.com.hk GF Securities (Hong Kong) Brokerage Limited 29-30/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong 1Q15 SSSG outperformed peers The Anta brand reported a digit SSSG (vs digit in 4Q14), also driven by footwear. Fila s 1Q15 SSSG was above 20%, in line with our estimate for 18% in FY15. During 1Q15, the average retail discount was kept at ~25% for Anta and Fila (vs 25% in 2H14). Channel inventory was maintained at a healthy 4-5 month level at end-1q15. Focus on product functionality Going forward, the company will focus on product functionality to differentiate itself from peers. We agree with the company that of functional products to outperform casual products. For example, we believe running footwear has great potential in China. In 2014, there were 900,000 running competition finishers in China, according to Chinese Athletic Association, representing only 0.06% of China s population. In the US, there were 19m running competition finishers in 2013, according to Running USA, equivalent to 6% of the US population. Maintain Buy Both 1Q15 SSSG and 4Q15 trade fair results were in line with our expectation. We like Anta s diversified drivers from various segments and its market share expansion underpinned by strong execution and rising brand equity. We maintain our TP of HK$18.50, still based on 18x FY15E P/E. Trading at 17.4x FY15E P/E, Anta s valuation remains attractive compared to A-share peer Guirenniao s ( CH) 82.6x FY15E P/E. The reduction of wholesale discount for the Anta brand are a potential catalyst. The company is negotiating with its distributors and sees a 50/50 chance of reducing the wholesale discount for the coming 1Q16 sales fair. Stock performance 75% 50% 25% 0% -25% May-14 Aug-14 Nov-14 Feb-15 May-15 HSI Anta Source: Bloomberg Key data May 14 close (HK$) Shares in issue (m) Major shareholder Ding Shizhong (55.4%) Market cap (HK$ bn) M avg. vol. (m) W high/low (HK$) 19.38/10.98 Source: Bloomberg Stock valuation Turnover Net profit EPS EPS YoY P/E Yield BPS P/B ROE (Rmb m) (Rmb m) (Rmb) (%) (%) (Rmb) (%) ,623 1, ,281 1, ,923 1, E 10,761 2, E 12,475 2,

2 Figure 1: Peer comparison order book Anta 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q % 15-25% 10-20% 5-15% high singledigit digit digit digit digit digit digit digit Li Ning NA NA NA NA NA NA NA Xtep 15-20% Peak 0% 361 Degrees 23% 15-20% 25-30% 23% 20% NA 15-17% Figure 2: Anta s better-than-peer SSSG Figure 3: Major assumptions high singledigit estimates NA mid singledigit high singledigit low-teen 0% mid-twenties high-teen NA 17% 11% 11% 7% 8% 11% 11% 16% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 mid singledigit digit digit digit digit digit Anta 0% 0% 0% % positive negative positive mid singledigit digit Li Ning NA NA - digit digit digit digit Xtep 0% 0% 0% 0% digit digit digit digit digit digit Peak 0% 0% 361 Degrees -2% -1% 0% 2% 2% 3% 5% 6% 6% (Rmb m) FY11 FY12 FY13 FY14 FY15E FY16E Total revenue 8,905 7,623 7,281 8,923 10,761 12,475 % 20.2% -14.4% -4.5% 22.5% 20.6% 15.9% - Anta products 7,886 6,808 5,823 6,435 7,169 7,965 % 16.5% -13.7% -14.5% 10.5% 11.4% 11.1% - Other products 1, ,458 2,488 3,592 4,511 % 58.9% -20.1% 79.0% 70.6% 44.4% 25.6% -- FILA 692 1,223 1,678 2,053 % 76.8% 37.1% 22.4% -- Kids ,213 % 50.5% 44.8% 23.3% -- E-commerce ,107 % 95.0% 65.0% 35.0% -- Others % 25.0% 25.0% 25.0% Gross profit 3,762 2,893 3,039 4,027 4,882 5,693 Gross margin 42.3% 38.0% 41.7% 45.1% 45.4% 45.6% - Anta products 41.2% 43.0% 43.4% 43.6% - Other products 44.2% 48.5% 48.9% 49.2% Selling & distribution expenses ratio 16.3% 13.6% 16.5% 19.0% 19.4% 19.7% Administrative expenses ratio 4.2% 5.5% 5.2% 4.4% 4.6% 4.4% Operating profit margin 22.6% 20.5% 21.5% 22.6% 22.5% 22.7% Effective tax rate 20.2% 21.6% 24.1% 22.7% 23.0% 23.0% Net profit 1,730 1,359 1,315 1,700 2,031 2,361 % 11.5% -21.5% -3.2% 29.3% 19.5% 16.2% Net profit margin 19.4% 17.8% 18.1% 19.1% 18.9% 18.9% Payout ratio 61.1% 71.7% 71.7% 71.0% 61.7% 61.7% low-teen high-teen Page 2

3 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Company report Figure 4: P/E band HK$ x 20 18x 15 14x 10 10x 5 6x 0 Figure 5: Valuation comparison for sportswear companies Sources: Bloomberg, GF Securities (HK) estimates Sources: Bloomberg, GF Securities (HK) estimates Price TP Mkt Cap P/E (x) EPS (%) Revenue (%) Yield (%) P/B (x) ROE (%) Sportswear Ticker Rating (May ) (HK$) (HK$ m) FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY14E FY15E FY16E FY15E FY15E Anta 2020 HK Buy , Peak 1968 HK Accumulate , Xtep 1368 HK Hold , (21) China Dongxiang 3818 HK NR 1.87 na 10, (64) (16) (11) Li Ning 2331 HK NR 4.28 na 8,069 na na na na Hosa 2200 HK NR 3.89 na 6, na na na na Degrees 1361 HK NR 3.01 na 6, (10) Pou Sheng Intl 3813 HK NR 0.72 na 3,873 na na na na na na na na na na na na na na Average (3) Page 3

4 Figure 6: Financial statements Income Statement Balance Sheet Year end Dec 31 (Rmb m) FY12 FY13 FY14 FY15E FY16E Year end Dec 31 (Rmb m) FY12 FY13 FY14 FY15E FY16E Revenue 7,623 7,281 8,923 10,761 12,475 Fixed assets Cost of sales (4,730) (4,242) (4,896) (5,879) (6,782) PPE ,068 1,158 1,241 Gross profit 2,893 3,039 4,027 4,882 5,693 Lease prepayments Prepayment for acquisition of land use rights Other income Intangible assets Other net (loss)/income 3 (8) (11) (11) (11) Other financial assets Selling & distribution expenses (1,038) (1,199) (1,697) (2,082) (2,458) Deferred tax assets Administration expenses (420) (376) (397) (490) (554) 1,934 1,931 2,037 2,095 2,147 Operating profit 1,563 1,566 2,019 2,419 2,827 Current assets Net finance cost Inventories ,041 1,201 Profit before tax 1,730 1,753 2,243 2,697 3,141 A/C receivables ,024 1,152 Income tax expense (374) (423) (510) (620) (723) Prepayments 707 1, ,143 Non-controlling interests 3 (15) (32) (45) (58) Other financial assets Net profit 1,359 1,315 1,700 2,031 2,361 Plegded bank deposits EPS (Rmb) Fixed deposits held at banks with maturity over 3 months ,100 1,400 1,700 Cash and cash equivalents 4,008 4,344 4,934 5,254 5,829 Growth rates (%) 8,102 8,187 9,347 10,456 11,770 Revenue (14) (4) Net profit (21) (3) Total assets 10,036 10,118 11,384 12,552 13,917 EPS (21) (3) Current liabilities Margin & ratios (%) A/C payables Gross margin Other payables 1,141 1,023 1,072 1,223 1,340 OP margin Bank borrowings ,348 1,348 1,348 Net margin Amounts due to related parties Effective tax rate Tax payables Payout ratio ,898 2,574 3,185 3,524 3,790 Cash Flow Statement Non-current liabilities Year end Dec 31 (Rmb m) FY12 FY13 FY14 FY15E FY16E Long-term payable to non-controlling interests Deferred tax liabilities Profit before tax 1,730 1,753 2,243 2,697 3, Depreciation and amortization Net finance cost (170) (175) (229) (277) (315) Equity (Reversal of)/provision for doubtful debts (46) (10) 0 Shareholders' equity 6,752 7,154 7,795 8,578 9,620 Write-down/(reversal write-down) of inventories 91 8 (59) (15) 0 Non-controlling interests Others 13 (32) ,933 7,349 8,005 8,833 9,933 Due to related parties 1 4 (1) 0 0 Change of working capital 429 (425) (68) (221) (215) Total liabilities & equity 10,036 10,118 11,384 12,552 13,917 Interest received Tax paid (446) (367) (522) (565) (671) Financial Ratios Operating cash flow 1,965 1,128 1,686 2,105 2,483 Year end Dec 31 FY12 FY13 FY14 FY15E FY16E Capex (227) (179) (263) (250) (250) Current ratio Acquisition of subsidiaries (136) (15) Quick ratio Disposals Inventory turnover days Others A/C payable turnover days Change of other financial investments (841) 312 (6) 0 0 A/C receivable turnover days Change in pledged deposit (210) Change in time deposit with maturity over 3 months (605) (300) (300) Asset turnover Investing cash flow (976) 620 (865) (550) (550) Total assets/total equity Net cash (Rmb m) 5,046 5,074 5,431 6,052 6,926 Change of borrowings 997 (528) Others (4) (5) (13) (4) (4) ROE (%) Dividend paid (996) (878) (1,090) (1,230) (1,355) ROA (%) Share issue Financing cash flow (3) (1,408) (238) (1,234) (1,359) Net change of cash flow estimates Page 4

5 Rating definitions Benchmark: Hong Kong Hang Seng Index Time horizon: 12 months Company ratings Buy Stock expected to outperform benchmark by more than 15% Accumulate Stock expected to outperform benchmark by more than 5% but not more than 15% Hold Expected stock relative performance ranges between -5% and 5% Underperform Stock expected to underperform benchmark by more than 5% Sector ratings Positive Sector expected to outperform benchmark by more than 10% Neutral Expected sector relative performance ranges between -10% and 10% Cautious Sector expected to underperform benchmark by more than 10% Analyst Certification The research analyst(s) primarily responsible for the content of this research report, in whole or in part, certifies that with respect to the company or relevant securities that the analyst(s) covered in this report: (1) all of the views expressed accurately reflect his or her personal views on the company or relevant securities mentioned herein; and (2) no part of his or her remuneration was, is, or will be, directly or indirectly, in connection with his or her specific recommendations or views expressed in this research report. 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The recipients should be aware of relevant disclosures of interests (if any) when reading this report. Copyright GF Securities (Hong Kong) Brokerage Limited. Without the prior written consent obtained from GF Securities (Hong Kong) Brokerage Limited, any part of the materials contained herein should not (i) in any forms be copied or reproduced or (ii) be re-disseminated. GF Securities (Hong Kong) Brokerage Limited. All rights reserved /F, Li Po Chun Chambers, 189 Des Voeux Road Central, Hong Kong Tel: Fax: Website: Page 5